The price transmission in pork meat agri-food chain

Abstract

The paper deals with the analysis of price transmission in pork meat agri-food chain. The analysis is aimed at the determination of the type of market structure in the chain based on the derived theoretical model and fitted reduced model of price transmission in the form of VECM. Then, impulse-response analysis and decomposition of variance of fitted VECM show the system's reaction to innovations and the interaction between variables for longer forecast horizons. The results imply that processing stage may exercise oligopsonic power, i.e. the market structure has the type of oligopsony. Impulse-response analysis shows that the system approaches relatively fast the equilibrium and all responses are positive. Moreover, decomposition of variance informs about the increasing role of the wholesale price in the explanation of forecast error variance of agricultural price. Then, it follows from the obtained results (among other) that the pork meat agri-food chain may be characterised as demand-driven. The type of market structure implies that the agricultural support is in this case shared within the vertically related markets and thus is less efficient.