Price transmission analysis between Finnish and selected European broiler markets
Avainsanat:
boiler, price transmission, cointegrated, unidirectional, causality, shockAbstrakti
The import of poultry meat in Finland has been growing since 2000, mostly in broiler. Because of the avian flu scare, there has been a ban on importing poultry from Asia for the past two years, so Finland imported broiler mostly from European 25 countries, such as Denmark, Germany and France. The market share of broiler from foreign countries is growing, so is the competition on the price. Allowing for price signals to be transmitted spatially in different markets and market integration is the key premises in economics.
One of the main goals of the EU’s common agricultural policy is to get spatially integrated agricultural commodity markets within and between all member states. In an integrated market, price information should be efficiently transmitted between the member states. EU commission claims that also domestic policies and regulations applied in the member countries, should support (or at least not to distort) the goal of achieving the informational efficient single European market. Particularly in Finland, with small and remote domestic market, the issue of market efficiency and transmission of market information have significant implications for the first is actions taken in accordance of the antitrust legislation on regulating the domestic food industry structures. The second is permission for domestic agricultural subsidy programs that supplement the CAP. The main purpose of the paper is to estimate the price transmission relationship between the Finnish broiler market and selected its major exporting partners using the wholesale prices, i.e. the prices in front of the slaughterhouses in each countries. The result implies that the price level of Finnish broiler market is rather stable in comparison to the most of other EU countries, and the domestic demand and supply mostly decide the wholesale price in Finland. Finnish broiler price is not cointegrated with the price of the selected countries, indicating that there is no significant long-run relationship between them. The findings show, however, the unidirectional causality between Finnish broiler price and the prices in the other EU countries in the short run. That is, the broiler price shock of Finland appears to be driven partly by the prices of imported countries, but the reverse is not true.
