Marketing margins and price transmission on the Hungarian pork meat market

The analysis of vertical price relationship along the supply chain from producers to consumers has become a popular tool of evaluating the efficiency and degree of competition in agrifood systems over recent decades. There is a wealth of literature on the farm-retail price spread for different commodities and countries. However, with one exception (Bojnec, 2002) none have studied price transmission and marketing margins in the transition economies. It is a common belief that because of the distorted markets inherited from the pre 1989 period, the deficiency of the price-discovery mechanisms, and unpredictable policy interventions, marketing margins are generally larger in the transition economies than in competitive markets. Using cointegration analysis, we find that producer and retail pork meat prices are cointegrated, the retail prices entering the cointegration space as weakly exogenous variables. Structural tests imposing homogeneity conditions are carried out and show a competitive pricing strategy. Price transmission modeling suggests that, despite the common belief, price transmission on the Hungarian pork meat market is symmetric. [JEL classification: Q13, D12, D4.] © 2005 Wiley Periodicals, Inc. Agribusiness 21: 273-286, 2005.