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Price Transmission in the Beef Value Chain – The Case of Bloemfontein, South Africa


  • Ogundeji, A.
  • Mare, F.A.


The large difference between the producer price of a beef carcass and the retail prices of individual beef cuts raised concerns among producers. Producers believe that they were carrying all the risk and that retailers fixed their prices, irrespective of the market price at that stage. This study examines the price transmission mechanisms in the Bloemfontein beef market using the producer price and retail prices at four retail outlets collected over a period of 3 years. It further estimates the causality links between the producer and retail prices. The traditional (Engle-Granger) and standardized (Enders & Siklos) Augmented Dickey- Fuller procedures were used to test for co-integration and asymmetry in price transmission. Four competing models, namely, Engle-Granger, Threshold Autoregressive , Momentum Threshold Autoregressive, and Momentum Consistent TAR models were applied. The following results were found: asymmetric price transmission between producer and retail prices, the results on the flow of market information indicated that a flow of market information did exist in the markets of three of the four retailers. The price transmission relationship of two of the retailers are beneficial to the consumers, as the marketing margin declined over time, while the relationship of the other two retailers are detrimental to consumers.

Suggested Citation

  • Ogundeji, A. & Mare, F.A., 2018. "Price Transmission in the Beef Value Chain – The Case of Bloemfontein, South Africa," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 275930, International Association of Agricultural Economists.
  • Handle: RePEc:ags:iaae18:275930
    DOI: 10.22004/ag.econ.275930

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    References listed on IDEAS

    1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    2. Enders, Walter & Siklos, Pierre L, 2001. "Cointegration and Threshold Adjustment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(2), pages 166-176, April.
    3. Ronald W. Ward, 1982. "Asymmetry in Retail, Wholesale, and Shipping Point Pricing for Fresh Vegetables," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(2), pages 205-212.
    4. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
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    7. Sam Peltzman, 2000. "Prices Rise Faster than They Fall," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 466-502, June.
    8. Zerihun Gudeta Alemu, 2012. "Causality links between consumer and producer price inflation in South Africa," Applied Economics Letters, Taylor & Francis Journals, vol. 19(1), pages 13-18, January.
    9. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    10. Jochen Meyer & Stephan von Cramon‐Taubadel, 2004. "Asymmetric Price Transmission: A Survey," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(3), pages 581-611, November.
    11. Babiker, Babiker Idris & Abdalla, Abdel Gabbar M., 2009. "Spatial price transmission: A study of sheep markets in Sudan," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 3(1), pages 1-14, March.
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    Demand and Price Analysis; International Relations/Trade; Livestock Production/Industries;

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