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Does Farm and Processing Industry Structure Matter for Price Transmission? Some Evidence From Transition Countries: A Comparison of Dairy Sectors in Hungary and Poland

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Listed:
  • Zoltan Bakucs

    () (Institute of Economics Research Centre for Economic and Regional Studies Hungarian Academy of Sciences)

  • Jan Falkowski

    () (Faculty of Economic Sciences University of Warsaw, Poland)

  • Imre Ferto

    () (Institute of Economics Research Centre for Economic and Regional Studies Hungarian Academy of Sciences)

Abstract

Rapid and thorough changes have recently taken place in dairy supply chain in the whole Central and Eastern Europe. Growing concerns have been expressed that these changes may negatively affect farmers' relative position towards downstream industry, due to market power exercised by the latter. In response to this, the present paper aims to investigate the price transmission mechanism in two countries from the region, namely Poland and Hungary and contrast the results with dairy market organisations specific for these countries. Using cointegrated vector autoregression and controlling for potential structural breaks, it is shown that Polish milk prices, as opposed to Hungarian ones, are characterised by short- and long-term asymmetries. We discuss a number of potential explanations supporting the empirical results. We consider, among others, differences between the dairy chain structures and the role of FDI.

Suggested Citation

  • Zoltan Bakucs & Jan Falkowski & Imre Ferto, 2012. "Does Farm and Processing Industry Structure Matter for Price Transmission? Some Evidence From Transition Countries: A Comparison of Dairy Sectors in Hungary and Poland," IEHAS Discussion Papers 1212, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  • Handle: RePEc:has:discpr:1212
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    References listed on IDEAS

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    1. Alexandre Gohin & Hervé Guyomard, 2000. "Measuring Market Power for Food Retail Activities: French Evidence," Journal of Agricultural Economics, Wiley Blackwell, vol. 51(2), pages 181-195.
    2. S McCorriston & CW Morgan & AJ Rayner, 2001. "Price transmission: the interaction between market power and returns to scale," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 28(2), pages 143-159, June.
    3. Bakucs, Lajos Zoltan & Ferto, Imre, 2008. "Price transmission on the Hungarian milk market," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44175, European Association of Agricultural Economists.
    4. Azzeddine M. Azzam, 1999. "Asymmetry and Rigidity in Farm-Retail Price Transmission," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 525-533.
    5. Teresa Serra & Barry Goodwin, 2003. "Price transmission and asymmetric adjustment in the Spanish dairy sector," Applied Economics, Taylor & Francis Journals, vol. 35(18), pages 1889-1899.
    6. Daniel A. Lass, 2005. "Asymmetric response of retail milk prices in the northeast revisited," Agribusiness, John Wiley & Sons, Ltd., vol. 21(4), pages 493-508.
    7. S. McCorriston & C. W. Morgan & A. J. Rayner, 1998. "Processing Technology, Market Power and Price Transmission," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(2), pages 185-201.
    8. Lajos Zoltán Bakucs & Imre Fertõ, 2005. "Marketing margins and price transmission on the Hungarian pork meat market," Agribusiness, John Wiley & Sons, Ltd., vol. 21(2), pages 273-286.
    9. von Cramon-Taubadel, Stephan, 1998. "Estimating Asymmetric Price Transmission with the Error Correction Representation: An application to the German Pork Market," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 25(1), pages 1-18.
    10. Pieniadz, Agata & Hockmann, Heinrich, 2006. "Explaining Quality Differences at the Procurement Stage in the Polish Milk Sector," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25315, International Association of Agricultural Economists.
    11. Bakucs, Lajos Zoltan & Ferto, Imre, 2007. "Spatial Integration On The Hungarian Milk Market," 104th Seminar, September 5-8, 2007, Budapest, Hungary 7832, European Association of Agricultural Economists.
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    Cited by:

    1. Zoltán Bakucs, Lajos & Fertő, Imre & Szabó, Gábor G., 2010. "Contractual relationships in the Hungarian milk sector," IAMO Forum 2010: Institutions in Transition – Challenges for New Modes of Governance 52700, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO).

    More about this item

    Keywords

    price transmission; dairy sector; Hungary; Poland;

    JEL classification:

    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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