An econometric model is used to estimate the net relationship between changes in the farm-level price of milk and changes in the retail prices of four major dairy products-fluid milk, butter, cheese, and ice cream. Results indicate that the farm-retail price transmission process in the dairy sector is asymmetric. Retail dairy product prices adjust more rapidly and more fully to increases in the farm price of milk than to decreases. The role in pricing asymmetry of retail demand versus farm supply shifts is tested via a Chow-type test. Asymmetry is tested using the Houck procedure for estimating nonreversible functions.

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Asymmetry in Farm-Retail Price Transmission for Major Dairy Products

This paper provides a conceptual and empirical framework for analyzing marketing margins in a noncompetitive food-processing industry facing output price uncertainty. The framework allows the decomposition of observed margins into components reflecting the marginal cost of the processing industry, oligopoly/oligopsony price distortions, and an output price risk component. The empirical procedure is applied to a time series of spreads between wholesale pork prices and farm prices of market hogs. The principal finding is that, while farm/wholesale margins are more consistent with competitive performance now than they were fifteen years ago, the output price risk component persisted throughout the sample period.

Marketing Margins, Market Power, and Price Uncertainty

https://www.gipsa.usda.gov/psp/publication/con_tech%20report/rr96-6.pdf

Assessing Competition In Meatpacking: Economic History, Theory, and Evidence

The objective of this thesis is to examine the production and marketing performance of vegetables in the eastern and central parts of Ethiopia. Efficiency estimation and identification of their determinants in mixed-crop and market-driven (vegetables) production systems was performed in two districts of eastern Ethiopia. A significant economic inefficiency was observed for both systems, with lower efficiency scores for the market-driven farm production. The improvement in efficiency calls for institutional capacity building that enhances asset and capital formation, extension and credit services, consumption and family planning know-how and crop specialization. Results based on the comparison of the two production systems show that lower economic efficiency scores for the market-driven production is attributable to limited access to capital markets, high consumer spending, and large family size. Furthermore, an assessment of the marketing performance of vegetables is conducted. Since most produce sales are based on relational contracting with traders, the study of market performance encompasses an analysis of grower-trader marketing contract enforcement and factors influencing it. Results show that despite its poor performance, contract enforcement is mainly due to mutual trust and brokers’ mediation. Information access, trader-specific investments, farmer's age, whether the buyer is a trader, dependency on the trader, relationship duration, transaction frequency, and distance to the trader were found to be the significant factors affecting contract enforceability through brokers. Risks related to perishability and seasonality of supply, illiteracy, and client-buyer's type were found to be the significant factors causing contract breaches by the traders. In addition, traders’ produce pricing behavior in the procurement of vegetables from growers is analyzed. Results show that traders capture a significant proportion of the marketing surplus due to market power and audacity to absorb risk with this share varying along the degree of perishability and across cities. In general, the results of this study reveal the existence of considerable economic inefficiency in production, poor contract enforcement, and imperfect competition in the marketing of vegetables. The findings of this study indicate the need for governmental and/or private institutions interventions to improve the production and marketing performance of vegetables by providing the necessary institutional support to the smallholder farmers in the study areas.

/pdf/economic-efficiency-and-marketing-performance-of-vegetable-19ql9ag5ga.pdf

Economic Efficiency and Marketing performance of Vegetable Production in the Eastern and Central Parts of Ethiopia

This article provides a perspective on major innovations in research on agricultural markets over the past century. We review research on market structure and performance, vertical coordination arrangements, and institutions for producer collective action. Contributions to empirical modeling of agricultural price determination and marketing margins are also evaluated, as are innovations in research on spatial market relationships and the role of storage. Finally, we discuss contributions to understanding market information systems and the functioning of market-based mechanisms for agri

https://webdoc.agsci.colostate.edu/koontz/thinmarkets/meyers sexton tomek (ajae 2010).pdf

A Century of Research on Agricultural Markets

This paper seeks to determine the effect of changes in output price risk on marketing margins. A theoretical model of price determination in a marketing channel with risk-averse firms is developed. This model shows that if marketing firms are competitive and decreasingly absolute risk averse, then an increase in output price risk should result in higher expected marketing margins. Empirical evidence from the wheat marketing channel supports the theoretical model: increased price variability significantly increases wheat marketing margins for both the farm-mill margin and the mill-retail margin. These results suggest a potential benefit from price stabilization programs.

L. D. Schnake

Papers

Marketing Margins and Price Uncertainty: The Case of the U.S. Wheat Market