Price transmission along the CIS wheat-to-bread supply chains

Transcription

1 Price transmission along the CIS wheat-to-bread supply chains Ivan Djuric, Miranda Svanidze and Aaron Grau Leibniz Institute of Agricultural Development in Transition Economies Department Agricultural Markets

2 Research background Research conducted under the AGRICISTRADE project: Exploring the potential for agricultural and biomass trade in the Commonwealth of Independent States (CIS) ( Countries included in the study: Armenia, Azerbaijan, Belarus, Russia, Kazakhstan, Moldova, Ukraine and Georgia CIS 1

3 Research background Trade relations between the EU and selected CIS (e.g., negotiations about free trade agreements Armenia, Georgia, Moldova, and Ukraine); Regional integration becomes political priority for CIS (e.g., Eurasian Economic Union); Extreme agricultural price fluctuations (e.g., 2007/08, 2010/11, 2012); Recent geo-political developments (e.g. Russian agricultural import ban in 2014). 2

4 Research aim 1 To identify how fast and to which extent are price changes transmitted along the CIS wheat-to-bread supply chains. 2 To investigate if some of the supply chain members exercise market power. 3 To identify factors affecting price transmission along the supply chain. 3

5 Price transmission approach WHEAT PRICES BREAD VERTICAL PRODUCER (WHEAT) PROCESSOR (FLOUR) PROCESSOR (BREAD) RETAIL FLOUR CONSUMER FLOUR PRICES Vertical price transmission Long run (pass-through of price changes from one stage of the supply chain to another) No Complete Low value High value Indicator of market power or governmental interventions Indicator of perfect competition Short run (speed of adjustment) Long period of adjustment (inefficient markets) Short period of adjustments (efficient markets) 4

6 Price transmission models Vector error-correction model: k 1 p t = αβ p t 1 + Г i p t i + ε t i=1 Autoregressive distributed lag model: γ t = β 0 + β 1 γ t β k γ t p + α 0 x t + α 1 x t α q x t q + ε t Threshold autoregressive model : ε t = I t γ 1 ε t I t γ 2 ε t 1 + φ t I t = 1 if ε t 1 τ 0 ifε t 1 τ Non-linear regime-dependent model: γ t = α + γ α D t + βx t + γ β D t x t + u t D t = 1 if there is a policy intervention 0 if there is no policy intervention 5

7 Data Data sources: Statistical offices (CIS); State and consulting agencies (EU and international markets); AGRICISTRADE country reports (CIS: Scientific papers and country reports (e.g. FAO, WB, OECD, etc.); Expert interviews (CIS). No. Products Data description No. obs. 1 Wheat Producer prices Flour Wholesale/retail prices Bread Retail prices

8 Wheat-to-bread supply chain WHEAT PRICES BREAD PRODUCER (WHEAT) PROCESSOR (FLOUR) PROCESSOR (BREAD) RETAIL FLOUR CONSUMER FLOUR PRICES 7

9 Wheat-to-bread supply chain WHEAT PRICES BREAD PRODUCER (WHEAT) PROCESSOR (FLOUR) PROCESSOR (BREAD) RETAIL FLOUR CONSUMER FLOUR PRICES 8

10 Cross-product comparison 9

11 Gross margin developments 10

12 co-integrating vector for conjectural variations Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Thousand t 06/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /2013 co-integrating vector for conjectural variations Introduction Theory Methodology and data Empirical results Conclusions Market power indicators Wheat-to-bread supply chain in Russia wheat processing sector bread retail sector 0.06 export tax export ban production shortages 3, , ,500 2,000 1,500 1, wheat export theta processor 11

13 Factors affecting price transmission / Conclusions Import dependency Domestic producers face strong competition (higher imports faster adj. of producer prices lower adj. of retail prices); Underdeveloped processing sector For most of the CIS countries; Fast development of the retail sector Possible exercise of market power (e.g. Russian wheat-to-bread supply chain); Domestic trade and price regulations Strong impact on price adjustments (affects both producers and retailers). 12

14 Thank you for your attention! Contact: Dr. Ivan Djuric Senior Researcher Leibniz Institute of Agricultural Develpment in Transition Economies Tel: Fax: Address: Theodor-Lieser Str. 2, Halle Saale, Germany