Asymmetric price transmission and farmers' response in the Czech dairy chain

Abstract

The standard economic price theory of working with efficient source allocation is being confronted with a series of empirical findings of asymmetric price responses. The objective of the research was to examine whether the distribution of prices within the dairy chain in the Czech Republic was fair and whether farmers progressed in a collective approach to strengthen their position in the supply chain. We used the pre-cointegration and cointegration approach to test for asymmetry in the transmission of farm milk prices throughout the supply chain. Furthermore, we measured the development of market concentration by means of the Herfindahl-Hirschman index and discussed the background of the figures with producer organisation representatives. The results proved there were asymmetric price transmissions. In response, farmers consolidated and concentrated their milk sales. The concentration should not yet be understood as a goal but as a means to the next steps.