Abstract
The focus of this paper is on the analysis of market imperfections in the French and U.K. wheat value chains. We used mark-up and mark-down models and stochastic frontier analysis to estimate the degree of market imperfections in two completely different wheat-to-bread chains for two stages/sectors—milling and baking. Our results reveal some degree of market imperfections within the input and output markets for both the milling and baking sectors in France and the United Kingdom. However, the abuse of bargaining power is especially pronounced in the input market for the second stage of wheat processing, particularly in the French baking sector. However, we did not observe the expected positive association between the degree of market imperfections and company size except for a group of middle, large, and very large companies within the millers’ input market. Small companies indicate considerably high values of “Lerner”/Lerner indices, suggesting a benefit from other sources of competitive advantage (such as quality, niche markets, etc.).
Highlights
With the European Union (EU)’s adoption of the directive of unfair trading practices (UTP) in the agri-food supply chain in 2019, the already ongoing discussion of the concentrations of agricultural and food supply chains reached a new level [1]
We used mark-up and mark-down models derived from the conjectural variation approach and stochastic frontier analysis to estimate the degree of market imperfections
This study was motivated, firstly, by accusations directed towards the milling and baking industries within the EU, secondly, by the increasing concentration within these sectors over the last 40 years, and by the different structures observed between France and the United Kingdom’s wheat-to-bread supply chains
Summary
With the European Union (EU)’s adoption of the directive of unfair trading practices (UTP) in the agri-food supply chain in 2019, the already ongoing discussion of the concentrations of agricultural and food supply chains reached a new level [1]. Some scholars suggest that market power in agricultural markets dampens any gains from trade reform policies compared to a situation of perfect competition [4]. The issue of warning about concentration in food supply chains is older than the 2008 crisis and started with analyses by Sexton [7] and McCorrison [8], who noticed that industrialization and consolidation in the food system had increased [9]. Competitiveness in agricultural markets has been an issue of concern for quite some time
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