Modelling Price Transmission within the Supply Chain under a European Protected Designation of Origin Framework: The Case of Parmigiano Reggiano in Italy

Hugo Ferrer-Pérez,Filippo Arfini,José Gil

doi:10.3390/socsci8030087

Abstract

Lately, we have witnessed how European Institutions have directed many efforts at improving the effectiveness of food quality schemes (FQS) to address the increasing complexity that has affected all elements of the operating structure of agrifood supply chains worldwide, especially prices. In this paper, we conduct a comparative analysis of the price transmission process in the dairy sector between farm and retail markets within the protected designation of origin (PDO) framework and its non-protected counterpart in Italy. This paper considers a unique dataset for the PDO Parmigiano Reggiano cheese and for a non-protected counterpart in Italy covering a recent period after the price crises that took place nearly a decade ago. A multivariate error correction type approach was estimated together with the corresponding impulse response functions to provide useful insights for understanding the differences in the performance of the price transmission process between protected and non-protected food products. Contrary to most of the previous literature, our results support the hypothesis of symmetric price dynamics along the PDO cheese supply chain. The fewer number of farmers reduces the market power at the retail level generating more efficient price transmission dynamics. Short-run dynamics suggest that in the PDO cheese market farmers and retailers react quicker and with a similar magnitude to market changes, while in the conventional cheese market, retailers benefit in the short run from quicker and of higher magnitude responses to unanticipated market shocks.

Highlights

Three decades ago, some European Union Member States started to encourage and protect some specific food products according to their principles that in some case, some of them were quite disparate
Data were extracted from Istituto di Servizi per il Mercato Agricolo Alimentare (ISMEA) database and contains farm prices, which are prices paid to dairy firms by wholesalers or by distributors, and retail or consumer prices which are prices paid by consumers on the final market
Given the increasing complexity in modern agrifood supply chains and the wide diversity of products operating in relevant markets, the study of price transmission process along the supply chain has renewed the interest among agricultural economists

Summary

Introduction

Some European Union Member States started to encourage and protect some specific food products according to their principles that in some case, some of them were quite disparate. Sci. 2019, 8, 87 and provide them with a powerful tool to benefit the commercialization of those quality products with a significant comparative advantage (European Commission (2006) and Dimara et al (2004)) In this regulatory framework, European food policies have met consumers’ preferences, which are more and more focused on products whose characteristics may be differentiated from the rest of products, due to a greater certified quality. The constant search of a more environmentally-friendly from both producers and consumers in the European Union (EU) along with the economic, environmental and social issues of conventional procedures has led into a greater boost of the quality products especially, those organic or under an official quality specification at the expense of conventional products

Results

Discussion

Conclusion