Price transmission along the Lithuanian pigmeat supply chain

Abstract

Introduction. The paper analyses structural changes of pig farming in Lithuania and explores price behaviour along the Lithuanian pigmeat supply chain. Materials and methods. The conducted study uses annual indicators collected by Statistics Lithuania and weekly prices published by SE ‘Agricultural Information and Rural Business Centre’ (AIRBC). Methods of comparative analysis and graphical representation allow investigating the most important changes of Lithuanian pig farming. Price behaviour is studied employing econometric tests showing the characteristics of the analysed pigmeat price series and different aspects of price relations in the short- and long-term perspective. Results and discussion. The share of small and medium-sized farms with less than 10 pigs is decreasing in the structure of pig farms, while farmer and family farms have lost their key role in pig farming, in particular between 2004 and 2018. This development direction of pig farming was caused by multiple factors, including the change of business environment after 2004, transformation of agricultural support model and aftermaths of price hikes, the impact of governmental intervention due to the integration into the Eurozone, as well as animal health issues. Price transmission analysis demonstrates that pork market had faced several critical shocks that had an impact on price behaviour and stakeholders’ welfare. Granger causality test shows price setting direction from retail to farm, while, in the long run, the hypothesis of asymmetric behaviour is not supported. Conclusions. The study confirms dramatic change of Lithuanian pig farming sector and the need of additional support mechanism to foster a structure of pig farming that allows the co-existence of different types of farms. A price transmission study shows market efficiency problems in the short-run that could have a negative impact on farmers’ welfare.