Price transmission in shrimp production in Vietnam

Abstract

Under the trade international integration, vertical price transmission in agri-food export supply chains is an essential issue that needs attention. This study analyses the price transmission from export prices to farm-gate prices of the black-tiger shrimp and white-leg shrimp production in Vietnam. Monthly price series of black-tiger shrimp and white-leg shrimp were collected from January 2015 to October 2020, from the Department of Aquaculture of Ca Mau, Soc Trang, Kien Giang, Ben Tre provinces; Vietnam Association of Seafood Exporters and Producers, and Vietnam market analysis and forecast joint stock company. The Johansen cointegration test, the Toda-Yamamoto Granger causality test, the Engle-Granger’s two-stage estimation, and the asymmetric error correction model using the Houck and Ward approach were applied. The results showed a long-term relationship between the farm-gate prices and export prices for both black-tiger shrimp and white-leg shrimp. The export prices were the price leader. In the long run, the price transmission from export prices to farm-gate prices in both black-tiger shrimp and white-leg shrimp was incomplete; however, the white-leg shrimp’s price transmission was noticeably better than black-tiger shrimp’s. In the short run, there was no statistically significant effect of export prices on farm-gate prices of black-tiger shrimp; while the price transmission of white-leg shrimp was significant but relatively slow rate. The price transmission for black-tiger shrimp and white-leg shrimp was symmetric in the short run and the long run. The findings of this study are useful for farmers in developing production and business strategy. Symmetric price transmission in both the short run and the long run is a positive signal for farmers to invest in sustainable production approaches and to meet stringent standard requirements of the export market.