Abstract
In this paper we analyse vertical price transmission in two typical Italian wheat chains, the pasta and bread chains, that were particularly affected by strong market fluctuations during the last years. After having split the chains into two sides, upstream (farm–wholesale) and downstream (wholesale–retail), we apply a cointegration methodology allowing for the presence of potentially unknown structural breaks. Then, for the different subperiods detected by the break dates, we investigate the evolving price transmission elasticities finding evidence of asymmetric price transmission. In the pasta chain, farmers seem to be price-takers, while in the bread chain price transmission is related to market structure and to the coexistence of small and large retailers.
Highlights
Over the last few years agricultural commodity prices have undergone strong fluctuations as a consequence of economic, political and financial issues that have reshaped the global economic equilibrium
One of the most widely used methods is based on the analysis of price transmission mechanisms within the context of market integration [62,63,64,65] and the law of one price [66,67]. Within this framework the analysis proposed in this article follows a nonstructural approach to price transmission, along with a combination of time series mechanisms, to investigate the changing relations and the asymmetry in the adjustment speed to the long run equilibrium
The aim of this paper was to analyse vertical price transmission dynamics in two wheat-related food chains in Italy: the pasta and bread chains. Such food supply chains are important in the Italian food system and have suffered strong market fluctuations in the last decade, especially since the end of 2007
Summary
Over the last few years agricultural commodity prices have undergone strong fluctuations as a consequence of economic, political and financial issues that have reshaped the global economic equilibrium. In mid-2010 there was a new rise in prices and again a market fall This strong instability was spread along the food supply chain producing unsatisfactory patterns of marketing margins and altering price transmission mechanisms [1,2]. The interest on the issues related to commodity price fluctuation has increased over the last years when an exceptional price rise has destabilised the world economic scenario and has lowered the level of world agricultural stocks to quantities unseen for 25 years. Other scholars highlight the role of internal factors in affecting the asymmetry of price transmission along food chains [27,28,29,35,36]
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