Market Structure of the Feed Industry in Germany: Causing Asymmetric Spatial Price Transmission?

Hinrich Schulte; Oliver Musshoff

doi:10.1515/jafio-2018-0007

Enjoy 40% off

academic books on De Gruyter Brill *

Article

Market Structure of the Feed Industry in Germany: Causing Asymmetric Spatial Price Transmission?

Hinrich Schulte and Oliver Musshoff

Published/Copyright: June 26, 2018

Published by

Become an author with De Gruyter Brill

Submit Manuscript Author Information Explore this Subject

From the journal Journal of Agricultural & Food Industrial Organization Volume 17 Issue 1

Abstract

Over the last couple of years, the production amount of feed and the market concentration of the feed industry vastly increased in North-Western Germany. This development might lead to asymmetric price transmission of feed between regions in Germany because feed markets in other regions grow slower and therefore decline in relative volume and importance. To analyze this development, the objective of the study was to quantify price relationships of pig, hens and calves feed prices between Western Lower Saxony, Eastern Lower Saxony and Westphalia. Assuming Western Lower Saxony as the central market and using monthly price observation from 2007 until 2017, the results show that the feed prices were co-integrated across regions and type of feed. The results show a tendency of asymmetric price transmission for pig feed between Western Lower Saxony and Eastern Lower Saxony but this was not statistically significant at the 5 % level. Furthermore, we also tested the influence of the feed scandals dioxin in pig feed and mold in imported maize from Serbia, but we could not estimate a pattern of price adjustments between regions according to the feed scandals. Summarizing the results, we came to the conclusion that feed prices might be perfectly transmitted across regions and independently from feed scandals and type of feed.

Keywords: market concentration; feed industry; asymmetric price transmission

Appendix

Table A:

Results for price transmission in the hens feed industry.

Independent Variables	Coefficient/value		P-value

	WPH	ELS	WPH	ELS
ectt−1+	0.39**	0.10	0.04	0.64
ectt−1−	0.25	0.08	0.16	0.62
Δpt−1	0.27**	0.22**	0.03	0.04
Δpt−2	0.10*	0.06	0.08	0.26
Dscandl	0.16	0.18	0.52	0.51
F-statistics	5.07	2.36	0.00	0.04
F-test ect	0.20	0.00	0.66	0.94

Note: Assuming WLS is the central market. ELS = Eastern Lower Saxony, WPH = Westphalia. F-test ect denotes if the coefficients of the error correction term are significantly different from each other. Including the scandal dummy with a duration of 12 months. *P < 0.10, **P < 0.05, ***P < 0.01.

Table B:

Results for price transmission in the pig feed industry.

Independent Variables	Coefficient/value		P-value

	WPH	ELS	WPH	ELS
ectt−1+	0.49**	−0.20	0.04	0.22
ectt−1−	0.31	0.26**	0.16	0.04
Δpt−1	0.45***	0.40***	0.00	0.00
Δpt−2	0.15*	0.06	0.06	0.37
Dscandl	0.12	0.14	0.52	0.51
F-statistics	13.68	8.03	0.00	0.00
F-test ect	0.28	3.02	0.60	0.08

Note: Assuming WLS is the central market. ELS = Eastern Lower Saxony, WPH = Westphalia. F-test ect denotes if the coefficients of the error correction term are significantly different from each other. Including the scandal dummy with a duration of 12 months. *P < 0.10, **P < 0.05, ***P < 0.01.

Table C:

Results for price transmission in the calves feed industry.

Independent Variables	Coefficient/value		P-value

	WPH	ELS	WPH	ELS
ectt−1+	0.15	−0.01	0.16	0.95
ectt−1−	0.23	0.31*	0.17	0.06
Δpt−1	0.12	0.09	0.33	0.43
Δpt−2	0.15*	0.19*	0.17	0.08
Δpt−3	0.04	0.09	0.46	0.17
Δpt−4	−0.03	-	0.72	-
Dscandl	0.20	0.35	0.46	0.30
F-statistics	2.78	3.14	0.01	0.01
F-test ect	0.16	1.49	0.69	0.23

Note: Assuming WLS is the central market. ELS = Eastern Lower Saxony, WPH = Westphalia. F-test ect denotes if the coefficients of the error correction term are significantly different from each other. Including the scandal dummy with a duration of 12 months. *P < 0.10, **P < 0.05, ***P < 0.01.

Table D:

Results for price transmission in the hens feed industry.

Independent Variables	Coefficient/value		P-value

	WPH	ELS	WPH	ELS
ectt−1+	0.39**	0.11	0.06	0.54
ectt−1−	0.26	0.08	0.13	0.59
Δpt−1	0.28**	0.23**	0.03	0.04
Δpt−2	0.10	0.07	0.07	0.23
Dscandl	0.13	0.13	0.74	0.76
F-statistics	4.71	2.68	0.00	0.02
F-test ect	0.19	0.01	0.66	0.91

Note: Assuming WLS is the central market. ELS = Eastern Lower Saxony, WPH = Westphalia. F-test ect denotes if the coefficients of the error correction term are significantly different from each other. Including the scandal dummy with a duration of 6 months. *P < 0.10, **P < 0.05, ***P < 0.01.

Table E:

Results for price transmission in the pig feed industry.

Independent Variables	Coefficient/value		P-value

	WPH	ELS	WPH	ELS
ectt−1+	0.49**	−0.20	0.04	0.24
ectt−1−	0.31	0.26*	0.15	0.05
Δpt−1	0.45***	0.41***	0.00	0.00
Δpt−2	0.14*	0.06	0.07	0.37
Dscandl	0.22	0.21	0.35	0.37
F-statistics	13.43	8.40	0.00	0.00
F-test ect	0.28	2.80	0.60	0.10

Note: Assuming WLS is the central market. ELS = Eastern Lower Saxony, WPH = Westphalia. F-test ect denotes if the coefficients of the error correction term are significantly different from each other. Including the scandal dummy with a duration of 6 months. *P < 0.10, **P < 0.05, ***P < 0.01.

Table F:

Results for price transmission in the calves feed industry.

Independent Variables	Coefficient/value		P-value

	WPH	ELS	WPH	ELS
ectt−1+	0.15	0.00	0.16	0.98
ectt−1−	0.23	0.31**	0.16	0.04
Δpt−1	0.13	0.10	0.30	0.41
Δpt−2	0.16*	0.20*	0.16	0.06
Δpt−3	0.04	0.09	0.47	0.19
Δpt−4	−0.04	-	0.71	-
Dscandl	0.19	0.32	0.55	0.38
F-statistics	2.73	2.99	0.01	0.01
F-test ect	0.16	1.49	0.68	0.23

Note: Assuming WLS is the central market. ELS = Eastern Lower Saxony, WPH = Westphalia. F-test ect denotes if the coefficients of the error correction term are significantly different from each other. Including the scandal dummy with a duration of 6 months. *P < 0.10, **P < 0.05, ***P < 0.01.

Acknowledgment

The authors thank the anonymous referee and the editor for critical assessment and helpful comments.

References

Abdulai, Awudu. 2000. “Spatial Price Transmission and Asymmetry in the Ghanaian Maize Market.” Journal of Development Economics 63 (2): 327–349.10.1016/S0304-3878(00)00115-2Search in Google Scholar

Acosta, Alejandro, Rico Ihle, and Miguel Robles. 2014. “Spatial Price Transmission of Soaring Milk Prices from Global to Domestic Markets.” Agribusiness 30 (1): 64–73.10.1002/agr.21358Search in Google Scholar

AMI 2018. “AMI Preise Für Futtermittel. Agrarmarkt Informations-Gesellschaft (AMI). AMI, Bonn.” Accessed February 19, 2018. https://www.ami-informiert.de/ami-onlinedienste/serviceportal-forschung-lehre/futtermittel/marktdaten-download.htmlSearch in Google Scholar

BLE 2004. “Bundesanstalt Für Landwirtschaft Und Ernährung: “Struktur Der Mischfutterhersteller”.” Accessed February 05, 2018. https://www.ble.de/SharedDocs/Downloads/DE/BZL/Daten-Berichte/Getreide_Getreideerzeugnisse/StrukturberichtMischfutter03_04.pdf?__blob=publicationFile&v=1.Search in Google Scholar

BLE 2017. “Bundesanstalt Für Landwirtschaft Und Ernährung: “Bericht Zur Markt- Und Versorgungslage Futtermittel”.” Accessed February 05, 2018. https://www.ble.de/SharedDocs/Downloads/DE/Landwirtschaft/KritischeInfrastrukturenLandwirtschaft/MarktVersorgung/BerichtFuttermittel2016.pdf?__blob=publicationFile&v=3.Search in Google Scholar

Dickey, David A., and Wayne A. Fuller. 1979. “Distribution of the Estimators for Autoregressive Time Series with a Unit Root.” Journal of the American Statistical Association 74 (366a): 427–431.10.1080/01621459.1979.10482531Search in Google Scholar

Engle, Robert F., and Clive W. Granger. 1987. “Co-Integration and Error Correction: Representation, Estimation, and Testing.” Econometrica: Journal of the Econometric Society 55 (2): 251–276.10.2307/1913236Search in Google Scholar

Goodwin, Barry K, and Nicholas E Piggott. 2001. “Spatial Market Integration in the Presence of Threshold Effects.” American Journal of Agricultural Economics 83 (2): 302–317.10.1111/0002-9092.00157Search in Google Scholar

Goodwin, Barry K., and Ted C. Schroeder. 1991. “Cointegration Tests and Spatial Price Linkages in Regional Cattle Markets.” American Journal of Agricultural Economics 73 (2): 452–464.10.2307/1242730Search in Google Scholar

Han, Sungill, Chanjin Chung, and Prasanna Surathkal. 2017. “Impacts of Increased Corn Ethanol Production on Price Asymmetry and Market Linkages in Fed Cattle Markets.” Agribusiness 33 (3): 378–402.10.1002/agr.21476Search in Google Scholar

Hassouneh, Islam, Teresa Serra, and José M. Gil. 2010. “Price Transmission in the Spanish Bovine Sector: The BSE Effect.” Agricultural Economics 41 (1): 33–42.10.1111/j.1574-0862.2009.00423.xSearch in Google Scholar

Huettel, Silke, and Anne Margarian. 2009. “Structural Change in the West German Agricultural Sector.” Agricultural Economics 40 (1): 759–772.10.1111/j.1574-0862.2009.00413.xSearch in Google Scholar

LAVES 2013. “Niedersächsisches Landesamt Für Verbraucherschutz Und Lebensmittelsicherheit. „Futtermittelrechtliche Allgemeinverfügung an Futtermittelunternehmer Im Land Niedersachsen Und in Der Freien Hansestadt Bremen Zum Schutz Gegen Gefahren Durch Aflatoxin B1 in Futtermitteln“.” Accessed February 08, 2018. https://www.google.de/url?sa=t&rct=j& q=&esrc= s&source=web&cd=4&ved= 0ahUKEwij0pqwsJbZAhXJmLQKHdSoBtoQFgg7MAM&url=https%3A%2F%2F www.ml.niedersachsen.de%2Fdownload%2F76384& usg=AOvVaw06F3F8m1ida-NMckr2Sor5.Search in Google Scholar

Lloyd, Timothy A., Steve McCorriston, Wyn Morgan, and Tony Rayner. 2006. “Food Scares, Market Power and Price Transmission: The UK BSE Crisis.” European Review of Agricultural Economics 33 (2): 119–147.10.1093/erae/jbl001Search in Google Scholar

MacKinnon, James G. 1990. “Critical Values for Cointegration Tests.” Queen's Economics Department Working Paper No. 1227. San Diego: Department of Economics, University of California.Search in Google Scholar

Meuwissen, Miranda P. M., Alex L. Van Andel, Marcel A. Van Asseldonk, and Ruud B. Huirne. 2009. “Eliciting Processing Industry Damage from Feed Crises.” British Food Journal 111 (8): 878–892.10.1108/00070700910980982Search in Google Scholar

Meyer, Jochen, and Stephan Von Cramon‐Taubadel. 2004. “Asymmetric Price Transmission: A Survey.” Journal of Agricultural Economics 55 (3): 581–611.10.1111/j.1477-9552.2004.tb00116.xSearch in Google Scholar

Schroeder, Ted C., and Barry K. Goodwin. 1990. “Regional Fed Cattle Price Dynamics.” Western Journal of Agricultural Economics 15 (1): 111–122.Search in Google Scholar

Tifaoui, Said, and Stephan Von Cramon‐Taubadel. 2017. “Temporary Sales Prices and Asymmetric Price Transmission.” Agribusiness 33 (1): 85–97.10.1002/agr.21465Search in Google Scholar

Von Cramon-Taubadel, Stephan. 1998. “Estimating Asymmetric Price Transmission with the Error Correction Representation: An Application to the German Pork Market.” European Review of Agricultural Economics 25 (1): 1–18.10.1093/erae/25.1.1Search in Google Scholar

Von Cramon-Taubadel, Stephan, Jens-Peter Loy, and Jochen Meyer. 2006. “The impact of cross-sectional data aggregation on the measurement of vertical price transmission: An experiment with German food prices.” Agribusiness 22 (4): 505–522. DOI: DOI:10.1002/agr.20100.Search in Google Scholar

Zimmermann, Andrea, and Thomas Heckelei. 2012. “Structural Change of European Dairy farms–A Cross‐Regional Analysis.” Journal of Agricultural Economics 63 (3): 576–603.10.1111/j.1477-9552.2012.00355.xSearch in Google Scholar

Published Online: 2018-06-26

You are currently not able to access this content.

Articles in the same Issue

https://doi.org/10.1515/jafio-2018-0007

Keywords for this article

market concentration; feed industry; asymmetric price transmission