The Effect of the Northeast Dairy Compact on Producers and Consumers, with Implications of Compact Contagion

We model and measure the effects of the Northeast Dairy Compact on prices, quantities, and producer and consumer welfare, underscoring the distribution of these effects across regions and among producers and buyers. Using 1999 as a base year, simulations show that the Compact raised the farm price of milk in the Northeast by $0.45/cwt, lowered the farm price of milk in the rest of the country by $0.02/cwt, and transferred income from producers outside the Compact region and buyers in the Compact region to producers in the Compact region. Non-Compact producer losses exceeded Compact producer gains. Similar results are found for a scenario of Compact contagion—extension of the Compact to include additional states. In both cases, the Compact changed the distribution of the costs and benefits of price discrimination as practiced by milk marketing orders. The regional distribution of the Compact's welfare effects raises again the question of the organization and stability of the federal milk marketing order system.     

Measurement of Milk Container Preferences

Consumer preference for container types for fluid milk was investigated for gallon and half gallon containers using conjoint analyis. Consumers clearly preferred plastic jugs to paperboard for gallon containers, which explains the nearly complete capture of the gallon milk market by plastic. They prefer paperboard for half gallon containers, which corresponds to the failure of plastic to penetrate that size container very well. Relative prices of container types are adjusted for the utility consumers see in the containers. Utility adjusted prices of plastic gallon containers make them very competitive relative to alternative packaging materials. Prices of plastic half gallon containers make them less competitive once utilities are accounted for.     

Measuring the Impact of Ethanol Plants on Local Grain Prices

A considerable number of farmer-owned ethanol plants have been built in the past few years, with many more planned. In part, farmers' investment in ethanol plants is an attempt to increase grain prices in their local market. We examined this issue by estimating the impact on local grain prices of twelve ethanol plants that opened from 2001 to 2002. We find that these new ethanol plants increased local grain prices, but the impact was not uniform around the plant. Markets downstream from a new plant, where prices tend to be higher, experienced a smaller price impact from the ethanol plant. On average across plants, corn prices increased by 12.5 cents per bushel at the plant site, and some positive price response was felt 68 miles away from the plant.     

Demand,challenges, and marketing strategies in the retail promotion of local brand milk

This article addresses the demand and challenges for local brand milk and focuses on the marketing strategies for retail promotion. While federal and state government make efforts to promote local food purchases and consumption at the farm level, local foods face significant distribution challenges in grocers, especially in larger retail stores. Limited shelf space and high pricing by retailers impedes consumers’ purchases and results in weak competitiveness for local brands. Therefore, it is essential for local producers and “buy local” programs to understand what types of promotion and marketing strategies might be more effective in stimulating demand in retail outlets. Using 2010-2011 Nielsen Retail Scanner data in the Northeast region, we estimate a random-coefficient discrete choice model of demand to determine the effects of nutritional characteristics, price, packaging, and distribution strategies on the consumers’ choice to purchase locally branded milk. Results show that local brand milk faces significant demand challenges in addition to high prices and limited outlets in competing with lower-priced products. Marketing strategies, such as price cut, one-gallon package offering, and expanded presence in retail stores, can significantly stimulate the demand for locally branded milk, with one-gallon package offering being the most effective strategy.     

Energy‐milk price transmission at the product brand level

This article estimates the pass‐through rates between diesel fuel and retail milk prices at the product brand level. Using a random coefficient logit demand model and taking the direct and indirect impacts of energy prices, this research identifies changes in pass‐through rates before and after the great recession in 2008. Empirical results show that diesel prices significantly impacted the retail prices of milk products and are an important determinant of food price inflation. Pass‐through rates are estimated to range from 0.16 to approximately 0.60 through 2008 with an average of 0.22 for the whole period. Statistical tests indicate that pass‐through rates before June 2008 were significantly higher than after June 2008 when they dropped significantly to 0.04 to 0.17. Interestingly, private label brands have the lowest pass‐through rates, implying that compared to manufacturer brands, private label prices are more insulated from diesel price shocks.     

The role of retail market power and state regulations in the heterogeneity of farm‐retail price transmission of private label and branded products

Given the leading role of private label brands in the fluid milk market, it is of special interest to focus on possible differences in farm‐retail price transmission between private label and branded milk as well as the causes of heterogeneity. This article examines the heterogeneous effects of private label and branded products on price transmission in the fluid milk market using a panel threshold asymmetric error correction model. Results indicate that upward retail‐price adjustment is faster than the downward price adjustment for both private label and branded milk. The speed of adjustment of private label products is significantly faster than branded products in three different price regimes. We further investigate the reasons of heterogeneity in farm‐retail price transmission of private label milk. We find that both retailer market power and state pricing regulations contribute to the heterogeneity in asymmetric price transmission. Higher retailer market power causes retail prices of private label milk to rise faster and to fall slower. The existence of a state pricing regulation slows down the adjustment speed of retail prices of private labels back to the long‐run equilibrium, regardless of whether the retail price is low or high.     

Impacts of the End of the Coffee Export Quota System on International‐to‐Retail Price Transmission

We examine the impact of the end of the coffee export quota system (EQS) on international‐to‐retail price transmission in France, Germany and the United States. We take account of the existence of long‐run threshold effects and short‐run price transmission asymmetries (PTAs). We find evidence of threshold effects in both periods (EQS and post‐EQS) in all three countries and the presence of short‐run PTAs during the post‐EQS period in all countries, but not during the EQS period. Our results indicate that the threshold values are smaller in the post‐EQS period, suggesting that retail prices became more responsive to changes in international prices. However, the speed of adjustment towards the long‐run equilibrium decreases during the post‐EQS period in the three countries. In the short run, non‐linear impulse response analyses indicate that a shock in international prices was more persistent during the EQS period than in the post‐EQS period. Moreover, we find evidence of short‐run PTAs in the post‐EQS period, with differences across countries. We find support for the ‘rockets and feathers’ principle in the United States; in contrast, retail prices respond faster when international prices are falling in Germany and France. We explain these differences in terms of market structures.     

Food scares, market power and price transmission: the UK BSE crisis

This paper is concerned with the impact of food scares, principallythe BSE crisis in the UK, and focuses on price transmissionin vertically related markets. We show that if market powerhas an effect on the farm–retail margin, this determinesthe specification of the cointegrating relationship and thusprovides a test of market power. The results for the UK beefchain suggest that we cannot reject the importance of marketpower. The impact of the BSE crisis on farm prices is foundto be more than double that on retail prices, thus corroboratingpublic concerns regarding a differential impact of food scareson retailers and producers.     

Strategic pricing in a differentiated product oligopoly model: fluid milk in Boston

In an imperfectly competitive industry, differentiated products compete with each other with price rather than quantity as the strategic variable. Several previous studies have employed a generalized Nash–Bertrand model: Liang (1989) , Cotterill (1994) , Cotterill et al. (2000) , and Kinoshita et al. (2002) ; however, only Liang has explored the theoretical foundations of that model. This article generalizes the Liang two‐good model to three goods. A surprising and important result follows. Price‐conjectural variations do not exist in models with three or more goods. Price‐reaction functions, however, exist in multiple‐good models. We estimate them jointly with a brand‐level demand system to evaluate the total impact of a brand manager's price change on own quantity. In a differentiated product market, this is a useful addition to a partial demand elasticity approach, because a change in one brand's price typically engenders a price reaction by other brands that affects own quantity via substantial cross‐price elasticities among substitutes. Strategic pricing in the Boston fluid milk market was also influenced by the existence of a raw milk price support program, the Northeast Dairy Compact. We find that the advent of the Compact was a focal point event that crystallized a shift away from Nash–Bertrand to more cooperative pricing. If the downstream market is not competitive, one needs to consider strategic price reactions when designing and evaluating agricultural price programs.     

我国鸡蛋价格波动传导的影响因素分析——基于非对称的研究视角

[目的]文章采用鸡蛋价格的周度批发和零售数据,从成本、替代品两个维度探讨鸡蛋价格波动的影响因素和非对称传导特征。[方法]通过滚动回归的方式探讨非对称传导特征的动态变化,并进一步探讨了鸡蛋批零价格之间的相互影响和非对称传导特点。[结果]成本、替代品价格变动对与鸡蛋批零价格具有正向影响和非对称特征,但在静态的线性回归模型中并不明显。鸡蛋批发价格受成本价格变动的影响更大,而零售价格受替代品价格变动的影响更大。在动态的滚动回归模型下,成本、替代品价格对鸡蛋价格波动具有十分明显的时变非对称特征,但这种非对称传导特征并不一致。鸡蛋批发价格早期对零售价格具有正向的非对称传导,但近年来趋向于对称传导。鸡蛋零售价格对批发价格总体具有负向的非对称传导特征,零售价格下降对批发价格的影响更大。[结论]需要建立蛋鸡产业成本—价格监测预警系统,充分发挥产业技术平台、行业协会、学会等研究机构在生产决策中的指导作用。不断完善鸡蛋供应链建设,增强调控与监管政策的灵活性与创新性。     

Modeling price transmission between farm and retail prices: a soft switches approach

Vector error correction models (VECM) are used to model price transmission when farm and retail prices are cointegrated. To allow for nonlinearity in the cointegration process, researchers may specify thresholds to break the error correction process into regimes according to whether the retail price is above, below, or close to its equilibrium value given farm prices.  However, because the coefficients in a VECM can change when there is movement from one regime to another, the model can be discontinuous.  This implies sudden, “hard” regime changes. In this study, we extend the threshold VECM to include features of smooth transition autoregression (STAR) models. Our approach allows for gradual, soft regime changes.  An empirical application to retail cheese and farm milk prices is presented.     

Market liberalization and integration of maize markets in Malawi

The paper studies the extent of market integration of maize markets in Malawi in order to understand how it has been affected by market liberalization. Several measures of integration are introduced to analyze both the comovement of prices and the price adjustment process over time. Monthly retail prices of maize at eight main locations over the period January 1984 to December 1991 are considered. The main conclusion is that liberalization has increased market integration.     

The capitalization of coupled and decoupled CAP payments into land rental rates

This article explores the extent to which payments under the Common Agricultural Policy (CAP) are capitalized into land rents in Ireland with implications for the transfer efficiency of such payments, since subsidies may not benefit targeted recipients if they are capitalized into input prices. Capitalization in the years preceding and following the "decoupling" of agricultural support payments from agricultural production is explored. In the period prior to decoupling, direct support (Pillar 1) payments were highly capitalized into Irish agricultural rents (67–90 cents per euro of subsidies), while in the post‐decoupling period capitalization appears to have declined somewhat.     

Evolving Dynamic Relationships Between the Money Supply and Food-Based Prices in Canada and the United States

The objective of this paper is to analyze the relationships between the money supply and food-based prices (farm input, farm output, retail food prices) and shed some light on contradictory results in the literature by performing the analysis on two countries, testing and allowing for structural change, and decomposing long-run relationships in terms of speed of adjustment and adjustment amount. Money neutrality is rejected for all of the periods in both countries. However, some of the required conditions for money neutrality held temporarily in the U. S. This could be attributed to differences in policy-induced market signal distortions. In both countries, demand-pull forces have grown stronger, and the cost-push forces have grown weaker. In Canada, this is consistent with a growing and more concentrated retail sector exercising price leadership on farm input and farm output prices.     

Deregulation of wholesale petrol prices: what happened to capital city petrol prices?

Wholesale petrol prices were deregulated in August 1998. This paper will quantify the effect associated with the deregulation of wholesale petrol prices on relative retail prices for unleaded petrol in Adelaide, Melbourne and Sydney. This is done through Box–Jenkins autoregressive integrated moving average methodology coupled with Box and Tiao intervention analysis. Weekly price data will be used for Adelaide, Melbourne, and Sydney. It finds that from the beginning of 1999, deregulation coincided with relatively lower retail petrol prices for all three cities. In the absence of any other possible alternative explanation for the simultaneous fall in relative retail petrol prices across all three cities, it is concluded that this change was most likely associated with deregulation. These results suggest that regulation of wholesale petrol prices were ineffectual in terms of constraining capital city retail petrol prices at the very least and may have actually contributed towards relatively higher retail petrol prices. This also suggests that future policy interventions designed to constrain prices in the downstream petroleum industry should be very carefully considered.     

The influence of proximity to market on bean producer prices in Nicaragua

Transport costs are an important determinant of smallholder welfare in developing countries. In particular, transport costs influence the prices that smallholders receive for their produce. We propose a simple way of quantifying this influence. Taking the example of bean producers in Nicaragua, we employ a hedonic price model to estimate the effects of a smallholder's proximity to markets on the prices that he/she receives, while controlling for other factors such as the volume and quality of beans sold. We find that on average each additional minute of travel time reduces farm gate prices by 2.5 cents per quintal. Based on these results, the annual income from bean sales of the average smallholder in our sample would increase by between 24 and 110 USD if travel time to markets were reduced by 25%. Estimates of this nature can make an important contribution to cost–benefit assessments of infrastructure investments.     

Spatial dispersion of retail margins: evidence from Turkish agricultural prices

The farmer share of retail prices is shown to be about 16%, corresponding to about 84% of a distribution share, on average across agricultural products and regions within Turkey. The share of transportation costs in retail prices is only about 7%, while the share of retail margins is about 77% of retail prices. The dispersion of retail prices across regions is shown to be mostly due to local wages and variable markups, while the contribution of traded‐input prices is relatively small. Accordingly, the high dispersion of farmer prices across locations is not reflected in the dispersion of retail prices due to the high contribution of retail margins. These retail margins are also shown to account for about one third of the consumer welfare dispersion across regions and more than half of the consumer welfare dispersion across products.     

Hedonic wine price functions with different prices

This study examines the impact that recommended retail prices, actual market prices and the release of a prominent wine guide have on Australian wine hedonic price estimates, for attributes such as sensory quality, winery reputation and grape region. In general, hedonic price estimates appear to be independent of prices employed. The main identified differences in estimates relate to the size of the producer and some regional impacts. For market prices only, increases in producer size are estimated to reduce prices. This implies the existence of supply chain quantity discounting price practices. The impact of an authoritative wine guide appears to have a negligible influence on prices in Australia. In the absence of market transaction prices, the common practice of employing recommended prices for hedonic wine price estimation is defendable.     

The Swiss payment for milk processed into cheese: ex post and ex ante analysis

We make use of both an ex post and an ex ante evaluation to analyze the Swiss payment for milk processed into cheese. This payment for each kilogram of raw milk processed into cheese is issued to milk producers through dairy processors. In the ex post evaluation, by applying a vector autoregressive model, we estimate the effects of reductions of the payment for prices of raw milk used to produce Emmentaler, Gruyère, and industrial cheese. Past declines in the payment have only been partially transmitted to raw milk prices. The rate of transmission is higher for milk used for the production of industrial cheese than for artisan cheeses. In the ex ante impact evaluation, we use a partial equilibrium model and develop a counterfactual scenario in which the payment is removed. The payment for milk processed into cheese is found to have effects on cheese production and exports but also has important indirect effects on other dairy products. Our findings suggest that about two‐thirds of the payment are benefiting milk producers. At the same time, the overall welfare losses resulting from the elimination of the aid are smaller than the budget allocated to this measure, suggesting a net welfare gain from elimination.     

The impacts of cross-border tourists on local retail property market: an empirical analysis of Hong Kong

Hong Kong as a small city has witnessed a drastic change in the number of short-stay and same-day tourists from Mainland China ever since the relaxation of the tourism policy began in the early 2000’s. This study examines the impacts on the prices of retail space attributed to the substantial increase of cross-border shoppers. Based on a comprehensive retail property transaction records in Hong Kong and a semi-log regression model, our study confirms a positive impact of the number of cross-border shoppers on retail property prices, especially on the value of newer and larger-sized street-level retail shops. Moreover, we find that the effects brought on the retail property market are city-wide and not limited to specific districts which are relatively closer to the border with Shenzhen and with a higher degree of accessibility by these cross-border shoppers. This paper is limited by a number of assumptions including travel distance of the shoppers from Shenzhen. Nevertheless, with an increase in personal travels by the affluent Mainland Chinese citizens who usually spend a lot on shopping outside China, future studies can be made in other North American or European cities for comparison.