NPR - FUNCTIONING OF AGRICULTURAL FOOD MARKETS IN THE NETHERLANDS FOR EIGHT PRODUCTS

Abstract:

Market power and the abuse of power is often a topic of public discussion when regarding price formation in food chains. Supermarkets are often accused of not paying fair prices to farmers. The goal of this study is to analyse if Dutch markets for food products are competitive, in a way that neither buyers nor sellers in any of the supply chain stages are able to change purchase or selling prices independently. This goal is translated in the following research questions: i) are prices along the food chain following each other?, ii) does a long term price relation exist?, iii) are positive and negative price changes transmitted to the next stage with the same speed and to the same extent? The study was executed for eight – mostly unbranded and unprocessed – basic food products in the period 2011-2013 by analysis of buying and selling prices and costs in each of the stages of the supply chain. We conclude that in general, markets are competitive. Prices in successive stages in the value chain often have a long term relationship, asymmetric price adjustment was significant in only 3 out of 17 markets, where the downstream firm in the transaction has the advantages of the asymmetric price adjustment. However it should be kept in mind that the value chains differ in length and other characteristics: fresh versus stored products and processed versus unprocessed products. These characteristics influence price transmission in the food chain. Net profits per stage in the supply chain per product could not be calculated because of a lack of data.