Econometric Analysis of the Relationship between Wholesale Price and Consumer Price in the Pork Agri-food Chain in the Czech Republic

Annotation: This paper deals with an analysis of vertical price transmission in the pork agri-food chain in the Czech Republic. The paper is focused mainly on the position of consumers (as the final component of the pork agri-food chain) and their power to push the price level down against the efforts of retailers to push the price up. Imperfect competition and imperfect market structure of the pork agri-food chain might be assumed in this case. Price transmission in the pork agri-food chain is analysed based on the time series of pork wholesale price and pork consumer price that contain monthly data from January 1998 to May 2009. The price transmission is analysed in two periods - before and after EU accession. First of all, the nature of the time series is examined; then, the Vector Error Correction Model (VECM) (as a suitable econometric tool for examining price transmission) is employed to analyse both short-run and long-run relationships between the prices analysed. Furthermore, the market structure and position of wholesalers and consumers are examined and evaluated. Moreover, the role of retail is determined and its impact on price transmission is discussed. The role of supermarkets and hypermarkets, their position and potential pressure could be crucial for an analysed relationship, i.e. price transmission of the wholesale and consumer price of pork in the Czech Republic. Finally, conclusions and suggestions are presented, based on the results of the processed analysis. The analysis represents a consecutive step in the former price transmission analysis, which was focused on the relationship between farm-gate price and the wholesale price of pork. Subsequently, the whole pork agri-food chain will be covered and fully described.