Price transmission in the trans-atlantic northern shrimp value chain. (July 2018) - Nielsen, Max
Abstract: Recent research has found that markets for farmed shrimp and wild-caught northern shrimp in Europe are integrated, indicating that northern shrimp prices are affected by total supply and demand of shrimp. Thus, the continued growth of global aquaculture production and associated price decline affect northern shrimp fisheries. In this paper, price transmission in the trans-Atlantic northern shrimp value chain is analysed using a Vector Auto Regressive model in Error Correction form. Cointegration, the Law of One Price (LOP) and weak exogeneity are tested. The results reveal linkages from Greenlandic and Canadian exports, via Denmark to the final consumers in Denmark and United Kingdom. The LOP was rejected in all cases. Hence, price transmission exists, but it is imperfect. Peeled shrimp is further found to be subject to downstream market leadership, while impulse-response functions identify mixed responses, with downstream market leadership being the dominant characteristic. Growth in shrimp aquaculture, ceteris paribus, presses northern shrimp fishermen, the Greenlandic economy and local economies at Newfoundland through price reductions. As such, fisheries and their management must continuously improve efficiency to stay competitive. Highlights: Price transmission of trans-Atlantic northern shrimp value chain is analysed. Greenlandic and Canadian exports are linked to consumers in Denmark and the UK. Transmission of price changes are incomplete in all cases. Downstream markets mostly determine market prices upstream of the value chain. Fisheries must continuously improve efficiency to stay competitive to aquaculture growth.