The Behaviour of Salmon Price Volatility

Salmon prices exhibit substantial volatility. An understanding of the structure of volatility is of great interest since this is a major contributor to economic risk in the salmon industry. The volatility process in salmon prices was analysed based on weekly price data from 1995 to 2007. The Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model was used to test for volatility clustering and persistence of volatility for prices. We find evidence for and discuss the degree of persistence and reversion in salmon price volatility. Further, we find increased volatility in periods of high prices. For the industry this means that larger expected profits more often than not come at a tradeoff of greater price risk.Price risk, salmon aquaculture, salmon prices, volatility, Marketing, Research and Development/Tech Change/Emerging Technologies, Research Methods/ Statistical Methods, C22, Q21, Q22,

UK Natural Gas: Gas-Specific or Oil Driven Pricing?

In this paper we investigate the time-varying relationship between oil and natural gas in the UK. We develop a model where relative prices can move between pricing-regimes; markets switch between being decoupled and integrated. Our model endogenously accounts for periods where oil and natural gas temporarily decouple due to gas specific pricing. We show that gas-specific pricing is primarily related to fall/winter peak-load gas pricing and that mean reversion in relative prices is dependent on the time of the year. Most of the reversion back to oil occurs in spring and summer when demand for gas to heating and electricity is low and net-availability and transport capacity high. Accounting for periods of gas specific pricing is relevant when determining the long-run equilibrium value of oil relative to natural gas. Utilizing the regime where evidence is strongest for integrated markets we find that oil is historically priced at 2.3 times the value of natural gas in the UK, and that markets have been decoupled for 49% of the sample. Our results do not indicate that peak-load pricing has become more prevalent in recent years, i.e., we find no evidence of underinvestment in capacity after deregulation

Climate change and small pelagic fish price volatility

Price volatility, an indicative measure of price uncertainty, is an important factor influencing fisheries cost, income, food security, and pressure on fish stocks. An increase in price volatility means that prices are varying more, making it more difficult to adjust the activities accordingly. This paper explores price volatility changes for the small pelagic fish—a key group for food security—related to the potential outcomes of climate change, such as tropical widening. With the tropicalization of temperate and polar marine ecosystems due to species composition changes, one would expect that overall price volatility for the small pelagics may be reduced over time because volatility in the tropical region is on average the lowest. However, we find an empirical evidence that price volatility for small pelagic species has increased relatively in the tropical and sub-polar regions beyond what can be explained by changes in landing levels and the variation in the landings.publishedVersio

Tools of the trade: trade flexibility with respect to margins and buyers

Access to highly disaggregated trade data allows for a more nuanced investigation of different margins of trade, and the factors known to influence them. In this paper, the number of importers and shipments to each importer is investigated together with the more traditional margins. Potential explanatory factors of these trade margins are combined from three literature strands in addition to the standard gravity variables; firm productivity, per-unit shipment costs and country-specific trade costs. The empirical results show, not unexpectedly, that insights from all these different strands of literature influence trade margins significantly. In particular, the number of shipments per importer increases with distance, degree of remoteness and per-shipment cost, and the number of importers decreases with the distance, remoteness and per-unit shipping cost. This indicates that increased trade costs make exporters economize in existing networks. Finally, disaggregating the data into three main product categories using Rauch’s classification, trade patterns are shown to vary by product group.publishedVersio

Global markets and the commons: The role of imports in the US wild-caught shrimp market

The commons literature focuses heavily on rules and the behavior of resource users but places less emphasis on the returns to individual effort. However, for most resource settings, market conditions and associated resource prices are key drivers of exploitation effort. In a globalized world, import competition can strongly influence the incentives for individual resource users, a topic largely unexplored in the commons literature. Import competition is especially salient for seafood, one of the most internationally traded food groups. We analyze the US shrimp market, which was once dominated by domestic catches but is now mostly supplied by imports. For domestic producers (users of the commons), lower revenues result, while US consumers eat more shrimp at lower prices. Globalization changed the sources of price risk and compensation that domestic producers face and altered incentives to exploit the commons. In a market dominated by domestic supply shocks, the price response to a shock moderates the effect on revenue and effort. In a market dominated by imports, domestic shocks are buffered by import adjustments, while price movements are determined by global shocks. Despite losses for the domestic fishery, globalization creates new incentives to coordinate effort and capture price premiums determined in the global market.publishedVersio

Investigating Salmon Price Volatility

An understanding of the structure of price volatility is of great interest since this is a major contributor to economic risk in the salmon industry. The volatility process in salmon prices was analyzed based on weekly price data from 1995 to 2007. The Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model was used to test for volatility clustering and persistence of volatility for prices. We find evidence for and discuss the degree of persistence and reversion in the salmon price volatility. We further find that the usual assumption of an independent zero mean normally distributed error term is not satisfactory when describing the salmon price process

Tiltak for å øke produksjonen av laks og ørret i Nordhordland

Denne rapporten ser på bedrifts- og samfunnsøkonomiske effekter av å delvis lukke oppdrettslokaliteter i Nordhordland. Oppdretterne i Nordhordland er i PO4, et geografisk produksjonsområde som siden 2020 har vært farget rødt i trafikklyssystemet, og dermed gitt 2 etterfølgende nedtrekk i maksimal tillatt biomasse (MTB). Nedtrekk gir en direkte negativ effekt på den delen av verdiskapingen som genereres av havbruksnæringen og verdikjeden. Fortsetter nedtrekkene i denne regionen, vil verdiskapingen og produksjonen falle ytterligere. Med to nedtrekk vil verdiskapingen i PO4 bli redusert med om lag 1,7 mrd kr. per år. En delvis lukking av anlegg hvor konvertering til lukkede anlegg på 50 prosent av lokalitetene kombinert med en økning på 25 prosent i MTB kan verdiskapingen øke med nesten 4 mrd. kr per år sammenlignet med en situasjon med 2 nedtrekk. Tilsvarende vil en lukking av 25 prosent av lokalitetene vil gi omtrent like stor økning i verdiskaping som en reversering av 2 nedtrekk. Beregningene viser at der er stor forskjell på å fortsette som nå med rød PO og nedtrekk, og en koordinert og samlet strategi for å snu situasjonen.Tiltak for å øke produksjonen av laks og ørret i NordhordlandpublishedVersio

Estimating the Competitive Storage Model with Stochastic Trends in Commodity Prices

We propose a State-Space Model (SSM) for commodity prices that combines the competitive storage model with a stochastic trend. This approach fits into the economic rationality of storage decisions and adds to previous deterministic trend specifications of the storage model. For a Bayesian posterior analysis of the SSM, which is nonlinear in the latent states, we used a Markov chain Monte Carlo algorithm based on the particle marginal Metropolis–Hastings approach. An empirical application to four commodity markets showed that the stochastic trend SSM is favored over deterministic trend specifications. The stochastic trend SSM identifies structural parameters that differ from those for deterministic trend specifications. In particular, the estimated price elasticities of demand are typically larger under the stochastic trend SSM.publishedVersio

Estimating the Competitive Storage Model with Stochastic Trends in Commodity Prices

We propose a state-space model (SSM) for commodity prices that combines the competitive storage model with a stochastic trend. This approach fits into the economic rationality of storage decisions, and adds to previous deterministic trend specifications of the storage model. Parameters are estimated using a particle Markov chain Monte Carlo procedure. Empirical application to four commodity markets shows that the stochastic trend SSM is favored over deterministic trend specifications. The stochastic trend SSM identifies structural parameters that differ from those for deterministic trend specifications. In particular, the estimated price elasticities of demand are significantly larger under the stochastic trend SSM