Assessing Market Functioning: The Case of the Hungarian Milk Chain

The paper discusses the impact of market power in the Hungarian milk chain. In a first step a vector error correction model is estimates to assess whether a domestic market for raw milk exists. Since the answer was positive we proceed by developing a structural market model of the Hungarian market for raw milk that is able to identify a possible affect of market power on resource allocation. A nonlinear 3SLS approach was applied to estimate the supply and the demand for raw milk. The results provide that despite the high concentration of in dairy processing the indications for market poser are rather limited. The Bertrand like equilibrium can be attributed to the low degree of capacity utilization in dairy processing and the marketing alternative of farmers.market power, market integration, dairy, Hungary., Livestock Production/Industries, Marketing,

The Choice of Technology in Russian Agriculture: An Application of the Induced Innovation Hypothesis

Even after more then ten years after the beginning of the transition process, Russian agriculture shows only limited sign of a recovery. Production has not reached the level of the pre-transition period and investment is still on a very low level. In this paper we use the "Theory of Induced Innovation" in order to access the development of production structures in Russia and to identify the major obstacles for restructuring. We argue that due to multiple market failure (capital, labour) and inappropriate institutional arrangements inherited from Soviet times hinder the development of Russian agriculture. Both reasons causes that agricultural enterprises have difficulties with regard to an adjustment of factor input and production corresponding to the real scarcities of production factors. Agricultural policies based on subsidizing factor use or minimum prices will be an inefficient approach to solve the problems. A promising approach instead would be encouraging market transactions and fostering the integration of agricultural enterprises in the regional and domestic factor and product markets.technical change, efficiency, Russia, agriculture, induced innovation theory, Agribusiness, Q11, Q16,

Incentive Compatible Pricing and Quality Adoption: The Case of the Polish Dairy Sector

We construct a model to identify determinants of the diffusion rate of standards in a food chain. We argue that adoption decisions in the food chain are determined by farmers and processors economic considerations. Factors such as pricing behavior, compliance costs and market structure, all of which influence the adoption of standards, are identified and discussed in the paper. The findings are used to test an econometric model utilizing data on Polish milk processing firms in the period between 2000 and 2002. The results indicate that input and output prices have a significant influence on the diffusion rate of standards. The dominance of large-scale holdings in the relevant procurement market significantly increases, whereas high compliance costs decrease the diffusion. Small cooperatives were found to face significant problems in procuring high quality raw materials compared to their competitors.product quality, standards, EU enlargement, industrial organization., Industrial Organization, Livestock Production/Industries,

Farm Heterogeneity and Efficiency in Polish Agriculture: A Stochastic Frontier Analysis

This paper deals with the estimation of a random coefficient model. The virtue of this approach is that it considers firm heterogeneity, which conventional SFA models do not. Applying the model to Polish farms, the results indicate that the conventional random and fixed effect models overestimate the inefficiency score. In addition, the reasons for inefficiency are analysed. It is shown that despite the fragmentation of Polish agriculture, there is no evidence for scale inefficiency. Moreover, inefficiency could partly be attributed to factors, which affect the management input and requirements on farms.SFA, random component model, Poland, agriculture, management, Farm Management,

The Need for Theoretically Consistent Efficiency Frontiers

The availability of efficiency estimation software freely distributed via the internet and relatively easy to use recently inflated the number of corresponding applications. The resulting efficiency estimates are often used without a critical assessment with respect to the literature on theoretical consistency, flexibility and the choice of the appropriate functional form. The robustness of policy suggestions based on inferences from efficiency measures nevertheless crucially depends on theoretically well-founded estimates. This paper addresses stochastic efficiency measurement by critically reviewing the theoretical consistency of recently published technical efficiency estimates. The results confirm the need for a posteriori checking the regularity of the estimated frontier by the researcher and, if necessary, the a priori imposition of the theoretical requirements.functional form, stochastic efficiency analysis, theoretical consistency, Research and Development/Tech Change/Emerging Technologies, C51, D24, Q12,

Efficiency and Heterogeneity in Czech Food Processing Industry

Agribusiness,

Transition and foreign trade: the case of the Ukrainian agri-food sector

The purpose of this paper is to assess the progress of the transformation process and to analyse which policy measures are necessary for further economic integration into world markets. In this study we concentrate on the Ukrainian agri-food sector. The development of foreign trade may serve as indicator of success of market reforms. Thus we analyse the changes in the trade structure of agri-food sector and compute indicators of inter- (RTA Index) and intra-industrial (Grubel-Lloyd Index, Brülhart A-Index, characterising the marginal intra-industry trade) trade for the period 1996-2005. We discuss also which policy measures are necessary for further economic integration of Ukraine into world markets.agri-food sector, intra-industry trade, marginal intra-industry trade, Ukraine, International Relations/Trade,

Explaining Quality Differences at the Procurement Stage in the Polish Milk Sector

The challenge of implementing EU quality and safety standards for food production and trading is one of the driving forces behind the restructuring of the agrofood chains in Central and Eastern European Countries (CEEC). The progress made in the compliance process not only varies amongst sectors and countries, but also among particular chains due to differences in their internal structure and strategies, and features of their political and economic surroundings. We construct a models to identify determinants of the diffusion rate of standards in a food chain under pre-accession conditions. We argue that adoption decisions in the food chain are determined by farmers' and processors' economic considerations. Factors such as pricing behavior, compliance costs and market structure, all of which influence the adoption of standards, are identified and discussed in the paper. The findings are used to test an econometric model utilizing data on Polish milk processing firms in the period between 2000 and 2002. The results indicate that input and output prices have a significant influence on the diffusion rate of standards. The dominance of large-scale holdings in the relevant procurement market significantly increases, whereas high compliance costs decrease the diffusion. Small cooperatives were found to face significant problems in procuring high quality raw materials compared to their competitors. The material in the paper will be converted into a single sheet, as recommended in the conference instructions for preparing a poster presentation. Please find attached the rough layout of our poster presentation.product quality, standards, EU enlargement, industrial organization, Livestock Production/Industries, Marketing,

Technical and economic efficiency of Russian corporate farms: the case of the Moscow region

The research focus of the paper is to distinguish allocative and technical inefficiencies on Moscow region corporate farms. DEA specifications with both monetary and technical objective functions are applied. Reduced costs and sensitivity analyses are used to identify fixed inputs constraining either allocative or technical efficiency. To decrease heterogeneity and allow for the accessibility to different technologies of a given farm, the farms are grouped with respect to the set of outputs they produce. Thus, as a result of an unstable market environment, it is shown that allocative inefficiency causes 65-100 % (depending on the group) of total inefficiency in 2002 and 60-96 % in 1999. As for technical inefficiency, in 1999 its major source was the lack of liquidity (30-48 %) and other resources; in 2002 it was the lack of fodder (up to 37 %), liquidity (up to 31 %) and sown area (48 % in one of the groups). The role of insufficient management in regional farming inefficiency is evaluated as being much lower than many earlier studies suggest. -- G E R M A N V E R S I O N: In dem Diskussionspapier wird eine Unterscheidung zwischen allokativer und technischer Effizienz landwirtschaftlicher Betriebe in der Region Moskau vorgenommen. Hierzu werden DEA-Modelle mit technischen und ökonomischen Zielfunktionen spezifiziert. Mit Hilfe von Sensitivitätsanalysen werden Inputs identifiziert, die zu allokativer und technischer Ineffizienz führen. Um die Heterogenität in der Stichprobe zu reduzieren und um die Verfügbarkeit von Technologien für die landwirtschaftlichen Betriebe besser abbilden zu können, werden die Unternehmen entsprechend ihrer Produktionsstruktur gruppiert. Die Ergebnisse zeigen, dass je nach Gruppen die allokative Ineffizienz in den Jahren 1999 und 2002 zwischen 60 und 100 % der gesamten Ineffizienz erklärt. Dies deutet darauf hin, dass das unzureichende Management von größerer Bedeutung ist, als frühere Studien vermuten lassen. Die Hauptursache für die technische Ineffizienz war 1999 das Fehlen liquider Mittel. Im Jahr 2002 waren neben der Liquidität, die Verfügbarkeit von Futtermitteln und die Saatfläche die Inputs, die für die Ineffizienz verantwortlich waren. Der Anteil der bindenden Restriktionen betrug in den einzelnen Gruppen bis zu 31 %, 37 % und 48 % bei den genannten Faktoren.Technical inefficiency,allocative inefficiency,Data Envelopment Analysis,Moscow region,transitional economy,Technische Ineffizienz,Allokative Ineffizienz,Data Envelopment Analysis,Region Moskau,Transformationsländer

Price Developments on the World Markets for Milk Products: The Case of Butter

A time series model is estimated to identify the interrelation among prices on the international and the EU domestic market for butter. Although the findings were not derived from a causal model, the inspection of the data provides economically reasonable and important insights in structural relationship between international and domestic prices. It can be expected that similar relationships exists for other milk products as well. The fact that international prices in the EU and Oceania are causal for each other is an indication of an integrated market. However, price transmission is not perfect suggesting that competition between the EU and Oceania exists, however, but not as intense as it could be expected for a homogeneous good like butter. The estimates provide further some indication that the EU absorbs price fluctuations form the word market. Interestingly, changes of prices in Oceania have no impact on the domestic EU market. Fluctuations of the EU world market prices, on the other hand, are absorbed to a large extent. The reason for this reaction remains unclear. One explanation may an inappropriate fixing export refunds. Price variations within the EU are also transferred to the international markets.dairy market, international trade, market integration, International Relations/Trade, Livestock Production/Industries, F15, Q13, Q17,