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Price transmission in the Romanian agrifood chains in the context of market
instabilityCECILIA ALEXANDRI, Institute of Agricultural Economics, email: [email protected]
Conference SFER – Rural’Est: 20 ans de transition agricole et rural a l’Est: quel enseignements?
Presentation contents
Instability of world and European agricultural markets – evolutions and causes
Methodological elements, data sources, indicators for the analysis of Romania’s situation
Discussion of results regarding the agricultural prices, the processing prices and consumer prices evolution in Romania
The analysis of price volatility in different stages of the agrifood chains
Conclusions
Causes of price crisis on the agricultural markets
Structural factors Agricultural productivity
trends stagnate or decrease
Lack of public funds invested in agricultural research
Fast growth of demand due to record development rates, urbanization and change of diet in the emergent countries
Other destinations given to the agricultural production (biofuels)
Seasonality of agricultural production constrains the adjustment possibility
Conjuncture Extreme weather
conditions Low level of stocks Increase of energy and oil
prices Increased presence of
speculative investment funds on agricultural raw materials markets
Economic crisis
Food prices evolution at world level(%)- FAO food price
index-
Monthly prices evolution at world level in the year 2010-2011
Influence of incomes growth upon change of diet in the emergent countries (FAO)-Meat consumption evolution per capita
How price transmission along the agrifood chains is investigated
The intensity of adjustment
How much of the agricultural price variation is transmitted along chains to final consumersThe transmission intensity depends on the cost structure, chain and market operation, etc
Rate of adjustment
Length of time in which the agricultural price variation is transmitted to the final consumer-The marketing policy of large retailers-Spatial dispersion and number of stages of the chains
The asymmetry of price adjustment
To what extent the increase or diminution of agricultural prices is transmitted to the final consumerIncrease of agricultural price increase of consumer priceDiminution of agricultural price increase or diminution of consumer price
What happens to the food prices in the European Union countries
Agricultural prices are volatile, mainly in the recent period- since 2007 there have been two price increase/decrease cycles.
Consumer prices are more stable. On long term (in the last 50 years) :-Agricultural prices had a decreasing
tendency, but many experts support the vision that the trend will reverse in the next years
-Consumer prices had a slow increasing tendency, almost continuous
Magnitude of price variation along the agrifood chains in EU-27, in
the period 2007 – November 2010
Food price variation in the European Union, Bulgaria and
Romania (% February 2011 compared to February 2010)
Methodology and data sources used for investigating the prices along the food chains in Romania
Monthly series of agricultural price, processing price and consumer price indices, by sector and by main products
Perioad January 2006-November 2010 Analysis of price transmission at the level of the
entire agrifood sector and for the baking and meat and meat products chains
Analysis of price volatility in different stages of the chains and their dispersion evaluation, by certain time periods, through variation coefficients .
Price variation transmission along the agri-foods chains in Romania
(%)
Evolution of agricultural commodity prices, of the processed products prices and of consumer food prices in Romania in the period 2006/2010 (2005=100)
IPCa - 29%, Pret procesare - 54%, Pret agricol - 66%
Price variation transmission along the chain of milling and baking products, in Romania (%)
Prices evolution in the different stages of the milling and baking chain (2005=100)
Transmission of price variation along the chain of meat and meat products (%)
Evolution of prices along the chain of meat and meat products (2005=100)
Variation coefficients of the prices in the different stages of the agri-food chain (%)
0
2
4
6
8
10
12
14
16
18
11.2 10.8
16.2
9.4 8.9
5.8
8.4
5.13.4
4.5
2.4
8.8
0.5 0.7 0.71.2
4.6
0.6 1 0.8
%
Crop products
Animal products
Processing prices
Consumer prices
Variation coefficients of agricultural prices in Romania and on the European market (period 2005-July 2010)
In the period of economic growth the incomes increased, but they experienced a great territorial dispersion
INCOMES EVOLUTION IN REAL TERMS
GDP IN PPP-S TERMS IN DIFFERENT REGIONS OF ROMANIA
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
0
20
40
60
80
100
120
140
Wages Pensions
1990=
100%
Roman
ia
Cent
ru
Sud-
Est
Bucur
esti
Vest
0
20
40
60
80
100
120
4741
45
29
39 39
113
36
5120062008
UE=
100%
The population’s food consumption in Romania improved in recent years in qualitative terms
ANNUAL AVERAGE CONSUMPTION PER CAPITA IN 2009
CHANGES IN THE FOOD CONSUMPTION IN ROMANIA IN THE YEAR 2009 COMPARED TO
THE YEAR 2000
A few conclusions: In the investigated period 2005- November 2010: The agricultural prices experienced size variations higher than in
EU , mainly prices of vegetable products, due to the instability of the Romanian agricultural supply and fragmentation of the regional markets.
The consumer prices were more stable, being restricted by the purchasing power, yet they have an almost constant increasing tendency at low rates.
Price transmission along the chains has an asymmetric character in the sense that the processing price and the consumer price increase even though the agricultural price decreases (for instance on the meat and cereal products chain)
The distortions in price variation transmission along the chains is mainly due to the asymmetry of the negotiation power between the economic operators on the agrifood chains and the farmers, and to the imperfect competition on the markets
A significant part of the consumed food products comes from import (for example: vegetables, fruit, meat preparations, even cereals in some poor agricultural years); that is why the world and European market evolutions are directly felt by the Romanian consumer
In November 2010, compared to 2005, in nominal terms: -agricultural prices increased by 80% -processing prices increased by 56% - consumer prices by 30% -the gross average salary income by 101%