Price Transmission In China’s Pork Market

When the pork price is skyrocketing, the consumers have to pay more money and the producers gain no more profit, which seems to be that the increase in wholesale price is greater than that of producer price. After the outbreak and food safety incidents, the declining pork demand makes the producer price decrease more severely than wholesale price. It is believed that the price transmission is asymmetric in swine market. Along with China’s economic transition and the marketization process, there are drastic changes favorable to the efficient utilization of resources and to the trade of commodities operating among districts, and this has been caused the provincial hog prices showing the spatial interaction and the spatial effect. Therefore, an investigation on the impact factors of hog prices from the view of spatial econometrics is an important supplement to the previous literatures that ignored the spatial effect of provincial prices. The fluctuation of hog and pork prices caused great influence on the residents’life and the health development of the swine industry. Therefore, analyzing vertical price transmission along supply chain and the spatial effect of provincial hog prices could provide relevant policy information on pork price stable and promoting the healthy development of the swine industry.This research first subscribes the characteristics of the major links of swine market, the fluctuation of price spread of swine market and the relevant policy. Then based on the analysis about the relationship between the vertical coordination and the price transmission, the vertical price transmission mechanism at the farm and retail levels in the China’s swine market is investated using the threshold error correction model and the relation between distance and asymmetry price transmission is analyzed. At last, based on the spatial correlation test, the spatial econometric model is used to investigate the spatial effect of hog price and its marginal effect.The results indicate that there is a long-term relationship between farm and retail prices, and that a short-term threshold adjustment exists between farm and retail prices for hog-export provinces, while short-term linear adjustment for non-hog-export provinces. The results also revealed that the negative asymmetric exist in the price adjustment process for Sichuan, Hunan and Henan provinces, and the positive asymmetric for Jilin province.The results confirm the existence of spatial correlation for hog prices and the agglomeration effect is significant. The provincial hog prices present disequilibrium characteristics in the spatial distribution. The results also suggest that demand index, piglet price, maize price, and epidemic all positively influence local hog price, and the hog price is more sensitive to the fluctuations of piglet price and maize price. The stability of piglet price and maize price have a positive effect on the stability of hog price, while the outbreak of epidemic and financial crisis negatively influence the stability of hog price, and the relevant policy on swine market help to stable hog price.Asymmetric price transmission in hog-export provinces and the spatial effects of hog prices, based on the results, should be carefully considered when pork price control policy and industrial policy are being designed. First, the province with higher cost of product, greater demand or frequent outbreaks should be emphasized when the hog-pirce-monitoring-system is established, and maize price, piglet price and their stability should also be included in the monitoring system. Second, the early-warning information should be released as quickly as possible to prevent the price get into the threshold range with a quicker adjustment speed result in huge fluctuation of hog price. Third, local policy is more suited to these results than global policy. The implementation of local policy toward some pig-producing regions can avoid wasted money and effort in duplicating the policy in different regions and even improves the targeting of policy by avoiding the interworking of global policy implemented in each region.