Characteristics of price packages for the more significant domestic farm productions

Varga, Tibor – Tunyoginé Nechay, Veronika – Kemény, Gábor

Keywords: price centre, price transmission, merchandising channels, co-integration, farm produce, market force

The fragmentation of farm production determine marketing forms due to the varying concentrations of production phases, price packages emerging through the chain of commercial activities and attainable profits or losses. Our calculations confirm the opinion of market personnel that in the case of most farm produce the advantage is always with the most concentrated side, in the merchandising phase. Retailing chains are not only price leaders but they also determine prices throughout the vertical range through their import prices of processed products. Profits in most cases are made by the processors rather than the producer.
According to our investigations sectional advantage strongly varies with produce, a part of it lacks stability and may easily turn in favour of one vertical partner to another, primarily between merchants and processors. Other factors such as weather conditions affecting yields may influence prices so much that market advantage may shift from one section to another. In the case of most farm production investigated, price differences between neighbouring phases after a price jump may not wholly equilibrate, although without the jump they would tend to be stable. Consequently market sides in weaker positions are unable to obtain value proportional prices on the long run, thus price projections are adjusted according to the new situation leading to a continuous devaluation of their produce. An ultimate solution for this situation is the organisation of farmers for strengthening and stabilizing their market positions.

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