Price transmission in the beef industry in Chile
This study analyzes the price transmission process in the beef chain in Chile, using time series analysis and cointegration methods. We present a background of the industry, in which the relevant participation of imports in the availability of meat for national consumption stands out. Commercial transactions, from the primary level to the retail distribution level, carried out in the markets made possible to have the necessary information for price transmission analysis using a vertical perspective, along the value chain, based on the expected relationship between inputs, products at the wholesale level and final ready-to-cook products.
The analysis presented in this document support the hypothesis that the beef chain in Chile would be integrated through their prices, and that this integration substantively includes the imported products, which corresponds mainly to ready-to-cook meat products (meat in pieces) from Mercosur countries. The results of the estimated models are indicative that in addition to the existence of price transmission, it is high and consistent with expectations. Thus, in an open market, with high volumes of imported products such as beef in Chile, the agents in the chain must continue to face the strong incidence of foreign competition that will certainly continue in the future.
The implications of these results, observing the regional livestock context in which Chile is immersed, suggest the development of strategies focused on the search for differentiation, special brands and quality seals that attract consumer demand, which will generate greater value, at the same time that they will make it possible to face the competition in more appropriate strategic terms, based on a differentiation by quality or specific characteristics of the national product. Likewise, the background information analyzed allows us to account for the existence of a wholesale distribution market for ready-to-cook meat products that is currently not well represented in the statistics available for the industry, which makes it recommendable that efforts be devoted to gather frequently updated price information of the products that are traded in this market.
Full citation: Farías P., Claudio; Espinoza H., Álvaro; and Giacomozzi, Jaime. (2016). Santiago, Chile: Bureau of Agricultural Studies and Policy (ODEPA), Market Analysis Department.
This Working Paper was presented in the Conference “Agricultural Productivity, Climate Change and Sustainable Resource Management”, IAAE Inter-Conference Symposium & V Congreso Regional de Economía Agraria, Talca, Chile, Oct. 17-18, 2017.