1. PA Comparative Study of Farm-Retail Price Spread in Asia
Thesis Proposal Oct
Name: PHAM Thi Phuong Loan
Advisor: Prof. Seung Chul CHOI
Department: Livestock Business and Marketing Economics

2. Elasticity of price transmission
INTRODUCTION
Price difference between farm and retail levels (constituted mostly by marketing costs and profits)
Farm price spread
High and increasing price spreads in agricultural products lead to controversy: producers blame low farm prices while consumers blame high retail prices
% change in one price for each 1% increase in the other price
Difference between prices at different stages of the supply chain
Elasticity of price transmission
PRICE
Marketing margins
Are marketing margins too large?
Why are margins different among products?
How have margins changed over time?
How quickly are farm prices transmitted to the retail level and vice versa? (Wohlgenant, 2001)
Measurement: Ratio of percentage changes between two time periods

3. INTRODUCTION Country: Vietnam and South Korea Commodity: Rice and Pork
RESEARCH QUESTIONS
OBJECTIVES
Compare farm price spread among commodities between the two countries;
Determine the model of farm-retail price spread;
Calculate the elasticities of price transmission for each commodity in each country.
What are the farm price spread differences among commodities?
What are the elasticities of price transmission for each commodity?

4. LITERATURE REVIEWS
Present basic framework for analyzing marketing margins (The relative model)
Gardner, 1975
Sources of variation in the retail-farm price spread: shifts in the retail food demand, in the farm product supply, in the supply of marketing services
Wohlegenant & Mullen, 1987
Compare two models of farm-retail price spread
The markup model: implies that retail and wholesale prices follow farm prices;
Brorsen et al., 1985
Price risks affect the price spread
How price uncertainty affects the price spread in the marketing channels of agricultural commodities
Beef, maize, wheat, dairy products, eco-labeled products, eggs
Empirical findings
Wohlegenant & Mullen, 1987; Faminow & Laubscher, 1991; Brorsen et al., 1985; Kinnucan & Forker, 1987; Carambas, 2005; Kinnucan & Nelson, 1993

5. Empirical Specifications (Wohlegenant & Mullen, 1987)
RESEARCH DESIGN
Empirical Specifications (Wohlegenant & Mullen, 1987)
(1)
(2)
(3)
t: time (month )
M: farm-retail price spread (retail price - farm price)
Pr: retail price
IC: index of cost (Producer Price Index)
Qt: quantity of commodity produced
ε: unobserved error
a , b, c: parameters to be estimated

6. RESEARCH DESIGN Data sources Data analysis VIETNAM SOUTH KOREA
General Statistics Office Of Vietnam
Agro Processing and Market Development Authority – Ministry of Agriculture and Rural Development
Korean Statistical Information Service
National Agricultural Cooperative Federation
Statistical Summary (min, max, mean, standard deviation) 01
Data analysis
Linear regression estimation (Ordinary Least Squares) 02
Calculate the elasticities of price transmission for each commodity in each country 03

7. EXPECTED RESULTS Statistical Summary No Variables Obs Min Max Mean Sd1
Farm price 2
Retail price 3
Farm-retail price spread 4
Index of cost 5
Quantity of commodity produced

8. Linear regression estimation
EXPECTED RESULTS
Linear regression estimation
Model 1
Model 2
Model 3 Pr IC
Pr*Qt Qt R2 F DW
Obs
∗∗∗,∗∗,∗ Significance at 0.01 level, 0.05 level, and 0.10 level

9. Elasticities of price transmission for each commodity, for example
EXPECTED RESULTS
Elasticities of price transmission for each commodity, for example

10. REFERENCES
Brorsen, B. W., Jean-Paul, C., Grant, W.R, and Schnake, L. D. (1985). Marketing Margins and Price Uncertainty: The Case of the U.S. Wheat Market. American Journal of Agricultural Economics, 67: 521–528.
Carambas, M. C. DM. (2005). Analysis of Marketing Margins in Eco-Labeled Products, XIth Congress of the EAAE 'The Future of Rural Europe in the Global Agri-Food System', Copenhagen, Denmark, August 24-27, 2005.
Faminow, M.D. and & Laubscher, J.M (1991). Empirical testing of alternative price spread models in the South African maize market, Journal of Agricultural Economics, 6: 49-66
Gardner, B.L. (1975). The Farm-Retail Price Spread in a Competitive Food Industry, Journal of Agricultural Economics, 57: 399–409
Kinnucan, H.W. and Forker, O.D. (1987). Asymmetry in Farm-Retail Price Transmission for Major Dairy Products, American Journal of Agricultural Economics, 69:
Kinnucan, H.W. and Nelson, R.G. (1993). Vertical Control and the Farm-Retail Price Spread for EGGS, Applied Economic Perspectives and Policy, 15: 473–482.
Wohlgenant, M. and Mullen, J. (1987). Modeling the Farm-Retail Price Spread for Beef, Western Journal of Agricultural Economics, 12:

11. Thank You!

12. Price spreads for beef and pork, 2000-2015, monthly in the US
Sebastien Pouliot and Lee Schulz (2016), Measuring Price Spreads in Red Meat, Agricultural Policy Review, Winter 2016