The effect of trade liberation on the salmon market in Finland

1
The effect of trade liberationon the salmon
market in Finland

• By Jari Setälä1), Per Mickwitz2), Jarno
  Virtanen1), Asmo Honkanen1) and Kaija Saarni1)
• 1) Finnish Game and Fisheries Research Institute
• 2) Finnish Environment Institute
• IIFET 2002
• New Zealand

IIFET 2002, Wellington
2
Aim of the study

• Is to find out if the prices of imported salmon
  and domestic wild salmon and farmed salmon trout
  are co-integrated,
• i.e. do they belong to the same market?

IIFET 2002, Wellington
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Growing salmon market

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Prices converge in the 1990s

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Monthly real prices of domestic salmon trout and
wild salmon and imported salmon in 1992-2000

IIFET 2002, Wellington
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Monthly quantities of domestic salmon trout and
wild salmon and imported salmon in 1992-2000

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Co-integration analysis
Deflation (CI) Logarithms
Data tranformations

Unit root tests (ADF)
Stationarity
Johansen test
Co-integration

Exclusion tests
Are all price series co-integrated?
Weak exogenity test
Causality


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Studied time series

Time series 1992-1994 Prior
EU 1995-2000 Post EU 1992-1997 (6) Prior
MIP 1997 (7)- 2000 Post MIP 1993-1996 (6)
Time of radical change 1992-95-96-97-98-99-00
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Results unit root tests

All the tested series were non-stationary at the
levels and their first difference was
stationary, and can be included in co-integration
tests One exception Rainbow trout 1992-1994
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Results of multivariate analyses

Time series Cointegration 1992-1994, prior
EU ---- 1995-2000, post EU Yes 1992-1997(6),
prior MIP Yes 1997(7)-2000, post
MIP No 1993-1996(6) Yes 1992-95 Yes 1992-96
Yes 1992-97 Yes 1992-98 Yes 1992-99 Y
es 1992-2000 Yes
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Results of exclusion tests

Time series Part of the common
system Salmon trout Imported salmon Wild
salmon 1992-1994, prior EU ---- --- --- 1995-2
000, post EU Yes No Yes 1992-1997(6), prior
MIP Yes Yes Yes 1997(7)-2000, post
MIP ---- --- --- 1993-1996(6) Yes Yes Yes 19
92-95 Yes No Yes 1992-96 Yes Yes Yes 1992-
97 Yes Yes Yes 1992-98 Yes Yes Yes 1992-99
Yes Yes Yes 1992-2000 Yes Yes Yes

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Results of exogeneity tests

Time series Leading
price Salmon trout Imported salmon Wild
salmon 1992-1994, prior EU ---- --- --- 1995-2
000, post EU No Yes No 1992-1997(6), prior
MIP Yes Yes No 1997(7)-2000, post
MIP ---- --- --- 1993-1996(6) No
Yes No 1992-95 No Yes No 1992-96 Yes
Yes No 1992-97 Yes Yes No 1992-98 Yes
Yes No 1992-99 Yes Yes No 1992-2000 Yes
Yes No

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Adjustment speed towards equilibrium

Time series Adjustment
coefficient Salmon trout Imported salmon
Wild salmon 1992-1994, prior EU ---- --- --- 1
995-2000, post EU -0,08 0,17 0,46 1992-1997(6
), prior MIP -0,11 -0,11 0,63 1997(7)-2000,
post MIP ---- --- --- 1993-1996(6) -0,31 -0,1
6 0,67 1992-95 -0,11 0,31 0,71 1992-96 -0,1
0 -0,20 0,55 1992-97 -0,09 0,15 0,62 1992-98
-0,08 0,02 0,59 1992-99 -0,08 0,15 0,49 1
992-2000 -0,10 0,17 0,44

IIFET 2002, Wellington
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Results of bivariate tests
Time series Cointegration
Salmon trout/ Salmon trout/ Imported
salmon Imported salmon Wild salmon
Wild salmon 1992-1994, prior EU ---- ---
No 1995-2000, post EU Yes Yes Yes 1992-1997(6
), prior MIP No Yes Yes 1997(7)-2000, post
MIP No No No 1993-1996(6) Yes Yes Yes 1992-9
5 Yes Yes Yes 1992-96 No Yes
Yes 1992-97 No Yes Yes 1992-98 No Yes
Yes 1992-99 No Yes Yes 1992-2000 No Yes
Yes

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Conclusions
There is a long-run relationship between the
prices of domestic salmon trout, wild salmon and
imported salmon Changes in prices of imported
salmon and salmon trout affect quickly to the
price of wild salmon The price of imported
salmon influence the price of salmon trout
They are substitutes, even not perfect ones The
results of imported salmon and salmon trout are
sensitive to the period investigated

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Conclusions

• Why not co-integration all the time
• Not same fish species - not perfect substitutes
• Salmon has an effect on salmon trout - not the
  other way around
• Structural changes
• changes in value chain - concentration
• changes in use of salmon trout from fresh to
  processed products
• EU and MIP

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Monthly prices of domestic rainbow trout and
imported salmon in 1992-2000

18
Monthly prices of domestic wild salmon and
imported salmon in 1992-2000

19
Monthly producer prices of wild salmon and farmed
rainbow trout in 1992-2000

20
Import of fresh salmon was liberated in 1990s

21
The value of market collapsed in 1994-97