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Fish Price Volatility

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Fish Price Volatility Atle Oglend Roy Endr Dahl FAO FPI Workshop, Ischia, 03.10.13 Mean Monthly Trade Quantity: EU Japan U.S. Mean Trade Variation: Japan EU ... – PowerPoint PPT presentation

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Title: Fish Price Volatility


1
Fish Price Volatility
  • Atle Oglend
  • Roy Endré Dahl
  • FAO FPI Workshop, Ischia, 03.10.13

2
Introduction
  • Fishing is a risky venture
  • Price variability is a significant risk component
  • Few studies on fish-price volatility, relative to
    other agricultural commodities
  • Data availability
  • Single species volatility studies (e.g. Oglend
    and Sikveland, 2008 Oglend, 2013, Sollibakken,
    2012 Buguk et. al. 2003)
  • Forecast studies (e.g. Guttormsen, 1999 Vukina
    and Anderson, 1994 Gu and Anderson, 1995).

3
Introduction
  • We utilize trade-data to analyse fish-price
    volatility on a global scale
  • Fish is a highly traded commodity group
  • Accounts for 10 percent of total agricultural
    exports (FAO, 2012)
  • Data allows statistical analysis of volatility
  • 2012 State of World Fishers report (FAO)
  • In the next decade, with aquaculture accounting
    for a much larger share of total fish supply, the
    price swings of aquaculture products could have a
    significant impact on price formation in the
    sector overall, possibly leading to more
    volatility

4
Volatility in Agricultural Prices
  • Price volatility suggests a fundamental level of
    uncertainty and risk
  • Generally considered undesriable
  • Not all price variations imply uncertainty
  • Terms of trade variability can have a negative
    impact on economic growth
  • Variability in agricultural prices are generally
    considered high
  • Varies over time and across products

5
Volatility in Agricultural Prices
  • Supply shocks generally considered more important
    than demand shocks in terms of price movements
  • Variations in catches, stocks, quotas, growth
    conditions, climate, diseases etc.
  • Elasticity of demand and short-run supply is low
  • Higher el. of supply for aq. than capture
    fisheries
  • Elasticity of income is low gt macro-economic
    fluctuations are of less direct importance to
    prices
  • Impact through input factor prices
  • Storability reduces volatility
  • Higher volatility for fresh fish
  • National trade policies can influence global
    prices

6
The FAO fish-price index
  • The FAO fish price index summarizes common trends
    in fish prices world-wide

7
Data
  • Monthly trade-data on fish and fishery products
    imported to the U.S., Japan and EU
  • Important import markets
  • Reliability of data
  • Data provided by the Norwegian Seafood Council in
    cooperation with the FAO
  • The data is characterized along four dimensions
  • Markets EU, Japan, U.S.
  • Technology Aquaculture, Capture Fisheries
  • Species groups White Fish, Salmonidae,
    Crustaceans, Tuna, Pelagic excluding Tuna, Other
    Fish,
  • Product forms fresh, frozen, filet, whole and
    fishmeat
  • Observations from January 1990 to October 2012

8
Data
  • Price unit import-value
  • Volatility std.dev. of month-by-month
    log-returns
  • Avoids potential trend effects
  • 106 unique prices
  • Some missing values in the data
  • We exclude prices with less than 30 observations
  • Additional variables considered when comparing
    volatilities
  • Obs. used to calculate volatility
  • Sampling heterogeneity
  • Monthly average trade volume
  • C.V. of trade volume

9
Volatility for different groups
10
Method
  •  

11
Method
  • Regime Analysis
  • Iterated Cumulative Sum of Squares (Inclan and
    Tiao, 1994)
  • Originally developed to identify volatility
    regimes in financial time-series
  • We look for differences in volatility across time
    for each category
  • Only applied to prices with complete observations
  • Volatilities in each category is weighted by
    trade volume
  • Accounts for statistical variations across time

12
Conditioning Variables and Volatility
           
Regression of Log Std. Dev. on different conditioning variables. Regression of Log Std. Dev. on different conditioning variables. Regression of Log Std. Dev. on different conditioning variables. Regression of Log Std. Dev. on different conditioning variables. Regression of Log Std. Dev. on different conditioning variables.  
           
Variable Coefficient t-stat Specification Tests (p-values) Specification Tests (p-values)  
Constant -0.213 -0.435 AR 1-2 test 0.547  
Log Mean Trade Volume -0.170 -6.670 ARCH 1-1 test 0.165  
Log obs. -0.023 -0.185 Normality test 0.334  
Log C.V. Trade Volume 0.548 6.180 Hetero test 0.459  
Log sampling Heterogeneity 0.023 0.065 Hetero-X test 0.722  
      RESET23 test 0.087  
           
           
13
Conditioning Variables and Volatility
14
Volatility Across Markets
  • Regression Analysis Results
  • No statistically significant differences in
    volatility across markets
  • Regime Analysis Results

15
Volatility Across Technology
  • Regression Analysis Results
  • Aquaculture prices significantly lower volatility
    than capture fisheries(wild) prices
  • 2. Regime Analysis Results

16
Volatility Across Species
  • Regression Analysis Results
  • Significantly higher volatility for the pelagic
    group
  • Supply from capture fisheries
  • Robust against trade volume and trade variations
  • Some evidence that the Salmonidae group has lower
    volatility
  • Significant only when trade variation is
    accounted for

17
Volatility Across Species
  • Regime Analysis Results

18
Volatility Across Product Forms
  • Regression Analysis Results
  • Fresh vs. Frozen
  • No evidence for significant differences in
    volatility
  • Filet, Fish-meat and Whole fish
  • Filet has significantly lower volatility than
    whole fish and fish-meat
  • Robust across trade quantity and variation

19
Volatility Across Product Forms
  • 2. Regime Analysis Results

20
Volatility Across Product Forms
  • 2. Regime Analysis Results

21
Volatility rankings (lower is higher volatility)
22
Volatility rankings (lower is higher volatility)
23
To Summarize
  • Differences in volatility across fish categories
  • No significant difference in volatility across
    import markets
  • Aquaculture lower volatility than capture
    fisheries
  • Pelagic highest volatility of the species group
  • No significant differences between fresh and
    frozen fish
  • Filets lower volatility than whole fish and
    fish-meat
  • Fish vs. other commodities
  • Aquaculture comparable volatility to other
    commodities, but above chicken and feeder-cattle
  • Wild fish (pelagic) very high volatility
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