W. Erno Kuiper

Testing for the law of one price and identifying price-leading markets: an application to corn markets in Bénin

A data-determined method is proposed to test for the law of one price as a long-run equilibrium condition and to identify which markets in a network of spatially dispersed commodity markets quote the reference price. The method consists of supplementing Johansens FIML cointegration procedure with a permanent-transitory decomposition and rules of inference in linear time-series models with unit roots. As an example, we apply our method to prices of six corn markets in Benin. We find that the law of one price holds in the long-run. It appears that two rural markets quote the reference price: their prices adjust fastest towards the permanent change induced by the common stochastic trend.

Agency Problem and Hedging in Agri-Food Chains: Model and Application

The last 4 decades have seen the transformation of food supply chains from being supply driven to becoming much more closely integrated with consumer demand. With this development, the transaction mechanism in food marketing channels has changed from an open-market mechanism to coordination through the use of contract-supply arrangements between farmers and food processors and retailers. In this article, we assess the interaction of marketing channel members through the use of contracts and its impact on incentives, coordination costs, risk aversion, risk allocation, and risk management strategies. For this purpose we specify a 3-stage principal-agent supply chain model involving producers, wholesalers, retailers, and a futures market. We compare the situation with and without a futures market. The empirical results regarding the Dutch ware potato marketing channel during 1971 to 2003 reveal that as a result of increases in incentives to producers and wholesalers, the coordination costs of the marketing channel decreased significantly, both with and without futures trade. The coordination costs of the marketing channel in the case with a futures market appear to be lower than without futures, demonstrating the informational (i.e., price discovery) role of futures markets.

The Price Path Due to Order Imbalances: Evidence from the Amsterdam Agricultural Futures Exchange

The lack of sufficient market depth particularly in many newly initiated futures markets results in relatively high hedging costs, and this inhibits the growth of futures contract volume. In this article the price path due to order imbalances is analyzed and a two-dimensional market depth measure is derived. Understanding the underlying structure of futures market depth provides the management of the futures exchange with a framework for improving their market depth and gives hedgers a better understanding of market depth risk. The managerial implications of our findings are demonstrated empirically using data from the Amsterdam Agricultural Futures Exchange.

Market performance of potato auctions in Bhutan

Abstract Market performance with respect to a main horticultural export commodity in Bhutan is the subject of this paper. Imperfections in (market) infrastructure and market structure and conduct may prevent an optimal price for farmers. Market performance is assessed by testing the law of one price for this commodity. This is done by testing three series of auction price data on both long-run and short-run price integration. It is concluded that for the period 1996-2000 the auction prices were interrelated both in the long and short run with one of the three auctions as the price-leading market. In contrast, in the period 2001-2005 the market arbitrage process slowed down, indicating the rise of market imperfections. Policy implications are suggested.

Attitudes of Dutch Citizens toward Sow Husbandry with Regard to Animals, Humans, and the Environment

ABSTRACT The pig industry is struggling with negative attitudes of people toward sow husbandry. To be able to respond to these attitudes, the pig industry first has to understand people’s attitudes. The first objective of this study was to determine the attitudes of Dutch people toward sow husbandry with regard to animals, humans, and the environment. The second objective was to group people based on their attitudes toward sow husbandry and determine and compare the socio-demographic characteristics of these groups. An online survey was conducted in the Netherlands and there were 1,607 respondents. On average, respondents had negative attitudes toward all issues defined in this study. The most negative attitudes were toward the effect on both animals and consumers of the use of antibiotics, the number of animals kept per square meter, the possibility for animals to go outside, food safety risks, public health risks, and environmental waste. The findings indicate the importance of considering all the issues identified in this study during the process of developing measures to improve people’s attitudes toward sow husbandry. Respondents could be divided into four clusters; each cluster represented different attitudes toward sow husbandry and had different socio-demographic characteristics. This makes it possible for the pig industry to assign people with specific socio-demographic characteristics to one of the clusters and predict their attitudes toward sow husbandry. Knowledge of these attitudes enables the pig industry to predict how different groups of people will respond to different animal welfare measures. Results of this study are therefore useful for the pig industry to help improve people’s attitudes toward sow husbandry.