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Competitiveness of Salmon and Salmon Trout
Markets Along the Value Chain in Finland
By
Jessica Hartmann, Jari Setala , Kaija Saarni, Asmo
Honkanen and Jarno Virtanen
Project funded by the European Commission CT 1999-01346
‘Margins along the European seafood value chain: Impact of the salmon industry on market
structures’
1
Outline of presentation
 Purpose of this study
 Overview of the Finnish market for salmon and
salmon trout
 The marketing chain for salmon and salmon trout
 Methodology
 Results
 Conclusions
2
Introduction
 The fish market in Finland has changed dramatically
since the removal of trade barriers to the importation
of fresh salmon in 1993.
 Imported salmon has rapidly captured markets from
domestically produced salmon trout.
 There are fewer and larger firms at the wholesale and
retail level along the fish marketing chain in Finland.
3
Purpose of the study
1. Investigate the relationship between salmon and
salmon trout prices at different points along the fish
marketing chain in Finland.
2. Determine how price information is transmitted
through the fish marketing chain.
4
The Finnish market for
salmon and salmon trout
 Finnish salmon market comprises two fish species:
- domestically farmed salmon trout (rainbow trout
of 1-3 kilos marketing size); and,
- imported salmon from Norway.
 Imports of fresh salmon have grown to represent
around a third of the total market for salmon and
salmon trout in Finland.
5
Production and imports of salmon and
salmon trout in Finland
25
20
15
'000
tonnes
10
5
0
78
80
82
84
Salm on trout production
86
88
90
Im ported salm on
92
94
96
98
2000
Im ported salm on trout
6
The Finnish market for
salmon and salmon trout
 Salmon trout (rainbow trout) is increasingly being
substituted by salmon at the wholesale and retail
level in Finland.
 It is almost impossible for consumers to tell salmon
and salmon trout apart at the retail level.
7
Which one is salmon?
8
The marketing chain for
salmon and salmon trout
 Fewer and larger operators are undertaking the
delivery and marketing of salmon and salmon trout in
Finland.
 This is due both to the increased dominance of
supermarkets in retail sales, and also to innovations
in processing, transports, distribution and logistics,
that increase the efficient scale of operation.
9
The marketing chain for
salmon and salmon trout
 The market share of the two biggest retail chains in
Finland is 70 percent of total sales.
 The market share of the six biggest fish wholesale
companies in Finland is over 50 percent of the total
fish market.
 The large retailers trade predominately with the large
fish wholesalers.
 The production sector for salmon trout in Finland has
not concentrated as quickly.
10
The marketing chain for
salmon and salmon trout
 Often, salmon and salmon trout sold at retail in
Finland is sold through ‘retail campaigns’.
 Retail campaigns are one off sales campaigns
whereby large quantities of salmon and salmon trout
are sold at distinctly reduced prices in order to attract
people into stores to buy normal priced consumer
goods.
11
The marketing chain for
salmon and salmon trout
Production salmon
Production salmon trout
Wholesale salmon trout
Exports salmon
Norway
Imports salmon
Finland
Wholesale salmon
Campaign salmon trout
Retail salmon trout
12
Methodology
 Cointegration techniques and the Law of One price
are used to test for proportionally between prices
along the marketing chain for salmon and salmon
trout in Norway and Finland.
 Weak exogeneity tests are used to determine in
which direction price information is transmitted
through the marketing chain.
13
Price proportionality
The Law of One Price can be expressed as:
Inp1  a  blnp 2
where p1 and p2 are the prices of goods 1 and 2
respectively.
If a = 0 and b = 1, then the two prices are equal.
If a  0 but b =1, the prices have a proportional
relationship.
If b  1, the prices are not proportional.
14
Price proportionality
b=1
prices are
proportional
a
lnp2
lnp1
15
Cointegration
 Usually price proportionality is tested for by running a
simple regression.
 However, when the price series under observation
are non-stationary, it is not possible to do this.
 Instead, one must use cointegration theory and the
Johansen procedure.
 The Johansen procedure is useful because it allows
us to conduct hypothesis testing on the coefficients in
the cointegration vectors.
16
Data
 Prices used in this analysis are for whole fresh
salmon sold at all points along the marketing chain
between Norway and Finland, and for whole fresh
salmon trout sold internally within the Finnish market.
 Data is monthly between 1995 and 1999.
17
The marketing chain:
stages of analysis
Horizontal analysis: salmon
and salmon trout
Production salmon trout
Wholesale salmon trout
Production salmon
Exports salmon
Norway
Imports salmon
Finland
Wholesale salmon
Campaign salmon trout
Retail salmon trout
18
The marketing chain: stages of analysis
Horizontal analysis: salmon and salmon trout
5
4.5
4
3.5
price
euros/kg
3
2.5
2
1.5
1
0.5
0
Oct-99
Jul-99
Apr-99
Jan-99
Oct-98
Jul-98
Apr-98
Jan-98
Oct-97
Jul-97
Apr-97
Jan-97
Oct-96
Jul-96
Apr-96
Jan-96
Oct-95
Jul-95
Apr-95
Jan-95
prod sal trout
imports salmon
19
The marketing chain: stages of analysis
Horizontal analysis: salmon and salmon trout
6
5
4
3
price
euros/kg
2
1
0
Oct-99
Jul-99
Apr-99
Jan-99
Oct-98
Jul-98
Apr-98
Jan-98
Oct-97
Jul-97
Apr-97
Jan-97
Oct-96
Jul-96
Apr-96
Jan-96
Oct-95
Jul-95
Apr-95
Jan-95
wsale sal trout
wsale salmon
20
The marketing chain:
stages of analysis
Production salmon
Vertical analysis: salmon trout
Production salmon trout
Wholesale salmon trout
Exports salmon
Norway
Imports salmon
Finland
Wholesale salmon
Campaign salmon trout
Retail salmon trout
21
The marketing chain: stages of analysis
Vertical analysis: salmon trout
4.5
4
3.5
price
3
euros/kg
2.5
2
1.5
Oct-99
Jul-99
Apr-99
Jan-99
Oct-98
Jul-98
Apr-98
Jan-98
Oct-97
Jul-97
Apr-97
Jan-97
Oct-96
Jul-96
Apr-96
Jan-96
Oct-95
Jul-95
Apr-95
Jan-95
wsale sal trout
prod sal trout
22
The marketing chain: stages of analysis
Vertical analysis: salmon trout
6
5
4
price
3
euros/kg
2
1
0
Oct-99
Jul-99
Apr-99
Jan-99
Oct-98
Jul-98
Apr-98
Jan-98
Oct-97
Jul-97
Apr-97
Jan-97
Oct-96
Jul-96
Apr-96
Jan-96
Oct-95
Jul-95
Apr-95
Jan-95
wsale sal trout
campaign sal trout
23
The marketing chain: stages of analysis
Vertical analysis: salmon trout
7
6
5
4
price
euros/kg
3
2
1
0
Oct-99
Jul-99
Apr-99
Jan-99
Oct-98
Jul-98
Apr-98
Jan-98
Oct-97
Jul-97
Apr-97
Jan-97
Oct-96
Jul-96
Apr-96
Jan-96
Oct-95
Jul-95
Apr-95
Jan-95
wsale sal trout
retail sal trout
24
The marketing chain:
stages of analysis
Production salmon
Vertical analysis: salmon
Production salmon trout
Wholesale salmon trout
Exports salmon
Norway
Imports salmon
Finland
Wholesale salmon
Campaign salmon trout
Retail salmon trout
25
The marketing chain: stages of analysis
Vertical analysis: salmon
4.5
4
3.5
price
euros/kg
3
2.5
2
1.5
Oct-99
Jul-99
Apr-99
Jan-99
Oct-98
Jul-98
Apr-98
Jan-98
Oct-97
Jul-97
Apr-97
Jan-97
Oct-96
Jul-96
Apr-96
Jan-96
Oct-95
Jul-95
Apr-95
Jan-95
prod salmon Norway
exports salmon Norway
26
The marketing chain: stages of analysis
Vertical analysis: salmon
4.5
4
3.5
price
euros/kg
3
2.5
2
1.5
Oct-99
Jul-99
Apr-99
Jan-99
Oct-98
Jul-98
Apr-98
Jan-98
Oct-97
Jul-97
Apr-97
Jan-97
Oct-96
Jul-96
Apr-96
Jan-96
Oct-95
Jul-95
Apr-95
Jan-95
exports salmon Norway
imports salmon Finland
27
The marketing chain: stages of analysis
Vertical analysis: salmon
5.5
5
4.5
4
price
euros/kg
3.5
3
2.5
2
1.5
Oct-99
Jul-99
Apr-99
Jan-99
Oct-98
Jul-98
Apr-98
Jan-98
Oct-97
Jul-97
Apr-97
Jan-97
Oct-96
Jul-96
Apr-96
Jan-96
Oct-95
Jul-95
Apr-95
Jan-95
imports salmon Finland
wsale salmon Finland
28
Results 1
Horizontal analysis: salmon and salmon trout
 Prices for salmon and salmon trout at the same point
in the marketing chain are cointegrated
 This confirms that the two species compete in the
same market and are substitutes.
 The price series are not proportional.
29
Results 1
Horizontal analysis: salmon and salmon trout
Finland
cointegrated
Production salmon trout
Imports salmon
cointegrated
Wholesale salmon trout
Wholesale salmon
30
Results 2
Vertical analysis: salmon trout
 Prices are cointegrated at all points along the
marketing chain for salmon trout.
 Prices are proportional between production and
wholesale.
 The wholesale price of salmon trout was found to be
exogenous to both the retail and production price.
31
Results 2
Vertical analysis: salmon trout
Finland
Production salmon trout
proportional
Exogeneous price
Wholesale salmon trout
cointegrated
cointegrated
Campaign salmon trout
Retail salmon trout
32
Results 3
Vertical analysis: salmon
 Prices are cointegrated and proportional at all stages
along the marketing chain for salmon.
 Export prices are exogeneous to production prices in
Norway, while import prices are exogeneous to
wholesale prices in Finland.
33
Results 3
Vertical analysis: salmon
Production salmon
proportional
Exogeneous price
Exports salmon
proportional
Exogeneous price
Imports salmon
Norway
Finland
proportional
Wholesale salmon
34
Conclusions
 Salmon and salmon trout markets are highly
integrated. The marketing chains for both fish species
are competitive from the production to the wholesale
level.
 The role of fish wholesalers in Finland is central in
the salmon trout marketing chain. They operate as
auctioneers between producers and retailers.
 Wholesale prices are the leading prices in
transmitting market information to other levels of the
marketing chain for salmon trout.
35