Value Chain Analysis for Salted & Dried Cod and Farmed Salmon

The focal point of the project is the value chains for Norwegian salted & dried cod (“klippfisk”) to Portugal and Norwegian farmed salmon to France, two products and markets of great importance to the region of Mid-Norway (counties of Møre and Romsdal and Trøndelag). More knowledge about these products will help ensure the competitiveness of local producers. The objective of the project is to analyse price linkages in the two chosen value chains. These products are both produced in and exported from Mid-Norway.

 

The vertical transmission of price shocks among various levels in the fish supply chain is an important characteristic describing the overall operation of the market. In general we would like to know for a given fish species the price relationship across markets, such as does one market act like a price leader, how markets respond to shocks in the supply chain, are upstream and downstream price shocks symmetric and, in some sense, is there an equilibrium across the different markets? 

 

In the supply chain for fish we can think of three markets; the ex-vessel market*, the industrial or processing market and the final / retail market. The first question of interest is how are these markets related? Common sense would tell us that a price shock at the ex-vessel level will cause adjustment to the price of processed products and then to the final retail price of fish. What is interesting is to measure what proportion of the price shock at the ex-vessel level that is passed on to other markets in the supply chain and the time lag involved in the price adjustment. We know that substitution amongst inputs takes place within the production process of a market and this means that 100 % of the price shock at the ex-vessel level will not be passed on in the supply chain. So the question is how much of the price shock is passed on and is this relationship stable over time? We can push this question a little further and ask about price shocks at the retail market stage: are these passed back up the supply chain to the processing / industrial and ex-vessel sectors? Again the question of interest is how much of the price shock is passed along and the required time of adjustment. These questions attempt to investigate price leadership within the supply chain.

 

A related question is to measure and test the stability of the final / retail price margin over time which is the difference between the ex-vessel and retail price of fish. Here we are concerned that monopoly power in the final market is able to capture monopoly rents without compensation to fishermen.

 

The ex-vessel price of fish is ultimately set by the end-user / retail demand for the product. Given that the ex-vessel price of fish defines the profits and welfare of fishermen and their communities, it is of interest to enquire as to the link between retail and ex-vessel prices.

 

The project is financed through the research fund of Møreforsking AS.