Vertical price transmission along the apple supply chain in Slovak Republic

Abstract

Currently, most of the Slovak apple production is situated in the southern region of Slovakia and it consists of small-scale producers (mostly family farms) which raises challenges in production, finances, quality, and coordination within the supply chain. This study aims to investigate vertical price transmission (VPT) in this sector. Understanding VPT can help identify inefficiencies in apple's supply chain. A poor price response or a conflict in the transmission process can lead to unnecessary costs and lower profits for those involved in product production and consumption. The VPT has significant policy implications, particularly in relation to cost control and response. By monitoring the VPT, policymakers can identify areas that require intervention to promote fairness, efficiency, and market transparency. The study focuses on consumer and producer prices of apples to monitor price transmission as well as long-term relationships for the period from January 2006 to December 2021. Johansen's cointegration test confirms a long-term relationship between producer and consumer prices, the same as the Granger causality test which shows that prices share a common long-run trend and there is a cause-and-effect relationship between them. However, threshold autoregression results suggest that there is cointegration, but the symmetry hypothesis is rejected, so positive and negative consumer price shocks do not affect producer prices to the same extent.

Keywords

• agriculture
• supply chain
• cointegration
• apple
• price transmission