Vertical Price Transmission of Milk Prices: Are Small Dairy Producers Efficiently Integrated Into Markets?

Abstract

ABSTRACT In recent years the dairy sector in Panama has experienced mergers and consolidations that have led to increases in industry concentration, a decrease in the number of producers, and an increase in the scale of operations. Small dairy producers have expressed concerns about the competitiveness of the dairy supply chain, arguing that price changes are not being transmitted efficiently from wholesalers to producer at the farm gate level. In this context, this study examines the degree of vertical price transmission between wholesalers and small dairy producers to assess the efficiency level of the dairy market chain in Panama. The findings of this research provide original and important contributions to the policy dialogue uncovering two key issues: 1) a unidirectional transmission of milk prices from producers to wholesaler, and 2) that the transmission of milk prices is asymmetric depending on whether prices are increasing or decreasing. [EconLit Classifications: Q11, Q13, Q18].