Economic Analysis of Japanese Household Demand for Salmon

The recent glut of both wild and farmed salmon in world markets has forced producers to become aware of the need to expand their marketing efforts to ensure that demand is not outpaced by supply resulting in a further decline in prices. Japan has been a major market for wild salmon, particularly sockeye salmon from North America, since the introduction of the 200 mile Exclusive Economic Zone. As farmed supplies have continued to increase, exporters such as Norway and Chile have turned their attention to this market as well. Up until now, most of the farmed salmon exported to Japan has been targeted to the restaurant market. If exporters wish to expand their market in Japan, they may focus also on the retail market. Prior to any assessment of the potential of the retail market for fresh farmed salmon, it is useful to understand the role that salmon plays in Japanese household seafood consumption.
This paper examines household consumption patterns of salmon in Japan. An econometric model is presented which estimates household demand for fresh and salted salmon focusing specifically on the effects of seasonality, regional location, and prices of other seafood products. Two systems of demand equations, one for each of two regions of Japan, are specified and estimated using monthly data on prices and expenditures to capture the effects on household demand for 12 seafood products. Results indicate that seasonality plays a significant role in the demand for many seafood products, particularly fresh and salted salmon. In addition, these seasonal effects are not necessarily the same between regions of Japan. Salmon competes with different seafood products during different times of the year. A rich variety of factors should be considered when marketing fresh aquacultured salmon in the Japanese retail market.     

Price transmission among different Atlantic salmon products in the U.S. import market

The cross-commodity price transmission is an approach to derive meaningful results from the price information, and is mostly influenced by the substitutability and complementary relations among products. Using time series data collected from the National Marine Fisheries Statistics, the present study specified and estimated cross-commodity price transmission models for 13 salmon products imported in the U.S. market. The salmon products are differentiated by form, cut, source/origin, and production environment. The estimated cross-product price transmission elasticity and degree of substitutability among them varied considerably. Whole fresh farmed Canadian and Norwegian Atlantic salmon did not have any close import substitutes in the U.S. market among the salmon products considered in the study. A reduced pricing strategy would result in an increase in U.S. salmon import market share of Chilean and U.K. Atlantic fillet fresh, if the U.S. import demand for it is relatively own-price elastic.     

Hedging salmon price risk

Salmon price is highly volatile and hard to predict, which obscures planning decisions and raises financing costs for market participants. This study considers hedging the spot price uncertainty with salmon futures contracts. It uses a new framework of hedging under square loss, consisting of a new objective function, an optimal hedge ratio and a measure of hedging effectiveness. The new framework aims at minimizing the expected squared forecast error. It generalizes the classical minimum variance hedging as it relaxes the assumption of known expected prices. The salmon futures contracts deliver satisfactory hedging performance, albeit constrained by low liquidity. Therefore, I suggest holding the contract through maturity rather than closing the futures and the spot positions simultaneously. This strategy alleviates the liquidity issue and saves transaction costs. All things considered, hedging with salmon futures is a moderately effective way of handling the salmon price uncertainty.     

Predicting the price of Vietnamese shrimp products exported to the US market using machine learning

Accurately predicting the price of exported fishery products is an important task for fisheries because it will enable market trends to be determined, leading to the development of high-quality fishery products. In this study, we predicted prices in selected base periods (2, 3, 6, and 12 months) to investigate how historical data influenced the Vietnamese export price. A dataset (from May 1995 to May 2019) was collected from the US Department of Agriculture (USDA). We initially hypothesized that the dependent variable, Vietnamese export price, was affected by 33 independent variables, but ultimately used 15 key variables, which were chosen on the basis of Akaike information criterion (AIC) to train the models. A tree-based machine learning technique, including the random forest and gradient boosting tree algorithms, was applied for predictions. It was found that the random forest algorithm performed well for historical data for periods of more than 6 months, while the gradient boosting tree algorithm was better over short durations of less than 6 months.

     

Salmon price volatility: A weight-class-specific multivariate approach

Salmon spot price has been highly volatile and hard to predict since mid-2000s, obscuring the industry players’ planning decisions. ARMA-GARCH and dynamic conditional correlation (DCC) models were employed on weekly data for 1995–2013 to examine the behavior of weight-class-specific prices which are directly relevant for salmon production and risk management. Two periods of different volatility regimes were identified, before and after 2006 when the salmon market was undergoing fundamental changes. Both volatility and conditional correlations increased from 1996–2005 to 2007–2013, and return dynamics became more homogenous across weight classes. This development is conducive to the functioning of the salmon futures and options exchange.     

THE RUSSIAN SEAFOOD REVOLUTION: SHIFTING CONSUMPTION TOWARDS AQUACULTURE PRODUCTS

A food consumption revolution is taking place in Russia. After decades of severe constraints on food consumption options under the communist regime Russian consumers are now adopting new food products—including seafood products – at a high pace. Since Russian consumers have previously had very limited seafood consumption choices, the market can be seen as an interesting laboratory for investigating consumer responses to products that have previously not been available. Among imported seafood products are both wild and farmed species. Furthermore, Russian imports include both traditional species such as herring, and ‘new’ species such as pangasius. We analyze market integration among seafood products using Russian monthly import prices from 2002 to 2007 on several products, such as herring, salmonids and pangasius. We find that pangasius compete in the white fish segment, and is a price leader. In the salmonids market, farmed salmon trout appears to be the price leader, both in the fresh and frozen market segment.     

Pricing efficiency across destination markets for Norwegian salmon exports

This paper investigates how pricing efficiency of Norwegian salmon exports varies across destination market characteristics. Efficiency is defined as the rate at which individual transaction prices adjust to common market information, and is estimated by dynamic fixed effects panel models with parameters conditional on trade attributes using micro-level trade data. Our results show that contract type (Incoterms) used in transactions can be used to segment the Norwegian export markets into three types: (1) high-value trade to large distant markets, (2) medium-value trade to close high-income markets, and (3) lower-value large bulk trades to lower-income close markets. We find that pricing efficiency is lowest for committed trades over long distance using planes, and highest for less committed large bulk trades to close markets. Despite significant heterogeneity, the majority of salmon price variation (around ¾) is common, providing a clear justification for the representativeness of a salmon price index.     

Assessing price integration and trade policy in the U.S. catfish market

In 2003, the United States adopted anti-dumping tariffs for Vietnamese catfish products entering the country. This study examines how these tariffs have impacted the price relationship between domestically produced and imported catfish products. Cointegration tests confirm a long-run price relationship between domestic and imported catfish, which has persisted despite the anti-dumping tariffs. However, imports are composed of catfish from Vietnam and other countries, with only the former subjected to tariffs. Results from vector error correction models suggest that Vietnamese catfish prices do not significantly influence domestic prices. Conversely, the price of catfish from countries other than Vietnam continues to impact prices received by domestic catfish farmers and processors. The domestic catfish industry is still affected by lower-priced imports from countries other than Vietnam, although some of these may be transshipments that truly originate in Vietnam. This research methodology could be adapted to investigate trade and price interactions among other aquacultured species, which will become increasingly important as global aquaculture expands.     

Export performance of major cultured shrimp producers in the Japanese and US markets

Increase in shrimp farming was stimulated by growth in world market for high-value shrimp products in the 1980s. The major cultured shrimp producers are located in Asia-Pacific and Latin American regions. The revealed comparative advantage (RCA) method is used to provide insights into the export performance of nine selected shrimp producers in the Japan and United States markets, separately. Shrimp is marketed in a wide variety of product forms, and prices vary according to various product attributes including species, size, taste, quality and origin. The results show that vertical product differentiation concerning different varieties of a good in terms of both quality and price plays an important role on the relative export competition of shrimp products among major shrimp-exporting countries. As a result of the geographical advantage, Asia-Pacific producers enjoy comparative advantage in the Japanese imported shrimp market. Joint ventures with the United States provide great benefits to Ecuador and Mexico in exporting fresh shrimp into the United States market.     

RECENT TRENDS IN SALMON PRICE VOLATILITY

The price of farmed Atlantic salmon from Norway has increased in recent years. This new regime follows several years of consistently falling prices. At the same time price volatility has increased substantially. This article models the volatility of salmon prices and establishes empirically that volatility is on an increasing trend. Further empirical analysis suggests that the volatility trend is largely accounted for by the common trend in other food prices relevant to salmon, including meats, cereals, oils and fish meal observed in recent years. Other potentially contributing factors to volatility are also discussed. This includes the role of the 2005 maximum total allowable biomass restriction, the 2006 introduction of the Fish Pool ASA futures market for salmon, the Chilean Salmon crisis and the increasing use of bilateral contracts.     

The spot-forward relationship in the Atlantic salmon market

This study examines the Fish Pool salmon futures contract with respect to how well the market performs in terms of the futures price being an unbiased estimator of the spot price and whether the market provides a price discovery function. Using data for 2006–2014 and with futures prices with maturities up to 6 months we find that spot and lagged futures prices are cointegrated and that the futures price provides an unbiased estimate of the spot price. We also find that, with the exception of the front month, that the causality is one-directional. The spot prices lead futures prices between 1–6 months maturity. Hence, while the spot and lagged futures prices are unbiased estimates, we do not find support for the hypothesis that futures prices provide a price discovery function. Rather, it seems that innovations in the spot price influence futures prices. This finding is not uncommon in new and immature futures contracts markets. Hence, the salmon futures market is still immature and has not yet reached the stage where futures prices are able to predict future spot prices.     

THE VALUE OF INFORMATION IN SALMON FARMING. HARVESTING THE RIGHT FISH AT THE RIGHT TIME

Research on management practices in fish farming has traditionally focused on two topics: production planning and forecasting of prices. This article combines these two areas of research, and illustrates how information on price patterns can change production plans, and hence increase the value of the farm enterprise. It will present a model farm and illustrate, with different levels of price information, how information on future prices alters the original production plan and hence creates extra value for the farmer. Although the specifics and empirical application of the paper are on salmon and salmon farming, the ideas and general results could be applied to all farmed species.     

Analysis of Catfish Pricing and Market Dynamics: The Role of Imported Catfish

The producer price of catfish is becoming relatively unstable compared to the trend in previous years, necessitating the need for a complete analysis of catfish pricing and market dynamics. An understanding of the price determination mechanisms in the catfish market and the relationships between producer price, domestic processed price, and import price are important because price variability can result in significant financial losses to the domestic catfish industry. This study used a cointegration procedure to examine the long-run relationships between domestic prices of catfish and imported price. Results from unit root and cointegration tests suggest that there is a long-run equilibrium relationship between pairs of these prices. Results from Granger causality tests and error-correction model estimations suggest that the market for domestic frozen fillets plays a significant role in the price determination of imported catfish. A similar relationship is found between producer price and frozen fillet price. Some significant measures that were estimated include a frozen fillet-producer long-run price transmission elasticity of 0.162, a frozen fillet-imported fillet long-run price transmission elasticity of 3.56, and a producer-frozen fillet short-run price transmission elasticity of 0.322. High levels of fillet prices appear to have influenced the level of catfish imports. As long as distributors and restauranteurs do not see a basis for paying a premium for U.S. catfish products, they will continue to purchase the lower-priced imported catfish and consequently imports will continue to increase.     

Salmon importation and consumption in Taiwan

ABSTRACT

Few studies have investigated salmon consumption and trade in unconventional emerging markets. Using import data, we calculate average per capita monthly salmon consumption in Taiwan, where all supply is imported, and use weighted least squares regression to relate it to economic variables, such as price, income, product types, and the exchange rate. By doing so, we interpret importers’ willingness to import and the features of salmon consumption. Results show complementarity between frozen and fresh salmon import quantities, insignificant exchange rate pass-through effects, and strong seasonal factors affecting salmon import quantity. In addition, the import price elasticity of fresh salmon is slightly larger than one, and the income elasticity is 1.33. We conclude that salmon has already become an important item for Taiwanese consumers, representing a case of globalization and liberalization. By explicating attributes of emerging seafood markets, this analysis will support stakeholders to formulate seafood trade policies and marketing strategies.     

Behaviour of price transmissions in vertically coordinated markets: The case of frozen black tiger shrimp (Penaeus monodon)*

Abstract

This study analyses the behaviour of the price transmission process for the leading cultured shrimp species, black tiger shrimp (Penaeus monodon), in both forward and backward directions between Thai and Indonesian shrimp packer markets and the Japan Tokyo wholesale market. The bivariate cointegration approach using the Engle‐Granger two‐stage estimation procedure is applied in this study. The results show that Tokyo wholesale prices appear to have stronger backward influences on the formation of overseas contract prices used by Japanese shrimp importers in the Thai and Indonesian shrimp packer markets. In addition, there is a tendency for the speed of price transmissions in the long term to increase with increasing size class (from 26 to 30–21–25 and 16–20 counts per pound) of black tiger shrimp, regardless of estimation specification in the direction of price transmissions and the shrimp country of origin.     

Performance of shrimp futures markets as price discovery and hedging mechanisms

Abstract

Granger causality tests revealed leading indicators of shrimp futures prices, implying that futures prices do not reflect all available market information and potentially fail to be an exemplary price discovery mechanism. Trading simulations confirmed that the use of some leading indicators allowed profitable arbitrage in shrimp futures trading. Shrimp futures were deficient as a hedging tool, as well. Correlations between futures and wholesale cash prices were often low, and basis risk rivaled price risk. Lack of liquidity is a likely explanation for shrimp futures’ shortcomings as a hedging tool and price discovery mechanism.     

Forecasting weekly salmon prices: Risk management in fish farming

Abstract

Production of farmed salmon has increased substantially during the last decade. Most of the salmon production is sold spot, resulting in large price fluctuations both for the producer and for the exporter. No derivative markets exist; consequently, no one can hedge prices. If prices could be forecasted within reasonable confidence bounds, risk would be reduced. This study used six easily applicable procedures to forecast weekly producer prices for salmon. The procedures tested were Classical Additive Decomposition (CAD), Holt Winters Exponential Smoothing (HW), Auto Regressive Moving Average (ARMA), Vector Auto Regression (VAR) and two different naïve models: post‐sample predictive accuracy was evaluated. Results indicated that the CAD model forecasted the direction of price movements best, whereas the VAR model performed best according to accuracy measures.     

Price cointegration in spatial markets: An application to milkfish markets in Taiwan

Abstract

The objectives of this study are to analyze the interdependent behavior of lead‐lag milkfish price adjustments between vertically‐related markets (from production to consumption) as well as between five major horizontally‐related wholesale markets. Empirical results show that there is a two‐way lead‐lag cointegrating price relationship between milkfish wholesale and retail markets. Since the fish wholesale market cannot completely and quickly assimilate the retail market information, the speed of response of wholesale prices to retail price changes is relatively slow, inducing low pricing efficiency. The Taipei wholesale market appears to cause the greatest leadership impact on the milkfish price formation compared to other wholesale markets in both the long‐run and short‐run. The results also reveal that there is a high degree of integration relationship between the horizontally integrated wholesale markets (Chiayi, Changhwa and Taichung) for milkfish in the southwestern region within a short distance.     

Price formation of the salmon aquaculture futures market

ABSTRACT

This study examines price formation of the internationally traded salmon futures exchange. Analyzing data from 2006 to 2015, the study identifies the co-integration relationship between the spot market price and 1–6-, 9- and 12-month futures contract prices. With exception of the 12-month maturity futures price, the unbiasedness hypothesis is shown to hold, thus evidence of risk neutrality and efficiency among the co-integrated pairs. Further, it is evident that the spot price provides leadership role in the price discovery function for the 1-, 2- and 6-months futures contract. On the contrary, the 3-, 4-, 5-, 9- and 12-months futures contracts provide the expected leadership role in the price discovery function, a case that supports a matured market that can be considered a necessary price risk management tool. The mixed finding is an indication of a maturing or near matured futures market. Analysis of the term structure of futures volatilities reveal that the shorter the length of the futures contract, the more volatility there is. This is because salmon prices exhibit short-term cyclical and seasonal patterns like other agricultural commodities. As such, salmon producers will be better off hedging in far month futures contracts, ceteris paribus.     

中韩牡蛎贸易变动趋势研究

论文旨在从进出口量、额和均价的角度,理清中、韩牡蛎进出口贸易的变动趋势。研究结果显示:1992-2011年,中国牡蛎进口贸易前期(1992-2006)波动上升,其后下降(2006-2008)再上升(2008-2011),进口价格震荡上升;1984-2011年,出口贸易在2000-2005年呈现明显高峰,出口价格有波动,但1998-2007年长期处于低谷;1976-2011年,韩国牡蛎进口贸易1993年开始急速上升,至1997年达到峰值,1998年又急速下降,其他时间虽有波动但相对稳定;出口贸易以2000年为界,此前波动上升,其后波动下降;牡蛎出口价格呈现上升(1984-1995)下降(1995-2002)再回升(2002-2011)的变动趋势;两国牡蛎进出口贸易自2008年前后均有上升迹象。