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Price Interaction betweenAquaculture and Fishery

• Roberta Brigante, IREPA and Audun Lem, FAO

• XIII EAFE CONFERENCE

• SALERNO 18-20 APRIL 2001

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PRICE INTERACTION BETWEEN AQUACULTURE AND CAPTURE

FISHERIES

• An econometric analysis of seabream and seabass in the Italian market

• 1991-1998

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RATIONALE FOR STUDY

• aquaculture accused of unfair price competition• lack of data and studies • Italian market in great turmoil

– increasing imports– declining own catch– Italian and Mediterranean aquaculture

production increasing– Italy main market for seabass/seabream from

Greece, Turkey, Spain etc.

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DIVISION OF WORK

• FAO GLOBEFISH: data, overall co-ordination

• IREPA: data, analysis and scientific supervision

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PAPER OUTLINE

• 1. State of fishing and aquaculture

• 2. Methodology

• 3. Presentation of data used for analysis

• 4. Results of econometric analysis

• 5. Conclusions

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THE STATE OF WORLD FISHERIES

AND AQUACULTURE (SOFIA)• Growing aquaculture sector

• unsustainability

• overexploitation

• FAO Code of Conduct for responsible fisheries

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METHODOLOGY

• Econometric models– Identify appropriate model ( LSE analysis) “from

general to particular”

– first phase: general model with lags in endogenous and exogenous variability

– second phase: test correct specification of general model, significance and stability of parameters; deletion of non-significant parameters, estimation of resultant model

– nine restrictions and nine models

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ERROR CORRECTION MODEL (ECM) Engle and Granger:

• If variables are co-integrated, estimate an ECM model

• If no co-integration, there is no long run equilibrium curve. In this case, the model that you can estimate is a first differences model.

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THE DATA

• quarterly seabass and seabream prices,

• capture and aquaculture

• source: IREPA, FAO, Italy 1991-1998

• capture prices: fairly stable with in-year vacillation

• farmed prices: long-term decline

• capture quantities:fairly stable

• farmed quantities: significant increase

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• logarithmic specification of price time series LC and LA

• Dependent variable: LC • Independent var.: LC, four times lagged

– variable LA– variable LA, lagged– 3 dummies: seasonal– 2 dummies: exceptional values– deterministic trend T

THE ECONOMETRIC MODEL

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• Seabass

• Seabream

RESULTS

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• Some co-integration between LC and LA, but no satisfactory results

• Granger causality test confirms result

• Farmed seabass no substitute for captured seabass (or vv)

SEABASS

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• Models give satisfactory results

• LC and LA stationary

• no linkage between prices

• Granger causality test confirms result

• Farmed seabream no substitute for captured seabream (or vv)

SEABREAM

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• captured and farmed seabass and seabream in Italy: not subsitutes

• no link between prices

• long-term change in farmed prices no impact on long-term capture prices

• Granger causality test confirms results

CONCLUSIONS

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• two distinct markets

• each market should focus on its specific strengths

• falling farmed prices can be countered only by emphasis on quality, products diversification, improved logistics

IMPLICATIONS

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THANK YOU !