Should We Cry over the Spilt Milk? Market Power and Structural Change along Dairy Supply Chains in EU Countries

Daniele Cavicchioli, Luca Cacchiarelli, Alessandro Sorrentino and Roberto Pretolani
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Luca Cacchiarelli: Department of Economics, Engineering, Society and Business Organization, University of Tuscia, Via del Paradiso, 47, 01100 Viterbo, Italy
Alessandro Sorrentino: Department of Economics, Engineering, Society and Business Organization, University of Tuscia, Via del Paradiso, 47, 01100 Viterbo, Italy
Roberto Pretolani: Department of Environmental Science and Policy, University of Milan, Via Celoria, 2, 20133 Milan, Italy

Sustainability, 2022, vol. 14, issue 8, 1-18

Abstract: A “first-pass” test on a set of monthly prices index series from 2000 to 2015 was applied to detect market power exertion in the dairy value chain of 25 EU countries. Due to econometric and theoretical restrictions, the test yielded conclusive findings only in 11 over 25 EU Countries. Such results show that in Austria, Portugal, Slovakia, Hungary and Croatia, the downstream sector exerts market power. Other EU countries (Spain, UK, Denmark, Czech Republic, Bulgaria and Sweden) are characterised by perfectly competitive dairy chains. These results were consistent with the findings of previous studies based on structural and mark-up models. Results of the market power test in the subsample of 11 countries have been related to various structural characteristics of the dairy chains. Market power exertion is negatively related to the average farm size. Such variable may be seen as a proxy of the degree of supply concentration provided by Producers Organizations (POs) to increase the bargaining power of the farm sector along the food chain. To test such a hypothesis, comparable data on supply concentration by POs across EU Countries are necessary. On the other hand, the structural change, represented by the increase of average farm size over time and the concentration rate in higher classes (above 250,000 € of Standard Output) is almost unrelated to the perfectly competitive conduct along EU dairy chains.

Keywords: market power; value chain; Common Agricultural Policy (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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Related works:
Working Paper: Should we cry over the spilt milk? Market power and structural change along dairy supply chains in EU Countries (2016)
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