Asymmetry in Farm-Retail Price Transmission for Major Dairy Products

Henry Kinnucan and Olan D. Forker

American Journal of Agricultural Economics, 1987, vol. 69, issue 2, 285-292

Abstract: An econometric model is used to estimate the net relationship between changes in the farm-level price of milk and changes in the retail prices of four major dairy products—fluid milk, butter, cheese, and ice cream. Results indicate that the farm-retail price transmission process in the dairy sector is asymmetric. Retail dairy product prices adjust more rapidly and more fully to increases in the farm price of milk than to decreases. The role in pricing asymmetry of retail demand versus farm supply shifts is tested via a Chow-type test. Asymmetry is tested using the Houck procedure for estimating nonreversible functions.

Date: 1987
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