Price Transmission in China's Swine Industry with an Application of MCM

The paper studies the relationship, adjustment ability, path, efficiency and intensity of price transmission in the swine industry chain in China, which consists of the prices of corn, compound feed for fattening pig, piglet, pig and pork. Monthly prices covering a period of 18 yr (1994-2011) are analyzed using a Market-Chain Cooperated Model (MCM). The empirical results show that there exists a stable long-term cointegration and short-term dynamic relationship in the price system. First, the adjustment speed of each price series is very slow and the transmission path is top-down and one-way significantly. Second, the price from upstream to downstream lags about 2 mon, while there is no lag in price transmission from midstream to downstream. Third, in terms of price transmission intensity, the price of pig impacted greatly on pork price, not only in the current period but also through the whole period. Besides, the price of corn has the largest lagged effects on pork price. According to the above empirical results, we suggest that government should strengthen monitoring and early warning of the swine industry chain, especially the upstream and midstream, attach great importance to the timely adjustment of feed prices and perfect the measures of price subsidy.