The relationship between input-factor and output prices in commodity industries: The case of Norwegian salmon aquaculture

Using the Norwegian salmon aquaculture as a case study, this paper examines the relationship between input-factor prices and cost driven output prices. We hypothesize that as variations in marginal productivity in an industry falls, the relative importance of input-factor price variations on unit production costs increases. For maturing commodity industries, price trends will go from productivity driven to input-factor price driven. Our empirical results indicate that the correlation between salmon price and feed input-factor prices (fishmeal, soybean meal and wheat) has increased in recent years. Consistent with a period of increased importance of feed costs to developments in salmon production costs, we find evidence of an emergent protein cointegration relationship between salmon, fishmeal and soybean prices. The paper provides an empirical framework to analyze changing relationship between output and input prices, and highlights some limits to inference using price analysis.