Document Type : Research Paper
Authors
Department of Agricultural Economics, Faculty of Economics and Agricultural Development, University of Tehran, Karaj, Iran
Abstract
Keywords
Main Subjects
Extended Abstract
Introduction
Chicken meat, as a strategic source of animal protein, holds a significant position in the food security of Iranian households. Its substantial share in household food expenditures means that price fluctuations directly and rapidly impact social welfare. The "marketing margin" defined as the difference between retail and farm prices, reflects the costs of marketing services, processing, transportation, and the competitive structure of the market. In recent years, Iran's poultry market has faced three major exogenous shocks: the COVID-19 pandemic, the increase in energy carrier prices, and the changes in the preferential exchange rate for imported inputs. This study aims to analyze the impact of these shocks on marketing margin behavior and to identify the presence of market power within the chicken meat supply chain.
Materials and Methods
This study is based on the theoretical framework of Gardner (1975), extended by Piggott et al. (2000). A simultaneous equations system was designed, consisting of four key functions: 1) a Translog production function (to account for the elasticity of substitution between farm inputs and marketing services), 2) retail demand, 3) farm-level supply, and 4) marketing services supply. Dummy variables were incorporated to capture the direct effects of the aforementioned shocks. Quarterly time-series data from Spring 2015 to Winter 2022 were collected from official sources, including the Central Bank, the Statistical Center of Iran, and the Livestock Affairs Support Company. After verifying residual stationarity and Co-integration, the system was estimated using the Three-Stage Least Squares (3SLS) method to control for simultaneity bias.
Results and Discussion
The estimation results indicated an elasticity of substitution of 0.34 between live Chicken and marketing services, suggesting limited substitutability in the processing stage. Market power indices (β) confirmed the presence of Market power in both the processing (0.63) and retail (1.79) sectors. Shock analysis revealed that the COVID-19 pandemic and rising energy prices led to an expansion of the marketing margin. The price ratio elasticities for these two shocks were 0.094 and 0.008, respectively. Conversely, the Changes in the preferential exchange rate had a contracting effect on the marketing margin (elasticity of −0.032).
Conclusion
Contrary to the common public perception, that links severe price volatility to profiteering by intermediaries, this study demonstrates that major economic shocks have a relatively limited and negligible impact on the expansion of the marketing margin for chicken meat. In other words, this finding indicates that price increases are not driven by an expansion of marketing margins; thus, any price intervention prior to a comprehensive understanding of market dynamics and without evidence of rent-seeking behavior could lead to supply disruptions and diminish the incentives for economic actors. Consequently, priority should be given to precise and continuous monitoring of price movements and identifying their underlying drivers to prevent the implementation of misguided policies affecting market performance.
This article is an extract from the first author’s doctoral dissertation, and the second author was the supervisor.
The authors would like to thank the faculty members of the Department of Agricultural Economics at the University of Tehran for their guidance and support.
This study was conducted in accordance with the ethical guidelines of the journal. The authors avoided data fabrication, falsification, plagiarism, and misconduct.
The author declares no conflict of interest.
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