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Structural breaks in the fishmeal - soybean meal price relationship

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  • The rapid increase in global aquaculture production since the early nineties has increased the demand for fishmeal as an ingredient in aquafeed. This increase has been hypothesized as the source of disruption in the fishmeal market by researchers such as Delgado et al. In this paper we evaluate whether or not there has been a change in the price relationship between fishmeal and soybean meal, its closest vegetable substitute. We focus on the behavioral implications of a change in substitutability. We test if structural breaks in the optimal commodity futures hedge strategy of a risk averse trading agent have occurred. Further we test if the breaks have also changed the long run relationship between the commodities by testing for cointegration. The results clearly support the hypothesis of structural change during the period 1978 to 2003. We identify two breaks, in August 1988 and in December 1995/January 1996. Both break dates coincide with supply side shocks. The first break occurred before the rapid increase in aquaculture production indicating that its role in the change of the price relationship is overstated. Cointegration analysis also supports the occurrence of structural breaks.
  • Keywords: fishmeal - soybean meal price relationship, Cointegration, structural breaks, Cross commodity futures hedging, Fisheries Economics, Demand and Supply
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  • Kristofersson, Dadi, James L. Anderson. 2004. Structural breaks in the fishmeal - soybean meal price relationship. Peer Review: No. In: Proceedings of the Twelfth Biennial Conference of the International Institute of Fisheries Economics & Trade, July 20-30, 2004, Tokyo, Japan: What are Responsible Fisheries? Compiled by Ann L. Shriver. International Institute of Fisheries Economics & Trade, Corvallis, Oregon, USA, 2004. CD ROM. ISBN 0-9763432-0-7
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