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Price relationships between domestic wild salmon, aquacultured rainbow trout and Norwegian farmed salmon in Finland

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  • The prices of Finnish salmon and aquacultured rainbow trout have dropped to a new all-time low in 1995. The price, in real terms, the fishers were paid for domestic salmon in the beginning of the 90's was only one fourth of what it had been in 1980. This price decline during the 80's can, to a large degree, be explained by the increased catches and increased aquaculture production of rainbow trout (Mickwitz 1994). In the 90's, the market has changed. The formerly very restricted import of salmonides has been liberated and is now almost totally free. The seasonal distribution of the catches has changed and the total quantity has dropped. The production of rainbow trout that rose at an average annual rate of 15% in the 80s, has dropped in the 90s. After Finland joined the EU in the beginning of l995, the food prices in general have been decreasing. The salmon and rainbow trout price collapses can not anymore be explained by the same factors as before. The task of this study is to examine the linkages between the prices of domestic salmon, aquacultured domestic rainbow trout and Norwegian farmed salmon in Finland. If these three product forms [1] are substitutes for each other, then there should be a balance between the prices, so that a long run change in one price would so be seen in the long run price for the other products. In the terminology of econometrics, the time series for the price will be examined in order to establish whether they are co integrated or not. If a co integration relationship exists then follows a long run relationship and a set of short run adjustment parameters also can be found. The domestic salmon, the imported Norwegian salmon and the domestic rainbow trout all have some common characteristics, but they also differ from each other. All the three products are species with red coloured meat. The red colour of the salmon caught in the Baltic Sea is, however, much lighter than that of the two farmed products. The rainbow trout is much smaller (the average weight is 1 to 2 kg> than the imported or domestic salmon). The supply of the farmed products is more certain and the individual fish are much more homogenous within in a lot. Because of these and other differences, one can not a priori determine that they (all) are close substitutes. This study is by no means original with respect to its idea. There have been a lot of studies on the co integration of price series of different fish species and products in recent years, for example by Gordon and Hannesson (1994), Hannesson (1994a and 1994b), and Steen (1994a, 1994b and 1994c). In addition to the studies by Steen of some European salmon markets, the prices of salmon in Europe have also been studied with other methods by for example Asche et al. (1994 and 1995). In other studies on European salmon markets (for example the studies conducted by Asche, Salvanes and Steen 1994), the domestic production consumed domestically has often been excluded. This has been the case, since in the context of these studies, this production has been considered a small and therefore not very relevant component of the market. In this study the focus is on the relationship between imported salmon from Norway and domestically caught salmon or cultured rainbow trout. Although the amount of salmon caught by Finnish fishermen is small and the Finnish production of rainbow trout is internationally small compared to the Norwegian salmon production the issue is highly relevant. This is the case since trade sanctions against Norway could only be legally motivated under World trade organisation (WTO) and the European Economic Area (EEA) if the import causes serious disturbances for the domestic production. That this has happened has been argued by especially Ireland and Scotland within the EU supported by Finland among others. A pre-request for the Norwegian salmon to cause disturbances for Finnish fish farmers and salmon fishermen are of course that the prices are related. The paper is structured as follows: In section 2, the Finnish market for salmon and rainbow trout is briefly described and the data used for the analyses is presented. In section 3, the concepts of unit roots and co integration are briefly described. The results of the econometric analyses are presented in section 4 and the conclusions are drawn and discussed in section 5.
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  • Mickwitz, Per. 1996. Price relationships between domestic wild salmon, aquacultured rainbow trout and Norwegian farmed salmon in Finland. In: Proceedings of the Eighth International Conference of the International Institute of Fisheries Economics and Trade, July 1-4, 1996, Marrakech, Morocco. Compiled by Ann L. Shriver. International Institute of Fisheries Economics & Trade, Corvallis, Oregon, USA, 2002. CD ROM.
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