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Humboldt-Universität zu Berlin - Lebenswissenschaftliche Fakultät - Quarterly Journal of International Agriculture

Quarterly Journal of International Agriculture No. 2/14


Vertical Price Transmission in the International Fresh Fruit and Vegetable Supply Chain: Israeli Grapefruit Exports to the EU after Export Liberalisation

Linde Götz
Leibniz-Institute for Agricultural Development in Transition Economies (IAMO), Halle (Saale), Germany

Stephan von Cramon-Taubadel
Georg-August University Goettingen, Germany

Yael Kachel
The Hebrew University of Jerusalem, Israel


Abstract

We investigate competitiveness and price behaviour in the Israeli citrus export sector following the removal of the government export monopoly and the entry of private export companies in 1991. We identify asymmetric price transmission for some exporters even in the liberalized market which only became symmetric when a minimum price agreement was established by the government in the grapefruit market. Our findings indicate that citrus growers’ seasonal losses resulting from asymmetric price transmission amounted to as much as 4.0% of their total revenues, and a much larger share of their profits. This result is consistent with the hypothesis that the observed asymmetry in price transmission was caused by Israeli exporters exerting market power over Israeli citrus growers. Concluding, our analysis demonstrates that the liberalization of the Israeli grapefruit export market by the abolishment of the government marketing board alone was not sufficient to establish a competitive market. Rather, an additional temporary government market intervention was necessary to foster competitive pricing behaviour by the exporting companies vis-à-vis the Israeli grapefruit growers.

Keywords: international fresh fruit and vegetable supply chain, vertical price transmission, export liberalization, market power, Israel, citrus

JEL: F13, Q13, Q17, Q18

Vol. 53 (2014), No. 2: 99-120