The Ripple Effect of Natural Disaster on the Agricultural Industry Chain

Abstract

Agricultural industry chains are increasingly vulnerable to natural disaster such as earthquakes or hurricanes. This paper investigates the ripple effect on the agricultural industry chain which is heavily influenced by the natural disaster. Taking the pig industry chain in the disaster area —Luzhou, Sichuan Province as an illustration, the paper was committed to the dynamics of price adjustment and the causal analysis along the marketing channel on the basis of the time-series analysis and variance decomposition about the weekly price series of pork, hogs and piglets. The estimations constructed by a vector error correction (VEC) model show that price adjustment is asymmetric with respect to both speed and magnitude. The results also reveal a differential impact of the exogenous shock on farmers, processors and retailers, leading to widening of price margins and pointing to imperfect price transmission. Regarding efficiency and equity of the marketing channel our findings are critical, especially at the farm level.