Agricultural Markets Integration in the European Union

Further Empirical Evidence on the Pork Sector

Market integration among the EU pork markets is studied from both a long and short-run perspective. Johansen`s[1988] multivariate cointegration procedure is used to identify long-run equilibrium relationships among pork prices. Some hypotheses about perfect integration are formulated and tested. Forecast Error Variance decomposition is used to examine the short-run interrelationships among price series. Pig carcases (grade II) prices from EUROSTAT are used and five countries are considered: Denmark, Spain, Germany, United Kingdom and Italy. Data cover the period from January 1973 to December 1993. Structural breaks have been considered when testing for the presence of unit roots. Results suggest that a high degree of integration exists among these selected markets although the detection of only one cointegrating vector does not provide evidence enough in favor of a unique pork market in the EU. Production characteristics, deficiencies in information transmission and sanitary controls may explain sluggishness in prices adjustments. (JEL Classification: C32, F15, Q11)