IIFET 2006 Portsmouth Proceedings
SPATIAL INTEGRATION OF FRESHWATER FISH MARKETS IN THE NORTHERN BALTIC
SEA AREA
Jari Setälä, Finnish Game and Fisheries Research Institute, jari.setala@rktl.fi
Jukka Laitinen, Åbo Akademi, jukka.laitinen@abo.fi
Jarno Virtanen, Finnish Game and Fisheries Research Institute, jarno.virtanen@rktl.fi
Kaija Saarni, Finnish Game and Fisheries Research Institute, kaija.saarni@rktl.fi
Max Nielsen, Food and Resource Economics Institute, max@foi.dk
Asmo Honkanen, Finnish Game and Fisheries Research Institute, asmo.honkanen@rktl.fi
ABSTRACT
Freshwater fish species and Baltic salmon are important to small-scale fisheries in Finland and Sweden.
The formerly local markets for these species have expanded as the food trade has been opened up
to international competition. In this study we use cointegration analysis to test the spatial integration of
freshwater fish markets in Finland, and between Finland and Sweden. The analysed fish species are
salmon (Salmo salar), perch (Perca fluviatilis), pikeperch (Sander lucioperca), European whitefish
(Coregonus lavaretus) and pike (Esox lucius), and the data covers producer prices from 1995 to 2004. We
found that the regional producer prices in Finland were co-integrated. This indicates that the prices are
determined on a wider market area. Moreover, the study suggests that Finnish and Swedish markets for
Baltic salmon, whitefish, pikeperch and perch were partially integrated, while pike markets were separate.
The political implication is that an essential part of the local small-scale fisheries' operational
environment is determined outside the national borders, because most of the freshwater fish species are a
part of the international fish market.
Keywords: Fish markets, market integration, freshwater fish species, cointegration analysis
INTRODUCTION
European whitefish (Coregonus lavaretus), pikeperch (Sander lucioperca), perch (Perca fluviatilis), pike
(Esox lucius), and Baltic salmon (Salmo salar) are the main fish species of small-scale fisheries along the
Finnish and Swedish coast. Previously domestic coastal fisheries supplied the local, regional and national
markets. Import of fish has substantially increased as the food markets have been opened up to
international competition. The import of farmed salmon has multiplied after Finland and Sweden joined
the EU in 1995. Imports of freshwater fish species have also grown, especially since the Baltic countries
and Poland became members in the Union.
As markets become more and more international, the prices are determined on a wider market area than
before. Pricing has traditionally been the main cause of contention between fishermen and fish
wholesalers. If prices are determined on international level, local fish wholesalers have few chances to
influence the prices. Instead they have to adjust the prices to the changes in the international market.
Therefore, proper information about the extent of market and price formation is needed.
As a result of the international competition the producer prices tend to decrease. So far this negative price
development has come true in the salmon market. The real price of Baltic salmon is today only a fifth part
of the price at the beginning of 80’s. Several studies indicate that there is a highly integrated global
market for salmon (Gordon, Salvanes and Atkins, 1993; Asche, Bremnes and Wessells, 1999; Asche,
2001). This means that increased production of farmed salmon is likely to be the main cause for the lower
prices received by fishermen. Most of the studies focus on farmed Atlantic salmon and wild North
American salmon, and the interactions between main market areas in the world, e.g. Europe, USA and
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IIFET 2006 Portsmouth Proceedings
Japan. In the Finnish market there is some evidence that imported farmed salmon determines the price of
wild-caught salmon (Setälä et al. 2003).
Contrary to salmon, the producer prices of main freshwater fish species have remained reasonable in spite
of increasing international trade. Salmon is nowadays a bulk product in the fish markets, whereas
freshwater fish species are considered good alternatives with white fish meat. Especially pikeperch and
perch are high-valued niche products on the European market. Freshwater fish species have so far not
been an issue of international fish market research, although some market reports have been published in
native languages (for example Setälä et al 2004; Brunner 2004).
The interest in these fish species has increased in the EU, because new producer countries have joined the
union and the demand for these species is increasing. Moreover, fish farmers have been keen on
diversifying their production, because the world market price of salmon has fluctuated dramatically. For
instance, France, Denmark, the Netherlands, Belgium, Poland, Norway, Sweden and Finland have made
significant R&D investments to develop farming of freshwater fish species. Perch and pikeperch are
considered as the most potential candidates in most of the countries. Finnish fish farmers have preferred
European whitefish.
Most of the previous studies concern species traded worldwide. Minor market areas have become
interesting as more and more national trade barriers are abolished and globalisation reaches new fields of
food business and niche markets. Cointegration analysis has been widely used to test the extent of market
(Ardeni 1989; Goodwin and Schroeder 1991; Gordon et al. 1993; Asche et al. 1999; Asche and Bremnes
1997; Asche and Steen 1998). In this study we apply cointegration methodology to examine the
geographical extent of salmon and freshwater fish market in the Northern Baltic Sea area. We use
national fish prices to analyse market integration between Sweden and Finland and prices from different
coastal areas to analyse regional market integration in Finland.
Based on the previous studies (for example Mickwitz 1995; Asche et al. 2001; Setälä et al. 2003) we a
priori assume that the prices of salmon would be perfectly integrated. In addition to wild-caught Baltic
salmon we analyse farmed Norwegian salmon imported to Finland and Sweden. We also a priori assume
that the market of pikeperch is integrated, because both countries import substantial amounts of pikeperch
from Estonia. The market of perch can be at least partially integrated, because both countries export some
perch to Central Europe. The Finnish and Swedish whitefish markets may also be partially integrated,
because Swedish whitefish is imported to Finland. There are no reasons to believe that market of pike is
integrated, because there is no regular trade of pike between Finland and Sweden. A priori assumption is
that all the regional prices in Finland are integrated.
We use Johansen’s cointegration analysis and the test of Law of One Price (LOP) to analyse the depth of
market integration. If the LOP is in force, the market is fully integrated, and if the prices are cointegrated,
but the LOP is not in force, the market is partially integrated. The results of market integration can be
further utilised in demand analyses. Demand analyses provide highly useful information for interpreting
how prices of wild-caught freshwater fish species would change due to emerging farming of these
species. If the LOP is in force between prices of different regions or two countries, we can construct a
single aggregate quantity and price for the fish species to be included in estimation of the demand system
(Asche et al 1999). Aggregation of some essential market information makes it possible to include more
other relevant factors in the estimation without complications. The knowledge of the extent of perfectly
integrated market might also decrease the need of data for demand system estimation, since price series
are only needed for parts of integrated markets (Nielsen 2003).
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IIFET 2006 Portsmouth Proceedings
The paper is henceforward organised as follows. First we shortly describe the fish market in Finland and
Sweden. In the following chapter we briefly present the data and the methodology used in the analysis. In
the last two sections the results are shown and discussed.
DESCRIPTION OF FISH MARKET IN FINLAND AND SWEDEN
Finland
The Finns consume annually about 80 000 tonnes of fish. Salmon, salmon trout and Baltic herring are the
main products, while freshwater fish species are niche products on the fresh fish market. The market share
of wild-caught salmon and freshwater fish species have for a long time been about 10 per cent of the total
market. During the last decade imported salmon has rapidly captured markets from domestic salmon trout
and Baltic herring, and Norwegian salmon is today the main product in the Finnish market. Marine fish
species have minor importance to the Finnish market.
European whitefish, Baltic salmon, perch and pike are caught along the length of the Finnish coast.
Pikeperch is most common in the southern coastal areas. Whitefish is a cold-water species, and therefore
the main fishing areas are in the northern Bothnian Sea. The medium size of whitefish is smaller in the
northern areas. The catches of Baltic salmon and whitefish have declined, while the catches of pikeperch
and perch have grown during the last decade.
Private fish wholesalers along the coast collect the fish from the fishermen. The main market is in the
most populated southern Finland. Freshwater fish species are mostly sold as fresh fillets. Finland imports
pikeperch from Estonia. Since domestic demand for freshwater fish is great, only a small amount of fish
is exported. However, perch is regularly exported to Estonia and Central Europe. Pikeperch and pike are
occasionally exported to Central Europe.
Sweden
The Swedes consume about 130 000 fish products annually. The main products are marine fish species
from western and southern coast of Sweden. Norwegian salmon has increased its market share. Imported
salmon is also processed and re-exported to Central European market. Freshwater fish species play a
minor role in the Swedish market. However, the demand for pikeperch and perch has rapidly increased
(Setälä et al. 2004). The growing demand has been satisfied with increasing import from the Baltic
countries. Whitefish is exported to Finland and some perch is exported to Central Europe.
Salmon and whitefish are caught from the northern coast, while pikeperch, perch and pike are more
common in the Stockholm archipelago. Fish is sold through auctions, co-operative associations and some
private companies. Direct selling to consumers or local markets is more common in Sweden than in
Finland. The main market for freshwater fish is the Stockholm area. Freshwater fish is also exported via
Gothenburg fish auction to Central Europe.
DATA
The sample period of national prices was from January 1995 to December 2004. The tested species were
imported farmed salmon and wild-caught Baltic salmon, pikeperch, perch, whitefish and pike. The tests
between different regions in Finland were performed to pikeperch, perch, whitefish, and pike. The data
covered the time period from January 1993 to December 2004. The regions were the Bothnian Bay, the
Northern Quark, the Archipelago Sea and the Åland (Fig. 1). For pike and pikeperch also the Gulf of
Finland was included in the analysis. Pikeperch prices were only available for the Gulf of Finland, the
Åland and the Archipelago Sea. There were too many missing observations in the price series of salmon
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IIFET 2006 Portsmouth Proceedings
for regional tests. The few missing values in other series were estimated using arithmetic average of the
previous and subsequent observation. Swedish price data were transformed from Swedish crones to euros.
Logarithmic transformation was undertaken to all price series.
Bothnian
Bay
Northern
Quark
Sweden
Finland
Åland
Stockholm
!(
Archipelago
Sea Gulf of Finland
Estonia
Figure 1. The coastal areas in the regional analyses
METHODOLOGY
The price series by species were analysed graphically and statistically. We used Johansen’s cointegration
test which is based on the n-dimensional vector autoregressive (VAR) model
(Eq. 1)
Xt = µ + φ1 Xt-1 + … + φk Xt-k + ΨDt + ut
where Xt is a n x 1 vector of I(1) endogenous variables at time t, µ is a n x 1 vector of constant terms, Dt is
a vector of non-stochastic variables, such as seasonal and intervention dummies, and ut is a n x 1 vector of
niid (0, Σ) error terms. The VAR model in equation (1) written in vector error correction model (VECM)
form is
∆Xt = µ + Γ1∆ Xt-1 + … + Γk-1∆ Xt-k+1 + Πt Xt-k + ΨDt + ut
(Eq. 2)
where Γi = - (I - φ1 - …- φi ), (i = 1,…, k – 1), Π = - (I - φ1 - …- φk ). Equation (2) contains information on
both the short-term and long-term adjustment to changes in Xt, via estimates of Γi and Π, respectively. If
Xt is a vector of I(1) variables, the left-hand side and the first (k-1) elements of (2) are I(0), and the term
Πt Xt-k is a linear combination of I(1) variables. Because of the assumptions made on the error term, the
element ΠXt-k must also be I(0). Hence either Xt contains a number of cointegration vectors, or Π must be
a matrix of zeros. The rank of Π, r, determines how many linear combinations of Xt are stationary. If r = n
(full rank), the variables in levels are stationary; if r = 0 so that Π = 0, none of the linear combinations are
stationary. When 0 < r < n (reduced rank), there exists r cointegration vectors. In this case one can
factorise Π so that Π = αβ’, where α represents the speed of adjustment to disequilibrium and β is a
matrix of long-term coefficients.
Juselius (2005, manuscript) emphasizes the economic relevance of the variables in the system, not only
the time series properties. To find cointegration between nonstationary variables, only two of the
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IIFET 2006 Portsmouth Proceedings
variables have to be I(1). However, not all the individual variables have to be included into system need
to be I(1), as it is often incorrectly assumed. Often, a stationary variable might a priori play an important
role in a hypothetical cointegration relation. In particular, variables with a high degree of autocorrelation,
also near-integrated variables, are often very important in establishing a sensible long-term relation.
The cointegration rank divides the data into r relations towards which the process is adjusting and p – r
relations, which are pushing the process. The former are interpreted as equilibrium errors (deviations from
steady state) and the latter as common driving trends in the system. Hence, the choice of r will influence
all subsequent econometric analysis and may very well be crucial for whether we accept or reject our
hypothesis.
We employed pairwise tests to analyse national markets and multivariate tests to analyse regional
markets. We applied specific to generic approach and preferred models without extensive lags, because
long lag lengths may indicate misspecified models. Some blip dummies were added to the models for too
large residuals. Misspecification test of normality, autocorrelation and ARCH were performed for each
model.
The determination of the cointegration rank is probably the most crucial part of the analysis, since all the
results from the test procedures are conditional on the chosen rank. By choosing a too large rank we
include a cointegration relation to the model that does not improve the explanatory power of the system.
On the other hand, a too small rank would mean that we could ignore relevant economic relations from
our model.
In our analysis we follow the approach given in Juselius (2006) emphasizing that the choice of rank
should be based on all relevant information and especially the economic relevance of the results.
Therefore we have based the determination of the cointegration rank on trace test statistics, roots of the
companion matrix, graphical inspection of cointegration relations and economic relevance.
After choosing the rank, we made restrictions on alpha and beta vector to find out economic interpretation
of the results. We imposed restrictions to test of stationarity, exclusion, weak exogeneity and unit vector
of alpha. The tests of exclusion indicate whether all variables belong to the system. Weak exogeneity
implies that the price is determined by exogenous factors, and that the other prices are determined from
this leading price. The tests of unit vector in alpha, however, point out the variables exclusively adjusting
and having no effect to other variables.
Finally, we made identification restrictions on beta, and especially, we tested the Law Of One Price
(LOP) by setting pairwise homogeneity restrictions on beta vector. If the LOP is in force, the analysed
species are homogeneous in the sense that prices follow each other over time. Thus, relative prices are
constant and markets are perfectly integrated. If a cointegration vector is found but LOP is rejected,
markets are partially integrated.
We used the software package CATS in RATS in the estimation (Hansen and Juselius 2002). The
estimation procedure is also presented step by step in the article made by Virtanen et al. 2006.
RESULTS
Market Integration between Finland and Sweden
The market integration of imported salmon, wild salmon, pikeperch, perch, whitefish and pike markets
between Finland and Sweden was pairwise tested by species. According to graphical analysis the prices of
salmon imported to Finland and Sweden follow almost exactly each other (Fig. 2). The prices of wild
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IIFET 2006 Portsmouth Proceedings
salmon seem to have the same trend on the long term, although the prices in Finland fluctuate more. The
prices of pikeperch, perch and pike seem to follow each other in the long term, but the overall price level
is higher in Sweden and the Swedish prices fluctuate more. High prices have been paid to Swedish
fishermen outside the main fishing seasons. Whitefish prices are higher in the Finnish market. The overall
trend seems to be rather similar in both countries.
b) Salmon
a) Imported Salmon
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c) Pikeperch
b) Salmon
d) Perch
0
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e) Whitefish
f) Pi ke
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Finland
Sweden
Figure 2. Monthly prices of Finnish and Swedish imported salmon, salmon, pikeperch, perch,
whitefish and pike
All the models passed misspecification tests. According to the trace tests (Table I), roots of the
companion matrix and graphics of cointegration relations imported salmon, wild Baltic salmon,
pikeperch, perch and whitefish seem to have the rank of one. The stationary test reveals that the prices of
Finnish and Swedish pike are clearly integrated in different order i.e. there cannot be cointegration
between them.
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IIFET 2006 Portsmouth Proceedings
After setting the rank to 1, the tests of LOP and weak exogeneity were performed. The LOP holds only
for imported salmon. Basing on this, we can conclude that the national markets for perch, pikeperch,
whitefish and salmon are partially integrated. Salmon imported to Sweden and Swedish pikeperch and
perch are weakly exogeneous. The Finnish whitefish price is exogeneous to the Swedish price. In the case
of wild salmon neither the Swedish nor Finnish price is weakly exogeneous.
Table I: Test Results of Bivariate Tests between Finland and Sweden
Imported
Salmon
Salmon
Pikeperch
Perch
Whitefish
Pike
Test of Stationarity
Finnish
Swedish
7.65
7.81
[0.006]**
[0.005]**
17.00
24.19
[0.000]**
[0.000]**
13.08
7.88
[0.005]**
[0.000]**
9.99
11.20
[0.002]**
[0.001]**
20.45
12.68
[0.000]**
[0.000]**
15.44
0.20
[0.000]**
[0.659]
Trace Test
p=0
p<=1
p=0
p<=1
p=0
p<=1
p=0
p<=1
p=0
p<=1
p=0
p<=1
28.36 [0.022]*
10.27 [0.107]
39.25 [0.000]**
7.07 [0.126]
30.86 [0,001]**
8.52 [0,066]
23.46 [0.016]*
5.45 [0.246]
25.36 [0,008]**
2.46 [0,690]
Not tested
LOP
3.00 [0.083]
7.68
[0.006]**
6.54 [0.011]*
4.91 [0.027]*
5.88 [0.015]*
Not tested
Test of Weak Exogeneity
Finnish
Swedish
11.67
3.78
[0.003] **
[0.151]
18.89
4.96
[0.000]**
[0.026]*
13.29
0.24
[0.000]**
[0.625]
8.40
2.10
[0.004]**
[0.147]
0.95
17.02
[0.329]
[0.000]**
Not tested
Not tested
Notes: ** Significant at 1% level, * significant at 5% level
Spatial Integration of Markets in Finland
The integration of regional pikeperch, perch, whitefish and pike markets in Finland was tested with
multivariate analyses. Normality and autocorrelation tests were passed for all models. The only exception
was the model of pike in which there was some indication of autocorrelation. Therefore some caution is
needed when interpreting its results. The ARCH test was not passed for every model; however, it has
been shown that this is acceptable in cointegration analysis (Rahbek et. al 2002).
The regional prices seem to follow each other quite well in the long term, although there is fluctuation in
the short term (Fig. 3). The price level of whitefish differs in coastal regions, because smaller whitefish
have lower prices than bigger ones. The share of small whitefish is largest in the Bothnian Bay, while it is
marginal in the Archipelago Sea and Åland. The prices of whitefish and pikeperch are in average about
three times higher than the prices of perch and pike.
For pikeperch and whitefish we defined the rank of two and for pike the rank of four. For perch the trace
test statistics suggest full rank, but on the basis of the roots of the companion matrix and graphics of
cointegration relations we ended up to two cointegration relations in the system. This conclusion is in
accordance with the stationarity test (Table II), which indicates that none of the price series are stationary.
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IIFET 2006 Portsmouth Proceedings
b) Perch
a) Pikeperch
5
4
3
2
1
0
5
4
3
2
1
0
-1
04
20 1
03
20 1
02
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00
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99
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98
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94
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93
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Archipelago Sea
Åland
Bothnian Bay
Archipelago Sea
Gulf of Finland
c) Whitefish
Northern Quark
Åland
d) Pike
5
4
3
2
1
0
5
4
3
2
1
0
Northern Quark
Archipelago Sea
Åland
-1
04
20 -1
03
20 -1
02
20 -1
01
20 -1
00
20 -1
99
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98
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97
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95
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94
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93
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-1
04
20 1
03
20 1
02
20 1
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20 1
00
20 1
99
19 1
98
19 1
97
19 1
96
19 1
95
19 1
94
19 1
93
19
Bothnian Bay
Bothnian Bay
Archipelago Sea
Gulf of Finland
Northern Quark
Åland
Figure 3. Monthly regional prices of pikeperch, perch, whitefish and pike in Finland
Table II. Trace Test Statistics of Finnish Regional Tests
Pikeperch
Perch
Whitefish
Pike
p=0
p<=1
p<=2
p=0
p<=1
p<=2
p<=3
p=0
p<=1
p<=2
p<=3
p=0
p<=1
p<=2
p<=3
p<=4
Eigenvalue
0.185
0.135
0.01
0.378
0.313
0.087
0.070
0.384
0.251
0.083
0.021
0.456
0.233
0.144
0.124
0.062
Trace test
49.64 [0.000]**
20.67 [0.001]**
0.15 [0.769]
142.93 [0.000]**
75.92 [0.000]**
23.06 [0.018]*
10.16 [0.031]*
125.19 [0.000]**
56.49 [0.000]**
15.41 [0.208]
3.07 [0.577]
174.20 [0.000]**
87.86 [0.000]**
50.15 [0.000]**
28.02 [0.003]**
8.881 [0.056]
Notes: ** Significant at 1% level, * significant at 5% level
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IIFET 2006 Portsmouth Proceedings
After determination of the cointegration rank, the tests of long-term exclusion, stationarity, weak
exogeneity and test of unit vector in alpha were performed. The prices of pikeperch, whitefish and perch
passed the exclusion and stationary tests. The results indicate that the price of pike in the Northern Quark
is stationary.
Table III. Test Results of Exclusion, Stationarity, Weak Exogeneity and Unit Vector in Alpha Tests
PIKEPERCH
Exclusion
Stationarity
Weak
Exogeneity
Unit Vector in
Alpha
PERCH
Exclusion
Stationarity
Weak
Exogeneity
Unit Vector in
Alpha
WHITEFISH
Exclusion
Stationarity
Weak
Exogeneity
Unit Vector in
Alpha
PIKE
Exclusion
Stationarity
Weak
Exogeneity
Unit Vector in
Alpha
For rank 2
Archipelago
Sea
21.52**
[0.000]
20.33**
[0.000]
3.79
[0.150]
6.46*
[0.011]
For rank 3
Bothnian Bay
38.63**
[0.000]
34.77**
[0.000]
26.50**
[0.000]
11.69**
[0.0003]
For rank 2
Bothnian Bay
52.68**
[0.000]
33.04**
[0.000]
39.86**
[0.000]
20.93**
[0.000]
For rank 4
Bothnian Bay
60.68**
[0.000]
8.33**
[0.004]
43.81**
[0.000]
3.17
[0.075]
Åland
22.06**
[0.000]
20.36**
[0.000]
15.41**
[0.000]
0.59
[0.444]
Gulf of
Finland
28.35**
[0.000]
20.37**
[0.000]
13.02**
[0.001]
3.34
[0.068]
Northern
Quark
49.52**
[0.000]
25.91**
[0.000]
34.07**
[0.000]
8.97*
[0.011]
Archipelago
Sea
29.80**
[0.000]
36.67**
[0.000]
11.98**
[0.003]
24.73**
[0.000]
Åland
Constant
25.99**
[0.000]
39.59**
[0.000]
7.46*
[0.017]
31.90**
[0.000]
26.20**
[0.000]
Northern
Quark
31.03**
[0.000]
33.62**
[0.000]
25.80 **
[0.000]
2.77
[0.250]
Archipelago
Sea
18.06**
[0.000]
36.42**
[0.000]
2.78
[0.249]
25.89**
[0.000]
Åland
Constant
24.97**
[0.000]
32.61**
[0.000]
21.15**
[0.000]
31.05**
[0.000]
28.80**
[0.000]
Northern
Quark
15.02**
[0.005]
0.29
[0.588]
13.75**
[0.008]
0.47
[0.493]
Archipelago
Sea
18.09**
[0.001]
4.38*
[0.036]
12.53*
[0.014]
2.72
[0.099]
Åland
Gulf of
Finland
17.61**
[0.001]
8.64**
[0.003]
13.54**
[0.009]
7.46**
[0.006]
Notes: ** Significant at 1% level, * significant at 5% level
9
60.37**
[0.000]
7.08**
[0.008]
36.82**
[0.000]
1.52
[0.218]
Constant
4.69
[0.321]
IIFET 2006 Portsmouth Proceedings
The pikeperch of the Archipelago Sea is exogenous, i.e. it is the leading price in the system. Accordingly,
the results of the unit root vector in alpha test confirm that the prices of the Gulf of Finland and Åland are
purely adjusting and following the price of the Archipelago Sea. The price of the Archipelago Sea also
determines the prices in the whitefish system. The test of unit vector in alpha suggests that the price of
whitefish in the Northern Quark is following other prices. None of the regional perch and pike prices was
found to be weakly exogeneous. However, after testing homogeneity restrictions, the test suggests that the
perch price of Åland is weakly exogeneous. The tests of unit vector in alpha show that the pike prices of
other coastal areas but the Gulf of Finland are adjusting prices.
Next we imposed restrictions on the long-term structure. The LOP is in force for pikeperch and pike
between all the regions. The perch prices of the Archipelago Sea were found to be homogeneous with the
prices of the Bothnian Bay and Åland. The whitefish prices of Åland were found to be homogeneous with
the Bothnian Bay and the Archipelago Sea.
DISCUSSION
The results were mainly in accordance with a priori hypothesis. The Finnish regional producer prices
were cointegrated indicating that regions are in fact a part of a larger market area. The markets of Finnish
and Swedish salmon, pikeperch, perch and whitefish were partially integrated. This is a logical result,
because there are clear interactions between the national markets, although both markets are for most of
the species mainly supplied by domestic producers. There were no regular interactions between pike
markets, which were found to be national. The market of imported farmed salmon was fully integrated,
which once again (compare Mickwitz 1996, Hartman et al. 2004, Setälä et al. 2004) confirms that the
national market of farmed salmon is a part of a wider international market. One important policy
implication of these findings is that the prices of salmon and most of the freshwater fish species are
determined on international markets, far beyond the decisions of local fishermen and fish wholesalers.
The Swedish price for imported salmon was found to be exogenous to the Finnish price. The Swedish
price might be a better proxy for the world market price, because import volumes to Sweden are multifold
compared to Finland. There can also be some quality differences between the markets, because most of
the Swedish salmon is processed and most of the Finnish salmon is sold to fresh fish market. However,
none of the wild salmon prices was a leading price. There is no regular trade of wild salmon between
Finland and Sweden. The result also indicates that the price of wild salmon is partly separated from the
farmed fish market. This finding supports the assumption that caught salmon is moving from the bulk
market to a niche market of seasonal wild-caught species (Virtanen et al. 2005).
Swedish pikeperch and perch prices were exogenous to the Finnish prices. Both countries import
pikeperch from Estonia, which is the main player in the European pikeperch market. In Sweden import is
partly compensating the scarcity of Baltic cod. Thus, the import volumesa and the share of imported
pikeperch are greater in Sweden than in Finland. Therefore, the Swedish prices might reflect the
international price of pikeperch better than the Finnish ones. The exogeneity of Swedish perch price is
more difficult to explain. In Finland the markets of perch and pikeperch are partially integrated and the
price of pikeperch is the leading price (Virtanen et al. 2005). In that sense the mutual perch market could
behave in a similar way to the pikeperch market. The exogeneity of the Finnish whitefish price was an
obvious result, because Finland is the main market area to Swedish fishermen.
The Swedish prices fluctuated more than the Finnish prices and sometimes extremely high prices were
paid to Swedish fishermen. This could be a consequence of different market structures in Sweden and
Finland. In Finland most of the catches are sold to private wholesalers. In Sweden the catches are
particularly in winter so low that fish can almost totally be sold to narrow, but well paying market sectors.
There can also be differences in the underlying statistics. In Finland only the biggest fish wholesalers are
10
IIFET 2006 Portsmouth Proceedings
involved in the data collection, whereas in Sweden all the legalised first-hand buyers should make invoice
announcements to authorities.
The results of Finnish regional markets indicate that the prices of pikeperch, perch, whitefish and pike are
determined in the southern regions by the main market area. The prices in the sparsely populated
Northern Quark tend to adjust to other prices. The LOP was in force for all the regions of pikeperch and
pike indicating that the regional prices can be aggregated as one national price for further analysis. The
LOP was not in force between the prices of the Northern Quark and other regions for whitefish and perch.
This means that the Northern Quark is only partially integrated with other areas and there are some doubts
to include this price in the national price. However, the regional prices are already aggregated prices of
different size-classes of whitefish and perchb. The aggregated average price depends on the annual
distribution of and demand for fish of different sizes, which may cause some disturbance in the price
series. Therefore one should test, if LOP is in force between the prices of size-classes before one decides
whether to use a size-class based or aggregated price in the analyses.
The matter of aggregation is very important to construction of demand models. The most interesting
species for demand analyses are pikeperch and whitefish. As salmon and whitefish catches decline, highvalued pikeperch is an increasingly important species to the coastal fishermen in Finland and Sweden.
The international interest in pikeperch has also increased, because new producer countries have joined the
EU and pikeperch is a potentially new species in aquaculture. In Finland whitefish is a very topical
species for demand analysis due to the emerging whitefish farming. In the Finnish market the prices of
wild salmon collapsed as the supply of farmed salmon trout and salmon increased (Setälä et al. 2003).
Therefore, both fishermen and fish farmers are very concerned about what happens to the whitefish
prices, when the supply of farmed whitefish grows in the near future. According to this study, the national
markets for whitefish and pikeperch were only partially integrated. In consequence, the Finnish and
Swedish prices or quantities should not be aggregated, and the demand analyses should be performed
separately for both national markets.
ACKNOWLEDGEMENT
This study was done as part of the project “Price formation of freshwater fish species”. The authors are
grateful to the Nordic Ministry Council for its financial support.
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a
There are no reliable import statistics of pikeperch, because pikeperch cannot be distinguished from the
other freshwater fish species in the custom statistics.
b
The edible weight of perch I is at least 250 grams and perch II is smaller than that. The gutted weight of
whitefish I is over 800 grams, whitefish II 400-800 grams, whitefish III 250-400 grams, whitefish IV under 250
grams.
12