Price transmission, BSE and structural breaks in the UK meat sector

Abstract

This paper examines transmission between producer and retail prices for beef, lamb and pork in the UK and the impact of public concern over bovine spongiform encephalopathy (BSE) in early 1996. We used the cointegration procedure of Johansen et al. 2000), which admits structural breaks in cointegrating space. Results with monthly data for 1986–2000 show that a long‐run relationship exists between each producer and retail price, and that a structural break occurs in the beef relationship at the height of the BSE crisis, which increases the margin by £1.12/kg. In contrast, there is no evidence of BSE‐related breaks in the lamb or pork relationships