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MA Market Analysis


How prices are determined?

© BLE Bonn / Thomas Stephan

Economic analysis of price formation along value chains in agriculture and food sector

How national and international prices for agricultural goods and processed products are determined? What influence do producers, processors, traders and consumers have?

Background and Objective

Modern foods run through value chains in a variety of processing steps. As a result, the agricultural raw product has only a small share of value in the final consumer product. The pricing of the final product occurs in these complex structures. In this mechanism both the prices for the raw products as well as the cost of processing are encroached on.

In general, producer and consumer prices are known. But how does the price formation of the intermediate goods take place? Does the organizational form of a value chain or the market concentration affect the prices formation?

From the difference between producer and consumer prices cannot directly be derived, which market stage accounts for what proportion of the sale price. In addition, political conditions have a direct effect on the mechanisms of price formation. The withdrawal of the policy from the direct market control - for example, the expiry of the milk quota from April 2015 - changed the national but also the international price formation along value chains. Our task is to monitor and to explain market developments. We also try to identify undesirable developments at an early stage and to prepare course of actions for the policy.


We analyze the markets for grains and oilseeds, dairy, livestock and meat as well as sugar in the long term. Together with the knowledge of fundamental market factors these long-term market observation forms the basis of our work. We examine in particular the market structure, the competitive situation and the organizational form in and between the different value chains at national and international level.

Our analysis of price formation processes within chains contributes for higher transparency and better recommendations for policy,


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