Investigating the Effects of Economic Shocks and Price Risk on the Iranian Beef Marketing Margin Using Fourier Approximation

Articles in Press

Document Type : Original Research

Authors
Mahdi Pendar
Mohammad Rezvani
Arash Dourandish
Department of Agricultural Economics, Faculty of Agriculture, College of Agriculture and Natural Resources, University of Tehran, Karaj, Islamic Republic of Iran.
Abstract
Amid persistent economic shocks over the past decade, this study investigates the influence of price risk on beef marketing margin dynamics in Iran, incorporating structural breaks from April 2014 to March 2024. Price risk was estimated using the GARCH model, and the Fourier approximation was used to evaluate its effects on marketing margins while accounting for non-linear structural shifts. Findings from three estimation frameworks—markup, marketing cost, and relative margin—indicate that retail price risk positively contributes to the total beef marketing margin. In contrast, slaughterhouse-level price risk and slaughtering costs had an adverse effect on the farm-to-wholesale margin. Retail price risk and wholesale-to-retail marketing costs also increased the wholesale-to-retail margin. These results highlight the necessity of reevaluating retail-level price-setting mechanisms and strengthening risk management tools to shield producers from wholesale price volatility.

Keywords

Subjects

1.      Amsler, C., and Lee, J. 1995. An LM test for a unit root in the presence of a structural change. Econometric Theory, 11(2): 359–368. https://doi.org/10.1017/S0266 46660 000921X
2.      Apergis, N., Bulut, U., Ucler, G., and Ozsahin. S. 2021. The causal linkage between inflation and inflation uncertainty under structural breaks: Evidence from Turkey. Manchester School, University of Manchester, 89(3): 259-275.
3.      Azzam, A., and Dhoubhadel, S. 2022. COVID-19, Beef Price Spreads, and Market Power, Journal of Agricultural and Resource Economics, Western Agricultural Economics Association. 47(2): 462-476.
4.      Banerjee, P., Arčabić, V., and Lee, H. (2017). Fourier ADL Co-integration test to approximate smooth breaks with new evidence from crude oil market. Economic Modelling, 67: 114-124.
5.      Bollerslev, T. 1986. Generalised autoregressive conditional heteroskedasticity. Journal of Econometrics, 31(2): 307–327.
6.      Brester G.W., and Musick, D.C. 1995. The effect of market concentration on Lamb marketing margins. Journal of Agriculture and Applied Economics, 27(1): 172-183. Doi: 10.22004/ag.econ.15327.
7.      Brooks, C. 2008. Introductory econometrics for finance. Cambridge University Press.
8.      Brorsen, B.W. 1985. Marketing margins and price uncertainty: The case of the U.S. Wheat market. American Journal of Agricultural Economics. 67(3): 521 – 528. https: //doi.org/ 10.2307/1241071
9.      Elitzak, H. 1996. Food Cost Review. Agricultural Economics Report 729. Washington D.C., USA: United States Department of Agriculture.
10.  Enders, W., and Lee, J. 2012. A unit root test using a Fourier series to approximate smooth breaks. Oxford Bulletin of Economics and Statistics, 74(4): 574–599. https://doi.org/10.1111/j.1468-0084.2011.00662
11.  Engle, R. F. 1982. Autoregressive conditional heteroskedasticity with estimates of the variance of United Kingdom inflation. Econometrica, 50(4): 987–1007.
12.  Eshghi, F., Mojaverian, S. M., Tehranchian, A. M., and Hosseini Yekani, E. A. 2022. The Effect of News Shock on Consumption in the Iranian Economy: A Dynamic Stochastic General Equilibrium Approach. Agricultural Economics Research, 13(4): 134-148.
13.  Faminow, M. D., and Laubscher, J. M. 1991. Empirical testing of alternative price spread models in the South African maize market, Journal of Agricultural Economic, 6(1): 49-66. https://doi.org/10.1016/0169-5150(91) 90015-D
14.  Gardner, B. 1975. The farm-retail price spread in a competitive food industry, American Journal of Agricultural Economics, 57(3): 399-409. https://doi.org/10.2307/1238402
15.  Hirvonen, K., Minten, B.,  Mohammed, B., and Tamru, S. 2021. Food prices and marketing margins during the COVID-19 pandemic: Evidence from vegetable value chains in Ethiopia. Journal of Agricultural Economics, 52(3): 407-521. https://doi.org/10.1111/agec.12626
16.  Holloway, G. J. 1991. The farm-retail price spread in an imperfectly competitive food industry, American Journal of Agricultural Economics, 73(4): 979-989.  https://doi.org/10.2307/1242425
17.  Jayne,. T and Myers, R.J. 1994. The Effect of Risk on Price Levels and Margins in International Wheat Markets, Review of Agricultural Economics, 16(1): 63-73.
18.  Kohansal, M. R. and rafiei, H. 2019. An Investigation of Factors Affecting the Marketing Margins Using Spatial Regression: A Case Study of Neyshabour Plain in Iran. Agricultural Economics and Development, 27(2): 133-154.
19.  Lee, J., and Strazicich, M. C. 2003. Minimum Lagrange multiplier unit root test with two structural breaks. Review of Economics and Statistics, 85(4): 1082–1089. https://doi.org/10.1162/00346 53037 72815961
20.  Li, J., and Enders, W. 2017. Flexible Fourier form for volatility breaks. Studies in Nonlinear Dynamics and Econometrics, 22(1): 1–19.
21.  Lusk, J., Tonser, G., and Schulz, L. 2021. Beef and Pork marketing margins and price spreads during COVID-19. Journal of Applied Economic Perspective and Policy. 43(1): 4-23. https://doi.org/10.1002/aepp.13101
22.  O' Donnell, C. J. 1999. Marketing margins and market power in the Australian dairy processing and retailing sectors, 43rd Annual Conference of the Australian Agricultural and Resource Economics Society, Christchurch.
23.  Oskou, V., and Rostami, M. 2023. Investigating the Relationship between Economic Policy Uncertainty and Financial Statement Comparability. Journal of New Research Approaches in Management and Accounting, 7(90), 63–81.
24.  Pascalau, R., Thomann, C., and Gregoriou, G. N. 2011. Unconditional mean, volatility, and the FOURIER-GARCH representation. In G. N. Gregoriou and R. Pascalau (Eds.), Financial econometrics modeling: Derivatives pricing, hedge funds and term structure models (pp. 90–106). Palgrave Macmillan.
25.  Piggott, R., G. Griffith and J. Nightingale. 2000. Market power in the Australian food chain: towards a research Agenda, RIRDC Project, No. UNE-67A.
26.  Rezvani, M. and pendar, M. 2025. To examine the effect of price risk, eliminating the preferred currency and the covid-19 pandemic on the marketing margin of mutton. Animal Science. Research, online publication. doi: 10.22034/as.2024.62785.1749
27.  Schmidt, P., and Phillips, P. C. 1992. LM tests for a unit root in the presence of deterministic trends. Oxford Bulletin of Economics and Statistics, 54(3): 257–287. https://doi.org/10.1111/j.1468-0084.1992. tb000 02.x
28.  Shahbazi, H. , Kavoosi Kalashami, M. , Peykani, G. and Abbasi Far, Z. 2009. Investigating Price Risk’s Effect on Marketing Margin of Meet in Iran. Journal of Agricultural Economics and Development, 23(1): 79-87.
29.  Shahikitash, M. , Sheidaii, Z. and Mohammadzadeh, A. 2016. Market Power and Risk of Price Uncertainty (A Case Study of Date Market). Journal of Agricultural Economics and Development, 30(2): 107-116.
30.  Teterin, P., Brooks, R., and Enders, W. 2016. Smooth volatility shifts and spillovers in US crude oil and corn futures markets. Journal of Empirical Finance, 38(1): 22–36. https://doi.org/10.1016/j.jempfin.2016.05.005.
31.  Thompson, G.D. and Lyon, C.C. 1989. Marketing order impacts on farm-retail price spreads: the suspension of prorates on California-Arizona navel oranges. Am. J. Agric. Econ., 71: 647-660.
32.  Wohlgenant, M.K. 1985. Competitive Storage, Rational Expectations, and Short-Run Food Price Determination, American Journal of Agricultural Economics,  67(4): 739-748.
33.  Wohlgenant, M.K. and J.D. Mullen. 1987. Modelling the Farm-Retail Price Spread for Beef. Western Journal of Agricultural Economics, 12: 119-125.
34.  Zivot, E., and Andrews, D. W. K. 1992. Further evidence on the great crash, the oil-price shock, and the unit-root hypothesis. Journal of Business and Economic Statistics, 10(3): 251–270.
Journal of Agricultural Science and Technology

Articles in Press, Accepted Manuscript
Available Online from 28 December 2025