Analysis of import demand and consumption of salmon in France. Discovering the reasons behind the increasing salmon prices

Abstract

This thesis is an analysis of import demand and consumption of salmon in France. The objective is to discover the reasons behind the dramatically increasing salmon prices during the recent years. The dynamic first difference version of the Linearized Almost Ideal Demand System (LA/AIDS) is primarily applied and two separate demand systems are constructed and estimated. The first demand system analyses the French import demand for salmon, trout, cod and Alaska pollack in order to see how salmon operates in the same market with chosen representatives of other fish/seafood species. The second demand system focuses on salmon from different supply sources, namely Norway, the United Kingdom, Chile and the Rest of the World, in order to see how salmon from different countries of origin compete with each other in the same market. In order to account for the structural break in both demand systems, the whole observation period is divided into two samples: monthly observations from 1 to 156 cover the period from January 1999 to December 2011, while monthly observations from 157 to 216 cover the period from January 2012 to December 2016. In addition, the ordered logit model of salmon consumption choice is estimated in order to examine how different factors influence the frequency of salmon consumption for the French consumers. The applied model is based on the evoked sets concept and it is assumed that salmon choice can be explained by socioeconomic and demographic profile of a consumer, experience, perceptions and preferences regarding salmon consumption.

The main results show that, firstly, salmon acts as a much stronger substitute for whitefish species than vice versa, and, as a result, salmon faces less competition from other fish/seafood products, which, makes salmon prices increase significantly. Secondly, it is revealed that Norwegian salmon has become a much stronger substitute for Scottish salmon than vice versa, especially during the last five years. This indicates that it is harder for French consumers to replace the demand for Norwegian salmon, which forces the demand for Norwegian salmon to grow and pushes prices up. Next main result is that Norwegian salmon has started to act as an extremely strong substitute for Chilean salmon after the structural break, which reflects the consequences of the Chilean salmon decease crisis. Furthermore, salmon from all major supply sources follows the common trend and is becoming less expenditure elastic over time. This result is coherent with another finding that French consumers mostly consider salmon to be more suitable for weekday home occasions, which means that salmon is becoming a central part of the regular diet, which clearly contributes to the growth of salmon demand that, in turn, may cause the increase of salmon prices.

Keywords: salmon prices, French salmon demand, LA/AIDS model, elasticities, salmon consumption