Where Do Pork Price Changes Get Lost? Evidence from Hungary’s Price Caps

What is it about?

This study looks at how price changes moved through the Hungarian pork supply chain during a period of high food inflation and several retail-market interventions, including food price caps. We compare two stages: how producer prices affected retailers’ procurement prices, and how procurement prices affected the prices paid by consumers. We find that producer price changes were passed on relatively strongly to procurement prices, but much less strongly to consumer prices. In other words, most of the weakening in price transmission occurred at the final retail stage rather than throughout the whole supply chain. During the food-price-cap period, this difference became especially pronounced: upstream price transmission remained substantial, while the link between procurement costs and consumer prices weakened sharply. The results show why it is important to look beyond producer and consumer prices alone. Retail regulation may change where price pressures are absorbed within the supply chain, even when upstream market relationships remain strong. Our findings therefore help explain how food price controls can affect different stages of the market in different ways.

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Photo by Towfiqu barbhuiya on Unsplash

Photo by Towfiqu barbhuiya on Unsplash

Why is it important?

What makes this study distinctive is that it looks inside the supply chain rather than treating the relationship between producer and consumer prices as a single process. By using retail procurement prices as an intermediate step, we can identify where price transmission weakens. We find that producer prices continued to pass through relatively strongly to procurement prices, while the main attenuation occurred between procurement and final consumer prices. The study is also timely because it examines a period of unusually high food inflation and intensive retail intervention in Hungary, including food price caps, mandatory promotions, online price monitoring and a later margin cap. During the food-price-cap-only period, downstream pass-through fell sharply, while upstream transmission remained substantial. These findings matter for both researchers and policymakers. They show that looking only at producer and consumer prices can give a misleading picture of how a food supply chain is functioning. Understanding which stage absorbs or delays price changes can lead to better evaluation of retail regulation and a more informed debate about who bears the adjustment when governments intervene in food prices.

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