An Analysis of U.S.A. Seafood Market Wholesale Prices -- An Application of the Vector ARMA Model

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After Taiwan joined the World Trade Organization in January 2002, a significant tariff reduction had lowered the import cost of the fishery products and had increased the import demand significantly. Salmon, cod, shrimp and lobster are top four major import seafood groups in Taiwan and their demand will be more sensitive to the international seafood prices after trade liberalization. In this study, we try to collect the international seafood prices in order to measure the competitiveness of the domestic seafood supply in Taiwan. Since U.S.A. is the second largest import source country to Taiwan and it is also the second largest seafood importing country in the world, it is interesting to find that salmon, cod, shrimp and lobster are also the four major seafood imports in U.S.A. Even though Japan is the largest importing country of fishery products in the world, its import value has declined by 4.02% annually since 1995 to 2001. During the same period of time, the import value of seafood in U.S.A. has increased by approximately 6.42% annually and accounts for 17.24% of the total value of seafood imports in the world in 2001. Therefore, the seafood import market in U.S.A. will be an ideal market to provide us the information of international price of salmon, cod, shrimp and lobster in the world. This study collects the weekly wholesale prices of 15 product items of salmon, cod, shrimp and lobster started from the first week of January 1994 to the fourth week of December 2002 from Urner Barry Publications, Inc. For each of the four major imported product groups, the average F.O.B. prices before tariff in Taiwan are all lower than the average wholesale prices in U.S.A. during the above period. It is possible that the importers in Taiwan tend to import low-price and low-quality seafood or they may tend to under estimate their import value to avoid paying tariff to the government. Furthermore, this study used the non-nested causality test to investigate the lead-lag relationship between various wholesale price variables. The vector ARMA model is used to estimate the relationship for each of the four groups of fishery products in U.S.A. Results show that the wholesale prices are all correlated in one or two weeks lag, which suggest that the seafood price in the following week may be tracked by the price information in the past two weeks. The major findings in this study are as follows, (1) the import price of Chilean fresh fillets salmon (SACA) is a leading price index to two other salmon products; (2) the price of U.S.A. domestic dressed frozen halibut (CHDT) is a price leading index to three other cod products; (3) Among four imported sources of the shrimp products, the prices of Central and South American shrimp (SHCS), U.S.A. domestic brown shrimp (SHGB), and U.S.A. domestic white shrimp (SHGW) exhibit feedback relationships among each other; (4) Among all three kinds of imported lobster products, the prices of West Australian lobster tails (LOTA), Brazil lobster tails (LOTB) and Caribbean lobster tails (LOTC) exhibit feedback relationships with each other. The RMSPE of the in-sample price forecasts of cod, shrimp and lobster are all smaller than 3%, which indicates that the VARMA model performed very well in forecasting. This study recommends the government to establish a price-monitoring system to ensure the competitiveness of the domestic fishery products in Taiwan and to avoid a loss of the tariff revenue. Results of this study could provide a way to master the trend of international wholesale seafood prices and to provide the government a double-checking basis of the seafood import prices in Taiwan.