| Abstract |
The purpose of this study is to analyze the impact of rising raw material prices in the agri-food supply chain on processed food prices and related manufacturing firms’ performance. We estimate the impact of the increase in the producer price index for food raw materials on the increase in the producer price index for processed products and on the production and shipments of food manufacturing firms using an Auto Regressive and Distributed Lags (ARDL) model. The estimation results indicate that in two industries—seafood processing and storage, and grain processing, starch, and starch products manufacturing—the increase in raw material prices is not passed on to processed product prices, and the business performance in these industries is expected to deteriorate due to rising raw material costs. In the slaughtering, meat processing and storage industry and the fruit and vegetable processing and storage industry, the increase in raw material prices passes on to processed product prices, resulting in a lower likelihood of decreasing business performance. However, the reduction in production and shipment volumes of these industries could significantly harm business outcomes. Thus, balanced policies are needed to control food price inflation and support small businesses facing operational difficulties due to rising raw material costs.
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