Market Integration of Cold and Warmwater Shrimp in Europe

This study examines market integration between the cold and warmwater shrimp value chain in the UK, Denmark, Italy, Sweden, and Norway using cointegration methods. For all countries, market integration exists between cold and warmwater unprocessed shrimp imports, where the law of one price (LOP) holds in three of the five cases. For processed shrimp, the LOP holds in three of four integrated cases, and for retail sales in the UK and Denmark, the LOP fails to hold in the presence of market integration. Unprocessed coldwater shrimp leads the market in northern Europe. Downstream, prices adjust within a few months, indicating that a shrimp is a shrimp. In the short-run, the coldwater value chain seems to be protected from competition, but provides opportunities for a shift in consumer demand towards warmwater in the long-run. This implies that coldwater shrimp prices are determined by demand and supply of warmwater shrimp, which is 15 times larger.