| Consumers buy organic products to increase utility, while farmers invest in organic production to achieve price premiums. However, investors would like to avoid the risk of falling prices when organic supply increases to maintain profit. We suggest the use of market integration tests between non-stationary price series of organic/conventional products to reveal whether increasing organic supply can be expected to reduce price premiums. Increased organic supply will induce price falls if organic/conventional markets are independent. Organic supply growth will leave price premiums unchanged, if prices move together over time, since conventional supply typically is larger than organic. The method is applied to the Danish market for farmed salmonids.... |
