Price Stabilization of Taiwan Broiler Industry: An Evidence of STAR Approach

Price stabilization mechanism adopted for agricultural product is important policy for reasonable food supply under free agricultural trade. A generally used quantity supply control scheme associated with free imports of Taiwan broiler industry is considered in this study. It is argued that efficient quantity control will provide floor price support while at the same time free imports will create price ceiling. This paper examines the efficacy of such price control mechanism by an exponential smooth transition autoregressive (ESTAR) time series model. 2002 to 2007 monthly data of farm, retail, and import chicken prices are applied in empirical estimation. Stationary, nonlinear and asymmetric property tests of prices are included for model selection. Empirical results showed that price stabilization mechanism for Taiwan broiler industry is effective and reasonable during free import period. Price transition among prices to reflect rising feed cost is also efficient under the quantity supply control system.