New Zealand's Pastoral Exports: Can Small Countries Practise Pricing-to-Market?

Literature presumes that exporters from small countries and particularly of primary products do not practice pricing-to-market (PTM) because of lack of market power. Out paper examines New Zealand’s pastoral exports over 1988-2002 and finds strong evidence of PTM. Evidence rejects the hypothesis that New Zealand is a price taker in these markets. We find incomplete pass-through in sheep meat markets and more than complete pass-through in wool. The degree of PTM is more pronounced in meat and less, but significant, in will. Interesting co-movement in export pricing of New Zealand and Australia and a high degree of PTM are noted when the two counties together dominate a market. Generally we report a smaller PTM when there is a larger promotional expenditure in the corresponding market.