Methodological Annex

The landed price of fish products is generally determined by the interplay between supply from harvesters and demand from buyers and processors, which is itself determined by consumers' preferences and willingness to pay. The price used in the analysis is the average price received in that year for each species, and therefore may vary based on product, fleet and other characteristics or factors not considered in the model; investigation into the effect of these factors is an area for future research.

The aggregate supply of fish products can be estimated from available data on landings by the different producing countries. Due to the globalization of markets, supply is evaluated for Canada, North America, other major producing countries, and worldwide. Information on demand for fish products is not readily available. Hence, changes in demand are approximated by evaluating the changes in some of the main factors influencing consumer demand in key markets. These factors include gross domestic product (GDP), income per capita, exchange rate, unemployment rate, oil prices, and consumer confidence index. The set of explanatory variables was chosen based on its potential to forecast prices, and therefore excludes some other factors that may affect demand (e.g. substitutes, costs of input, stock levels, domestic indicators, etc.). After testing many combinations of variables, only the most relevant and robust specifications were kept (as listed in Table 4).

The statistical model explaining the average landing prices of snow crab, lobster, shrimp and cod in Atlantic Canada has the following form:

p_it = f (Supply_it, Demand_it )
= f (Landed Quantities_it , Economic Indicators Affecting Demand_it )
= α + βLAN_it + δXR_it + λGDP_it + εit

Where :

p_it : average landing price of species _i during season _t
LAN_it : landed quantities of species _i during season _t in the main producing countries  
XR_it : average exchange rate during the season _t between the Canadian dollar and the currencies of major export markets of species _i
GDP_it : GDP of the main consumer markets of species _i in season _t
ε_it : the error term

A system of four equations explaining the price of the species under study was estimated. To control for correlation between the error terms of the four equations, a seemingly unrelated regression (SUR) ^{Footnote 39} was performed using the iterative generalized least squares method. The model is estimated in a double-logarithmic form, i.e. the natural logarithm was applied to landed prices as well as to the set of explanatory variables in each equation. In addition to simplifying the interpretation of results, this form of estimation seems appropriate to our analysis because it significantly increases the explanatory power of regressions. A Durbin-Watson test allowed ruling out serial correlation between equations residuals with a 95% confidence level. Potential structural changes, trend variables, prices delayed (i.e. lags) and the first difference of variables were tested. Even though the model proved relatively robust in its actual form, potential stationarity issues should be examined more closely in future research. The adjusted R² of the equations, i.e. the percentage change in price that can be explained by the model, is 68.7% for snow crab, 92.1% for lobster, 73.6% for shrimp, and 81.0% for cod.