Impact of consumer confidence on pork prices in Korea, taking into account the quality difference: a comparison between imported frozen and domestic chilled pork belly

This study empirically explores the impact of consumer confidence on frozen and chilled pork belly prices in Korea, taking the quality difference into account. For our analysis, we utilise the vector error correction model (VECM) and impulse-response function. Based on the weak exogenous test results, we find that consumer confidence has a long-run causality on frozen and chilled pork belly prices in Korea. The cointegration vector from VECM also shows that consumer confidence has a positive and negative effect on high- (chilled pork belly) and low-quality food (frozen pork belly) prices, respectively. Impulse-response function results reveal that chilled pork belly prices are affected by consumer confidence more frozen pork belly prices. Our findings have implications for Korean pig meat farmers as well as importers. First, consumer confidence, a leading composite index for the future, is important for high-quality pork, particularly chilled pork belly. In turn, pig-raising farmers that produce chilled pork belly may improve their profits by setting the number of pigs they raise based on the consumer confidence index. Second, importers of frozen pork belly can enhance their profits by choosing their import volume based on the consumer confidence index. Our results confirm that consumer confidence affects the demand for both high- and low-quality pig meat (chilled and frozen pork belly, respectively).