The EU: A shellfish institution?

When looking at the link between supply and demand and price, most economists will use the example of a market in agricultural goods. So you'll hear of the price of carrots or potatoes quite a lot when you're studying the topic of price determination.

There is of course very good reason for choosing agricultural markets to illustrate this topic. These markets usually comprise many buyers and sellers, often with the producers of the goods having very little market power. In this way, these markets mirror, as well as any, the way markets are classically supposed to operate.

So, rather than using this example, let's look at the production of shellfish in the EU and investigate the link between output and price in this market. Firstly, though, here's a little background information on shellfish production in the EU.

The EU accounts for a very small proportion of the total world output of shellfish. It produces 3 % in volume and 4.3 % in value of worldwide output of all shellfish (known technically as 'aquaculture species'). However, for some species, the EU is the largest global producer. Over half a million tonnes of mussels are produced in the EU, equivalent to 70 % of world production.

In other aquaculture markets, though, such as those for oysters or clams, the EU is a small producer, accounting for only 3 or 4 % of global output. So you might have thought that EU producers have a fight on their hands trying to supply their domestic market when they are such a small producer globally.

In fact, though, despite being out-produced in clams by more than ten to one by China, (with production in excess of one million tonnes), the EU producers are able to continue to supply their domestic market, by specialising in live product.

We have gathered data from the UK Department for Trade and Industry on the level of production in the EU of clams and the price commanded for clams in the marketplace.

ORIGINAL DATA:
CLAM PRODUCTION IN THE EU 1988 - 1997

Now what we are interested in here is the extent to which the quantity of clams produced in the EU determines the price level of clams in the marketplace. You will need your knowledge of the product-moment correlation coefficient to help you understand what follows.

The first step is to graph the data to depict the EU clam market. Difficulties graphing the data? Get our version of the graph [Excel sheet 17K] and the data.

Next, construct a table (or use the spreadsheet file) that contains the production and price data that we have gathered and helps us to calculate the correlation coefficient. Here's our version:

Now use this data to calculate the correlation coefficient for clam production and price in the EU over the period of study.

Remember the formula for the correlation coefficient? Here's a reminder:

Your calculations should produce a value for r of - 0.78. If you didn't get this answer go back to your formula or spreadsheet and check the number work.

So where does the EU clam market go in the near future? Industry estimates of potential production see annual output increasing to 100 000 tonnes by 2010. Growth beyond that figure is likely to be constrained by lack of space. So with price falling as output rises, what can the clam producers do to increase their standard of living?

OK so improvements in efficiency are the key to boosting producer incomes.

Finally, let's consider the intra-EU picture of aquaculture:

Use this table as a basis for discussing the structure of the EU aquaculture market and the reasons for some member states' strong position and others' weaker standing.

Back to worksheets