Transmission of agricultural cost shocks in the French food supply chain

How do agricultural cost shocks propagate through food-supply chains? This study examines the transmission of agricultural input cost shocks into output prices of French food processors from 2015 to 2023. Using a novel dataset linking disaggregated producer price indices to agricultural input price indices, we find that approximately 67% of agricultural cost shocks are passed through to factory-gate prices in the long run. For domestic sales, the pass-through is 77%, and the full pass-through hypothesis can be rejected at the 95% level. Price adjustments occur within five quarters when selling to retailers and within three quarters when selling to other customers, reflecting contractual friction and price renegotiations. We show that agricultural cost shocks account for over 42% of the recent rise in domestic food industry factory-gate prices, slightly less than the share of agricultural inputs in production costs (44% in our sample). This study contributes to the cost pass-through literature by documenting the magnitude and dynamics of agricultural shock transmission across various food product categories.