IDEAS home Printed from https://ideas.repec.org/a/ags/ifaamr/244616.html
   My bibliography  Save this article

Price Transmission in Global Dairy Markets

Author

Listed:
  • Newton, John

Abstract

The price relationships governing dairy commodity price transmission among the US, Oceania, and EU markets are considered using vector autoregressive (VAR) and vector error correction (VECM) models. Results demonstrate a one-way price relationship for US dry milk powders as price shocks in Oceania and the European Union spread to the United States while US price shocks do not spread into those markets. US prices for cheddar and butter are impacted by price shocks in Oceania and the EU. However, US price shocks also spread into the Oceania market and may reflect potential arbitrage opportunities. Historically thought to be shielded from international prices through low import quotas and high out-of-quota tariffs, these results are the first to empirically demonstrate that US dairy commodity prices are influenced in both the long-run and short-run by international dairy commodity prices.

Suggested Citation

  • Newton, John, 2016. "Price Transmission in Global Dairy Markets," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 19(B), pages 1-15, August.
    • Handle: RePEc:ags:ifaamr:244616
    DOI: 10.22004/ag.econ.244616
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/244616/files/420150168.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.244616?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Bamba, Ibrahim & Maynard, Leigh J., 2004. "Hedging-Effectiveness of Milk Futures Using Value-At-Risk Procedures," 2004 Conference, April 19-20, 2004, St. Louis, Missouri 19028, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    2. Capps, Oral, Jr. & Sherwell, Pablo, 2005. "Spatial Asymmetry in Farm-Retail Price Transmission Associated with Fluid Milk Products," 2005 Annual meeting, July 24-27, Providence, RI 19316, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Teresa Serra & Barry Goodwin, 2003. "Price transmission and asymmetric adjustment in the Spanish dairy sector," Applied Economics, Taylor & Francis Journals, vol. 35(18), pages 1889-1899.
    4. Newton, Jonathan & Kuethe, Todd, 2015. "The Footprint of Chinese Demand for U.S. Soybeans," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 5, March.
    5. Newton, John & Thraen, Cameron & Novakovic, Andrew, 2014. "2014 Farm Bill: Key Factors to Consider with a California Federal Milk Marketing Order," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 4, March.
    6. Vitaliano, Peter, 2016. "Global Dairy Trade: Where are we, how did we get here and where are we going?," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 19(B), pages 1-10, August.
    7. Gould, Brian W. & Villarreal, Hector J., 2002. "A Descriptive Analysis of Recent Trends in the International Market for Dry Milk Products," Discussion Papers 37639, University of Wisconsin-Madison, Babcock Institute for International Dairy Research and Development.
    8. Henry W. Kinnucan & Olan D. Forker, 1987. "Asymmetry in Farm-Retail Price Transmission for Major Dairy Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(2), pages 285-292.
    9. Manchester, Alden C. & Blayney, Donald P., 2001. "Milk Pricing In The United States," Agricultural Information Bulletins 33612, United States Department of Agriculture, Economic Research Service.
    10. Price, Michael J., 2004. "Effects of U.S. Dairy Policies on Markets for Milk and Dairy Products," Technical Bulletins 184319, United States Department of Agriculture, Economic Research Service.
    11. Research Department, . "Agricultural Letter," Agricultural Letter, Federal Reserve Bank of Chicago, vol. 1957(419).
    12. Price, J. Michael, 2004. "Effects Of U.S. Dairy Policies On Markets For Milk And Dairy Products," Technical Bulletins 33578, United States Department of Agriculture, Economic Research Service.
    13. Tluczak, Agnieszka, 2012. "Attempt to Identify the Causal Relationships Between the Prices of Milk in Selected EU Countries," Acta Oeconomica et Informatica, Faculty of Economics and Management, Slovak Agricultural University in Nitra (FEM SPU), vol. 15(2), pages 1-3, July.
    14. Yeboah, Osei Agyeman & Shaik, Saleem & Agyekum, Afia Fosua, 2015. "Potential Impact of TPP Trade Agreement on US Bilateral Agricultural Trade: Trade Creation or Trade Diversion?," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196849, Southern Agricultural Economics Association.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhou, Xuanru & Zhang, Hua & Zheng, Shuxian & Xing, Wanli & Yang, Hanshi & Zhao, Yifan, 2023. "A study on the transmission of trade behavior of global nickel products from the perspective of the industrial chain," Resources Policy, Elsevier, vol. 81(C).
    2. Guo, Sui & Li, Huajiao & An, Haizhong & Sun, Qingru & Hao, Xiaoqing & Liu, Yanxin, 2019. "Steel product prices transmission activities in the midstream industrial chain and global markets," Resources Policy, Elsevier, vol. 60(C), pages 56-71.
    3. Judith Hillen & Stephan von Cramon‐Taubadel, 2019. "Protecting the Swiss milk market from foreign price shocks: Public border protection vs. quality differentiation," Agribusiness, John Wiley & Sons, Ltd., vol. 35(4), pages 516-536, October.
    4. Thomas Bittmann & Jens-Peter Loy, 2021. "Price transmission and cost pass-through on the German dairy value chain," Journal of New Economy, Ural State University of Economics, vol. 22(3), pages 84-102, October.
    5. Anthony N. Rezitis & Gregor Kastner, 2021. "On the joint volatility dynamics in dairy markets," Papers 2104.12707, arXiv.org.
    6. Hillen, J., 2018. "Protecting the Swiss milk market from foreign price shocks: Public border protection vs. quality differentiation," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276015, International Association of Agricultural Economists.
    7. Berger, Jurij & Dalheimer, Bernhard & Brümmer, Bernhard, 2021. "Effects of variable EU import levies on corn price volatility," Food Policy, Elsevier, vol. 102(C).
    8. Maximilian Koppenberg, 2023. "Markups, organic agriculture and downstream concentration at the example of European dairy farmers," Agricultural Economics, International Association of Agricultural Economists, vol. 54(2), pages 161-178, March.
    9. Morales, Luis Emilio & Balie, Jean & Magrini, Emiliano, 2021. "How has the minimum support price policy of India affected cross-commodity price linkages?," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 24(2), February.
    10. Rezitis, Anthony N. & Kastner, Gregor, 2021. "On the joint volatility dynamics in international dairy commodity markets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(2), January.
    11. Tejeda, Hernan A. & Kim, Man-Keun, 2020. "Dynamic price relationships and price discovery among cheese markets," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 24(1), September.
    12. Rezitis, Anthony N. & Rokopanos, Andreas & Tsionas, Mike G., 2021. "Investigating dynamic price co-movements in the international milk market using copulas: The role of trade agreements," Economic Modelling, Elsevier, vol. 95(C), pages 215-227.
    13. Monika Roman, 2020. "Spatial Integration of the Milk Market in Poland," Sustainability, MDPI, vol. 12(4), pages 1-17, February.
    14. Morales, L. Emilio, 2017. "The Effects of International Price Volatility on Farmer Prices and Marketing Margins in Cattle Markets," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 21(3), December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Weber, Sascha A. & Salamon, Petra & Hansen, Heiko, 2012. "Volatile world market prices for dairy products - how do they affect domestic price formation: The German cheese market," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122542, European Association of Agricultural Economists.
    2. Bittmann, Thomas & Holzer, Patrick & Loy, Jens-Peter, 2016. "Seasonal Cost Pass-Through In The German Milk Market," 56th Annual Conference, Bonn, Germany, September 28-30, 2016 244779, German Association of Agricultural Economists (GEWISOLA).
    3. Rumánková, R., 2014. "Asymmetry in Price Transmission of the Czech Wheat Agri-food Chain," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 6(1), pages 1-9, March.
    4. Lorena de Oliveira, Maria de Fátima & da Silva Carvalho, Maria Leonor & Raquel Lucas, Maria & Damião Henriques, Pedro & Mora Peixe, Fernanda, 2015. "Price Transmission on the Milk Portuguese Market," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 16(1), pages 1-12.
    5. Judith Hillen, 2021. "Vertical price transmission in Swiss dairy and cheese value chains," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 9(1), pages 1-21, December.
    6. Atanu Ghoshray & Sushil Mohan, 2021. "Coffee price dynamics: an analysis of the retail-international price margin [Commodity dependence and development: suggestions to tackle the commodities problem]," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 48(4), pages 983-1006.
    7. Johansson, Robert & Peters, Mark & House, Robert, 2007. "Regional Environment and Agriculture Programming Model," Technical Bulletins 184314, United States Department of Agriculture, Economic Research Service.
    8. Ahmed, Osama, 2018. "Vertical price transmission in the Egyptian tomato sector after the Arab Spring," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 50(47), pages 5094-5109.
    9. Rosa, Franco & Weaver, Robert D. & Vasciaveo, Michela, 2015. "Structural Changes and Dairy Chain Efficiency in Italy," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 6(3), pages 1-21, July.
    10. Lajdová, Zuzana & Bielik, Peter, 2013. "Vertical price transmission analysis: The case of milk in the slovak dairy sector," APSTRACT: Applied Studies in Agribusiness and Commerce, AGRIMBA, vol. 7(4-5), pages 1-8.
    11. Zoltan Bakucs & Jan Falkowski & Imre Ferto, 2012. "Does Farm and Processing Industry Structure Matter for Price Transmission? Some Evidence From Transition Countries: A Comparison of Dairy Sectors in Hungary and Poland," CERS-IE WORKING PAPERS 1212, Institute of Economics, Centre for Economic and Regional Studies.
    12. Herndon, Cary W., Jr. & Davis, Brandon L. & Parkhurst, Gregory M., 2005. "Do MILC Program Payments Affect Milk Supply Response Across Regions of the U.S.?," 2005 Annual meeting, July 24-27, Providence, RI 19438, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. Herndon, Cary W., Jr. & Looney, John Mark, Jr., 2008. "Does the MILC program Affect Milk Supply Response in Individual States of the United States?," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6782, Southern Agricultural Economics Association.
    14. Fousekis, Panos & Katrakilidis, Constantinos & Trachanas, Emmanouil, 2016. "Vertical price transmission in the US beef sector: Evidence from the nonlinear ARDL model," Economic Modelling, Elsevier, vol. 52(PB), pages 499-506.
    15. Daniele Cavicchioli & Luca Cacchiarelli & Alessandro Sorrentino & Roberto Pretolani, 2022. "Should We Cry over the Spilt Milk? Market Power and Structural Change along Dairy Supply Chains in EU Countries," Sustainability, MDPI, vol. 14(8), pages 1-18, April.
    16. Carvalho, Glauco Rodrigues & Bessler, David & Hemme, Torsten & Schröer-Merker, Eva, 2015. "Understanding International Milk Price Relationships," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196692, Southern Agricultural Economics Association.
    17. Ioanna Reziti, 2014. "Price transmission analysis in the Greek milk market," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 64(4), pages 75-86, October-D.
    18. Rizwan Abbas & Gehad Abdullah Amran & Irshad Hussain & Shengjun Ma, 2022. "A Soft Computing View for the Scientific Categorization of Vegetable Supply Chain Issues," Logistics, MDPI, vol. 6(3), pages 1-17, June.
    19. Giliola Frey & Matteo Manera, 2007. "Econometric Models Of Asymmetric Price Transmission," Journal of Economic Surveys, Wiley Blackwell, vol. 21(2), pages 349-415, April.
    20. Liang, Jing, 2010. "Three essays on food safety and foodborne illness," ISU General Staff Papers 201001010800002782, Iowa State University, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:ifaamr:244616. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/ifamaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.