Spatial Price Transmission of Soaring Milk Prices From Global to Domestic Markets

Abstract

Milk has become one of the most volatile agricultural commodities in the international market. High volatility of commodity prices and their implications for food security are clearly among the most important issues facing policy makers today. Thus, a deeper understanding of the magnitude, speed, and symmetry to which global milk prices are being transmitted to domestic prices at the farm gate level is a fundamental factor in the design of appropriate policy measures oriented to reduce not only the level of milk price volatility, but also poverty and food insecurity. The purpose of this article is therefore to assess the dynamics of the relationship between global and domestic milk prices. [Econ Lit Classifications: Q11, Q13, Q17].

The Irish dairy industry – Recent history and strategy, current state and future challenges

“…Maintaining cost competitiveness will be critical to managing the challenge of milk price volatility, which is likely to continue globally (Acosta et al . ).…”

“…Continued support of programmes and policy, which improve land mobility, may help to maintain cost competitiveness as improved land access will enable Irish farmers to increase cow numbers without increasing stocking rate and increasing supplementary feed. Maintaining cost competitiveness will be critical to managing the challenge of milk price volatility, which is likely to continue globally (Acosta et al 2014).…”

Market power in the German dairy value chain

“…The evolution of the CEs for both processors and retailers are similar: after a rather stable period between 2000 and 2006, the CEs of dairies and retailers dropped during the period of high prices (2007/2008, see Fig. ), due to empty public EU milk powder stocks as well as sharp increases in feed prices due to low global supply and high demand for grains from the biofuel industry (Acosta, Ihle, & Robles, ). During this period German dairies and retailers, but in particular the latter, may have acted less collusively in order to expand procurement in a period of stable supply (Perloff, Karp, & Golan, ).…”

Protecting the Swiss milk market from foreign price shocks: Public border protection vs. quality differentiation

“…These studies mostly focus on dry milk product prices in the aggregate regions EU, United States, and Oceania and find spatial long‐run linkages among these three regions (Fousekis & Trachanas, ; Newton, ; Zhang, Brown, Dong, & Waldron, ). Studies looking at fluid milk prices find some spatial price transmission from global markets to smaller countries, such as Panama (Acosta, Ihle, & Robles, ) and the Netherlands (Carvalho, Bessler, Hemme, & Schroer‐Merker, ). Testing for raw milk market integration among 20 EU member states, Bakucs, Fertő, Benedek, and Molnar () find only 35% of the price pairs to be cointegrated.…”