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Spatial price transmission and strategic trade patterns for global dairy market

2020, Xue, Huidan, 0000-0003-2813-2251

This thesis aims to make empirical contributions to spatial price transmission following market shocks in international agri-food trade markets with a focus on the dairy sector. It comprises one background, one literature review and three empirical studies on spatial price transmission of dairy product export prices at three different spatial levels, that is, national, regional and global, respectively. The thesis provides a comprehensive framework and analysis of spatial price transmission and market mechanisms for major dairy export countries (regions) under different shocks. At the national level, threshold cointegration models along with asymmetric error correction models are employed to examine spatial price transmission and price leadership for New Zealand and Ireland in the Chinese market and in the global market. A finding is that whereas New Zealand’s export prices maintain a leadership position in China, Ireland’s export prices are well integrated into global markets. In terms of price transmission, in contrast to Ireland’s relatively symmetric and swift adjustments, asymmetric price transmission from Chinese to global markets is found in New Zealand’s skim milk powder exports. At the regional level, Global Vector Autoregressive (GVAR) methodology was used to investigate market integration and price dynamics following shocks for both intra-EU and extra-EU exports in the EU cheese sector. Significant differences are evident in these two markets and the EU internal market is estimated to be better integrated than its external market. At the global level, a GVAR model was applied to understand butter export price transmission among geographically separated exporters as well as the dynamics of global butter export prices after shocks to macroeconomic factors and energy input prices, in both the short- and long-run. The study of this chapter finds that the global butter export market is not well integrated, with butter export prices greatly affected by palm oil prices, exchange rates and food inflation shocks. This thesis sheds light on the spatial price transmission of dairy export prices and deciphers interactions of export prices with various influencing factors in international trade. It addresses price leadership in a dairy major import country, market integration, as well as impacts of market shocks and the economic policy uncertainties on the export price and trade patterns for the global dairy sector. It also connects the research on dairy international trade to domestic dairy market and economic conditions, energy market and markets of the other commodities, thus highlighting the market mechanism and strategic trade patterns of the dairy sector in the contexts of dynamic economic and policy scenarios at global scope.