Abstract
A fast-changing global landscape highlights the importance of understanding spatial price dynamics in key international markets such as China, especially in the era of COVID-19 pandemic with international food trade and food system experiencing an unprecedented challenge. Nowadays, New Zealand’s dominant position in China’s dairy import market is being challenged by European Union (EU) dairy exporters leading to intensified market competition. Using monthly export data of skim milk powder (SMP), we applied threshold cointegration models along with asymmetric error correction models to examine spatial price dynamics and price transmissions of New Zealand and Ireland in Chinese and global markets. We found that New Zealand’s export prices retain their leadership position in China, Ireland’s export prices are well more aligned with those in international markets. In terms of own-country price transmission, Ireland’s relatively symmetric and swift adjustments were found to contrast with New Zealand’s SMP export prices, which displayed more asymmetric price transmissions.
Highlights
IntroductionUnion (EU) including the termination of the European Union (EU) milk quota, the Russian ban on EU dairy products, Brexit, Euro exchange rate fluctuations and so on, have brought greater challenges, as well as incentives, for EU policymakers and dairy exporters to expand in international markets [1,2]
In recent years, policy changes and market volatility in dairy markets in the EuropeanUnion (EU) including the termination of the European Union (EU) milk quota, the Russian ban on EU dairy products, Brexit, Euro exchange rate fluctuations and so on, have brought greater challenges, as well as incentives, for EU policymakers and dairy exporters to expand in international markets [1,2]
Given New Zealand’s dominant position and the changing market landscape following the rapid growth of imports from EU dairy exporters, we focused our investigation on the price dynamics between the dominant player (New Zealand) and a new player to identify price leadership
Summary
Union (EU) including the termination of the EU milk quota, the Russian ban on EU dairy products, Brexit, Euro exchange rate fluctuations and so on, have brought greater challenges, as well as incentives, for EU policymakers and dairy exporters to expand in international markets [1,2]. The past five years has seen rapid expansion by major EU dairy exporting countries to the Chinese market. While at the same time, Irish dairy exports face uncertainties with new opportunities and challenges due to Brexit and dairy quota abolition: (1) possible Non-Tariff Barriers to trade (NTBs) and market loss in the UK; (2) the increasing of milk production and an intensive milk powder investment would cause a surplus that needs to be exported to new markets. The Chinese market for SMP will become more important and competitive with anticipation of SMP market integration that will be determined by several factors
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