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Abstract
International milk market is created by 7% of world production
volume. Volatile world milk prices in recent 6 years caused different forms of its
transmission to national levels. In the paper this phenomena is investigated on
two levels. First, on macro level how world milk price affects national markets
in case of New Zealand as leading world exporter, Germany with growing net
export, and Serbia with self-sufficient production. Second, it is analysed vertical
price transmission in Serbian milk supply chain, according its magnitude, speed,
nature and direction in period January 2007 to May 2013. Results improved
understanding how world milk price influence milk price in Serbia and how
price shocks are transmitted through milk supply chain for several most
important kinds of milk products.Applied vector error correction model in
horizontal milk price transmission indicates asymmetry in price transmission
from world to Serbian milk market. Milk prices in Serbia respond to price
signals from German and world market, but with significant time lags and
increasing magnitude over time. From first to fourth month delay, milk prices
from German market positively influence Serbian market, and from fifth to tenth
month further increasing influence of world milk prices are presented. Nature of spatial asymmetry is positive. Results of threshold vector error correction model
applied on dairy supply chain, suggests similar conclusionsfor all four major
dairy products on Serbian market. Retail prices react mostly on raw milk price
changes, with constant response to processor’s prices. Price shocks are originate
at the processor level and are passed to farmers and to retailers. Blurred
relationship between processing and retail sector permits more accurate analysis.