Determinants of dairy‐product trade: Do subsidies matter?

Abstract

Given the recent changes in the supply and demand of dairy products, many opportunities arise for exporting and importing countries. This paper examines determinants of dairy‐product trade by applying the Poisson Pseudo‐Maximum Likelihood (PPML) method to the gravity model using panel data on 49 exporting and 235 importing countries for the 17 years from 2000 to 2016. The gravity model is estimated using both interval data and dynamic analyses. The results show that domestic subsidies have a modest, but significant, impact on dairy‐product trade across the models. For example, a 1% increase in subsidies leads to a roughly 0.02% increase in trade for an average country. Memberships in trade agreements, market size factors, and government institutions also positively affect dairy‐product trade. However, tariffs are insignificant in the main model specification. Results from the lag‐policy analysis show that the impact of subsidies disappears after the second year of distribution; whereas for the lead‐policy analysis, results suggest at least 3 years of anticipatory effects on domestic subsidies.

State support of the dairy industry and prospects for its development in the post-war period

“…According to OECD data, the budget support in Ukraine during 2019-2021 accounted for less than 1 % of the gross income of farms (OECD, 2021). In comparison, Iceland had the highest share of subsidies in the total revenue of dairy farms in 2019, at 59.86 %, followed by Japan and Norway with 58.42 % and 56.54 %, respectively (Kondaridze & Luckstea, 2023). These combined facts indicate the extremely low level of state financing for livestock breeding in Ukraine.…”

“…A study by Kumbhakar et al (2023) confirms the positive impact of subsidies on total factor productivity and profitability of farms in Norway. Kondaridze & Luckstea (2023) claim that a 1 % increase in subsidies leads to a roughly 0.02 % increase in milk product trade for an average country.…”

Innovative applications of whey protein for sustainable dairy industry: Environmental and technological perspectives—A comprehensive review

“…In 2018, global milk production witnessed a 2.2% upswing, reaching a total of 843 million metric tons (MMT) according to the FAO's 2019 report (Awasthi et al, 2022). Subsequently, in 2020, the world produced around 906 MMT of milk, registering a 2% increase from 2019, as outlined by Kondaridze and Luckstead (2023). Asia, particularly India, experienced a substantial surge in milk production in 2020, boasting a 2.6% rise, resulting in an output of nearly 379 MMT compared to the previous year.…”

“…In terms of imports, China, as the fastest-growing dairy market, comprised 15.5% of global dairy imports in 2020. Other key importers include Nigeria, Indonesia, and Malaysia (Kondaridze & Luckstead, 2023).…”

Brazilian soybean expansion, US–China trade war, and US soybean exports

“…11 As expected, the effect of tariffs on soybean trade is negative and highly significant, corresponding to a tariff elasticity of trade of -6.85. This negative effect of RTAs could also be attributed to the reverse causality between trade flows and RTAs (see Kondaridze and Luckstead [2022]).…”