On the joint volatility dynamics in international dairy commodity markets*

Abstract

The present study investigates the price (co)volatility of four dairy commodities-skim milk powder, whole milk powder, butter, and cheddar cheese-in three major dairy markets. It uses a multivariate factor stochastic volatility model for estimating the time-varying covariance and correlation matrices by imposing a low-dimensional latent dynamic factor structure. The empirical results support four factors representing the European Union and Oceania dairy sectors as well as the milk powder markets. Factor volatilities and marginal posterior volatilities of each dairy commodity increase after the 2006/07 global (food) crisis, which also coincides with the free trade agreements enacted from 2007 onward and EU and US liberalization policy changes. The model-implied correlation matrices show increasing dependence during the second half of 2006, throughout the first half of 2007, as well as during 2008 and 2014, which can be attributed to various regional agricultural dairy policies. Furthermore, in-sample value at risk measures (VaRs and CoVaRs) are provided for each dairy commodity under consideration.

Analisis Komparasi Perkembangan, Perilaku Dan Volatilitas Harga Daging Ayam Pada Pasar-Pasar Tradisional Terbesar Di Kota Jambi

“…Namun, volatilitas harga yang ekstrem tidak diinginkan dengan banyak konsekuensi negatif. Misalnya, harga yang sangat tinggi menyebabkan substitusi produk, yang pada akhirnya mungkin tidak dapat diubah, sedangkan harga yang sangat rendah mengakibatkan kerugian finansial, yang dapat menyebabkan kebangkrutan (Rezitis & Kastner 2021).…”

The linkage between international dairy commodity prices and volatility: a panel-GARCH analysis

“…2. Literature review Milk and dairy commodity prices tend to be sensitive to volatility because of perishability, seasonality of production and inelastic demand (Nicholson and Fiddaman, 2003;Rezitis and Kastner, 2021). Evidence shows that changes in policies, such as abolishing milk quotas in the EU, may also contribute to increased volatility.…”