Price Volatility Of Raw Milk In China Mechanism And Empirical Study

With the optimization of the dietary structure of Chinese residents,milk,as part of a balanced diet,has attracted the attention of the whole nation.Based on the important status of the dairy industry,the Chinese government has clarified the strategic position of the dairy industry,stating that “dairy industry is an indispensable industry for a healthy China and a strong nation,a representative industry for food safety,a symbolic industry for agricultural modernization,a strategic industry for coordinated development of the primary,secondary,and tertiary industries”.As the upstream industry of the dairy industry chain,the development of the raw milk industry is the basis to ensure the smooth operation of the whole dairy industry.However,in recent years,the development of China's raw milk industry is facing some severe challenges,especially the increased price volatility has become a prominent problem.Today,when the price mechanism of raw milk has not yet been fully formed in China,dairy farmers,as a weak party in the market,bear greater price and market risks,the frequent occurrence of “dumping milk and killing cows” incidents in various regions reflect the pain of dairy farmers.Based on this background,along with the research train of thought of “raising,analyzing and solving problems”,this paper mainly puts forward and answers the following questions: what are the observable and unobservable characteristics of raw milk price volatility in China? How to affect raw milk price volatility through vertical and spatial transmission? What measures and practices can be taken to smooth the price volatility of raw milk? Through the combination of mechanism and empirical research,the main contents and conclusions of this study are as follows:First,the seasonal adjustment and filter method are used to decompose the volatility of raw milk price in China.The results show that the seasonal volatility characteristics of raw milk price in China are obvious;There are two irregular violent fluctuations during the sample period;Since 2007,the price of raw milk has been on the rise and reached its peak in the middle of 2014,and then began to decline slowly and gradually stabilized;The price of raw milk in China during the sample period can be divided into four complete cycles.Then,the GARCH family models are used to conduct an empirical analysis on the characteristics of raw milk volatility in China.The research finds that the price volatility of raw milk has a significant clustering;The volatility of raw milk price has the characteristics of cost propelling,while the price return of beef has a significant negative impact on the raw milk price volatility;The volatility of raw milk price does not have the characteristics of high-risk and high-return;After adding related control variables,there is no significant asymmetry on the raw milk volatility in China.Second,using the vector autoregressive(VAR)model to examine the vertical transmission relationship between the price volatility of China's raw milk and fresh milk in the industrial chain,the paper finds that price volatility of downstream fresh milk is the reason for the price volatility of upstream raw milk,but the price volatility of raw milk does not affect fresh milk price volatility,the vertical transmission of price volatility from farm to retail in China's dairy industry chain is asymmetric.Meanwhile,using the threshold VAR(TVAR)model test shows that the variable relationship within the sample interval has not undergone significant nonlinear changes.Third,the multivariable GARCH model,namely the BEKK-GARCH model,is used to study the spatial transmission of the price volatility of international milk powder market to the volatility of China's raw milk market under the background of trade opening,that is,the volatility spillover effect.This paper finds there is a bidirectional volatility spillover effect between Global Dairy Trade(GDT)whole milk powder and China's raw milk market.Specifically,GDT whole milk powder has an ARCH-type volatility spillover effect on China's raw milk,and China's raw milk has a GARCHtype volatility spillover effect on GDT whole milk powder.However,there is a unidirectional volatility spillover effect between the GDT skim milk powder and China's raw milk markets,that is,GDT skim milk powder has a GARCH-type volatility spillover effect on China's raw milk market,but there is no volatility spillover effect from China's raw milk market to GDT skim milk powder market.Fourth,based on the perspective of breeding scale,the effect of different scales of dairy breeding on price volatility of raw milk in China is studied by using provincial panel data,the results find that under the condition of controlling the variables that affect the volatility of raw milk,the increase in small-scale dairy farms with 100 to 199 cows can significantly reduce the price volatility of raw milk,thereby promoting the stability of raw milk price;The effect of medium-scale dairy farms with 200 to 499 cows on the price volatility of raw milk is not significant.On the contrary,the increase of large-scale dairy farms with more than 500 cows has intensified the volatility of raw milk price.Fifth,the raw milk price negotiation mechanism in Shanghai,Heilongjiang,Shandong,and Hebei is sorted out and summarized,and discussed from three aspects: development history,price generation,experience and characteristics.On the whole,the four provinces have established a complete raw milk price negotiation mechanism,although there are differences in the evolution and operating mechanisms in practice,the established raw milk price negotiation mechanism is conducive to the stability of the regional raw milk supply to a certain extent,is a beneficial exploration and practice for maintaining the interests of dairy farmers and stabilizing price volatility of raw milk.However,in actual operations,there are still problems such as insufficient coordination and weak binding force of supervision,which need further guarantees of policies in the future.Based on practical issues,this paper deeply analyzes the price volatility of raw milk in China.The main innovations are as follows:(1)In terms of research perspectives,this study investigates the volatility characteristics of raw milk price in China from the perspectives of observable and unobservable features,so the characteristics of price volatility are discussed from multiple perspectives;This study divides the imported dairy products into shortage consumption type and price difference substitution type,and points out that the biggest and most direct impact on the raw milk industry is price difference substitution type dairy products;Regarding of stabilizing price,this study reveals what kind of the farming scale can stabilize the price,and provides support and reference for the Chinese government's support policy changes in the scale of farming.(2)In terms of research content,to fully grasp the impact of domestic and international markets on Chinese raw milk price volatility,this paper incorporates both the vertical transmission of the industrial chain and the spatial transmission of foreign markets into the research system,and comprehensively judges the domestic and foreign factors and motivations that affect the price volatility of raw milk in China.(3)In terms of research methods,this study uses monthly,weekly,and other high-frequency observational data to construct multi-level research data including weekly,bi-weekly,monthly and annual,and conducts multi-dimensional econometric model research on raw milk price volatility.In addition,the extended GARCH family models are used to clearly reveal the unobservable characteristics of raw milk price volatility in China.