Food scare crisis: The effect on Serbian dairy market

Rade Popovic, Boris Radovanov, James W. Dunn

Research output: Contribution to journalArticlepeer-review

10 Scopus citations

Abstract

The increasing trend of food scandal crises is not well followed in recent studies of spatial price transmission. This paper analyses the impact on the domestic market of an Aflatoxin M1 outbreak in the Serbian dairy sector during 2013/2014 using a spatial price transmission approach. Monthly farm milk prices in Serbia for the period 2007/2014 were contrasted with leading dairy exporting countries New Zealand, USA and Germany, which did not have a food scare in their dairy sectors. To estimate the impacts a Markov-switching vector error-correction model was utilized. For all four dairy markets the model identified two price change regimes: standard and extreme. Although it was predictable, an extreme regime was not identified during the Aflatoxin M1 crises in Serbia because of some specific characteristics of its dairy production. The results suggest that the Aflatoxin M1 outbreak 'froze' the Serbian dairy market and temporally disconnected it from the world milk market. Farmer's prices fell below their long-run equilibrium levels. The total loss of the Serbian farm-level dairy sector during the crisis reached up to 96.2 million EUR. These 'missed opportunity' significantly slowed investment in the dairy sector.

Original languageEnglish (US)
Pages (from-to)113-127
Number of pages15
JournalInternational Food and Agribusiness Management Review
Volume20
Issue number1
DOIs
StatePublished - 2017

All Science Journal Classification (ASJC) codes

  • Food Science
  • Business and International Management

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