ABSTRACT
Impact of the international milk market on the domestic milk price: a cointegration analysis

Alejandra Engler P.1 y Laura Nahuelhual M.2
 

In this study, cointegration analysis and vector error correction (VCE) model were applied to analyze the influence of the international milk market on the domestic milk prices paid to producers and milk reception by plants. The VCE model allows the identification of the long term relations among cointegrated variables and how fast the system adjusts to changes within the system. Two VCE specifications were estimated. The first included the variables average national price, national milk reception, CIF price, and exchange rate; the second specification included the variables X Region price, Metropolitan Region price, CIF price, and exchange rate. The results obtained indicated that confronted with disequilibrium, the national variables adjusted to return the long run equilibrium of the system. Concretely, the price paid to producers reacted to changes in CIF prices and reception reacted to changes in CIF and the exchange rate. On the other hand, no significant difference in price behavior in the X Region and the Metropolitan Region were observed with respect to changes in CIF price.

Keywords: milk market, cointegration, international market, milk.
1 Instituto de Investigaciones Agropecuarias, Centro Regional de Investigación Quilamapu, Casilla 426, Chillán, Chile. E-mail: aengler@inia.cl *Autor para correspondencia.
2 Universidad Austral de Chile, Instituto de Economía Agraria, Casilla 7-D, Valdivia, Chile.