Cause-Effect Relation Between National Milk Supply and the Price Paid to Brazilian Milk Producers : An Empirical Analysis

This paper analyzes the cause-effect relation between national milk supply and the price paid to Brazilian producers. It also seeks to model the expected returns on a monthly basis for the price of milk paid to producers in Brazil. Logarithmic returns of domestic supply and price of milk are used to perform cointegration and causality tests, followed by modeling to predict the future price of milk in Brazil. The results suggest that although the variables are not cointegrated, there is a causal flow running from national milk supply to domestic price of milk, while the causal flow in the reverse direction is far less expressive. Finally, the relative predictability for the price of milk is specially focused through autoregressive modeling