Where is the butter? Tracking recent butter and curd price changes across major milk producing regions in Poland

This paper analyzes prices of two important food products of consumers in Poland, namely butter and curd to establish market integration of these two very different products and the recent large increase of butter prices. Poland is the fourht largest milk producer in the European Union and a butter exporter. The analysis focusos on two major milk producing regions. The analysis uses series of weekly butter and curd prices for each region for the period from January 5, 2014 to November 5, 2017. Addtionally, an indicator of the phasing of the EU milk quota system is included in the analysis. The modeling approach verifies the presence of "one price" by testing the series for stationarity and cointegration confirming the latter. Ultimately, the analysis uses the Vector Error Correction model and the first-differences of observations confirming very strong spatial integratoin of the two regional market. Interestingly, the markets for both butter and curd in two regions remaind strongly integrated although butter is subject to inetrnational trade, wheres curd is exclusively sold on the dmoestic market and its prices remaind mostly unaffected by the butter prices fluctuations.