The duo of dairy sector: Spatio-temporal analysis and causality of milk and ghee prices in India

The present study has tried to give an insight into the growth rates (CAGR), instability and causal relationship between of two products (Milk and ghee) price over time in major markets in India. The study revealed that wholesale prices of milk and ghee and retail prices of milk have increased at a much lesser rate in the recent period (1998-07) than earlier period (1988-97). This has been possible due to higher growth in milk production owing to increased population of crossbred and lactating animals. Contrary to the belief, the capitalization of milk production through ghee could not be confirmed because in place having higher price of ghee were not having higher price of milk. The instability analysis shows that the prices of milk were more stable than ghee prices which may be attributed to consistent market supply and alternative processing facilities which were quiet obvious in milk. The overall trend appeared that instability in retail prices of milk was higher than wholesale prices of milk which was in turn higher instability in wholesale prices of ghee. The study concludes that granger causality relationship between wholesale and retail prices of milk were more pronounced than causality between wholesale prices of milk and ghee.