Gliding through space: Regional integration of butter prices

Regional differences in economic development and farming imply a different degree of local economy dependence on farm revenues. According to the NUTS classification ranking all regions in the EU, several regions of the eastern and southeastern Poland are among the least developed regions. Those regions tend to be sparsely populated, for example, the population density of Podlaskieand Warminsko-mazurskieVoivodshipsis only 48% of the national average, and that of Lubelskie Voivodshipequals about 61%. The average monthly gross earnings in those three regions ranged from 84% to 88.8% of the national average in 2017. PodlaskieVoivodshipis among top three leading dairy producing regions in the country and farming is the backbone of local economies. Parts of Warminsko-mazurskieand northern Lubelskie Voivodshipshave sizable dairy sectors. Dairy farming and dairy processing plants are important sources of income and employment. Among dairy products, butter is of particular importance because it is the well-accepted and widely used in the daily diet. Refrigerated or frozen butter can be stored for a period of time(Krause et al., 2008). As a storable item with relatively significant value added, butter helps to address the effect of milk production seasonality. Dairy processing cooperatives take advantage of butter storability in managing their inventories allowing for some flexibility in butter marketing. Recognizing the importance of dairy farm incomes to regional economies, this paper aims at understanding the dynamics of butter prices.