Development of Milk Prices in the Czech Republic

The sector of milk production underwent through the crisis. Knowing the future price can help the management of the farm to minimize the risks related to the decision-making in production. Hence, the aim of the paper is to find optimal model for modelling of monthly prices of milk from 01/1998 to 06/2016 and predict them for 07/2016-06/2017. First, the development of milk producers' prices is modelled by Autoregressive Integrated Moving Averages models. Consequently, the relations with monthly prices of maize (02/2006-06/2016) were examined using Vector Autoregressive (VAR) model. ARIMA model suggests prices of milk in the interval from 5.97 CZIC/I to 7.06 CZK/I that is more realistic prediction than in case of VAR model that predicts lower prices (5.86-6.38 CZK/I). There might be missing some important variables in VAR model of prices of milk that can improve the prediction capability. Therefore, the challenge for future research is to improve the models further using regression analysis with relevant determinants.