Remove the effect of milk price on milk production data

I have monthly milk production data. Milk production is driven by price, weather, and many other factors.

I am studying the effect of weather on-farm milk levels. I have found prices and policies have also played a vital role in lower milk levels. Before analyzing the data for the effect of weather, I would like to remove the effect of the milk price (one month lag) on milk production data. I have monthly milk price data. I would like to know how to remove the same.

Looking forward to your reply.
This is an interdisciplinary study, hence limited knowledge on this area.


Well-Known Member
Hi Titushah,

You may run a regression.
But you need to check that there is no multicollinearity (probably there is no multicollinearity between price and weather, but please check)


No cake for spunky
And you have to check that none of your variables interact. The problem you are going to run into is that you have a time series. Past milk production will impact future milk production. That is past levels of your Y will impact future levels of your Y quite possibly. Its also true that past milk production -> price and price -> milk production which violates key rules of regression.

None of the solutions for that are simple. VAR and VECM models are recommended but are not simple especially to interpret.