An Analysis of Retail Milk Pricing in the Eastern United States

Abstract

An analysis presented in the article evaluates the behavior of retail fluid milk prices, farm-level milk prices and farm-to-retail margins during the period of 2000-2010 in six cities located in the Eastern United States: Boston, MA; Syracuse, NY; Philadelphia, PA; Louisville, KY; Atlanta, GA; and Miami, FL. The empirical evidence presented in the article supports empirical findings reported in the existing literature: retail fluid milk prices tend to increase at a higher rate than farm-level milk prices and there is a presence of asymmetries in the farm-to-retail price transmission process. Furthermore, there is empirical evidence that may suggest that the patterns of behavior of fluid milk prices and farm-to-retail margins are different in the states with resale milk price control regulations (New York State and Pennsylvania) and states without resale milk price control regulations. In the former case, the pattern of changes in retail fluid milk prices is similar to the pattern of changes in farm-level milk prices. In the latter case, changes in the retail fluid milk prices do not necessarily reflect changes in the farm-level milk prices, which often causes farm-to-retail margin to increase.