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Market Power in the U.S. Dairy Industry

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  • Bolotova, Yulia V.

Abstract

The motivations for this case study are developments in the U.S. dairy industry involving implementation of a herd retirement (HR) program by the National Milk Producers Federation (NMPF) and the Cooperatives Working Together (CWT) in the period from 2003 to 2010. This program was part of a broader private supply management initiative, which aimed to balance milk supply and milk demand and to stabilize and strengthen milk prices received by dairy farmers. The HR program, which intended to decrease milk supply, raised legal issues leading to antitrust lawsuits filed by buyers of manufactured dairy products against dairy cooperatives. These buyers argued that the HR program was a form of illegal conspiracy aiming to increase prices for raw milk and manufactured dairy products. The lawsuits resulted in large settlements. This case study introduces economic, business, and legal issues related to implementation of the HR program. The case study presents a theoretical framework that may explain market and price effects of the HR program using the perspectives of dairy farmers and buyers of raw milk and manufactured dairy products. In addition, the case study presents a basic market and price analysis based on publicly available data reported by the U.S. Department of Agriculture. The case study is suitable for a variety of undergraduate and graduate courses taught in agricultural economics and agribusiness programs, as well as extension and outreach audiences. A teaching note includes teaching guidance, as well as answers to discussion and multiple-choice questions.

Suggested Citation

  • Bolotova, Yulia V., 2023. "Market Power in the U.S. Dairy Industry," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 5(2), March.
    • Handle: RePEc:ags:aaeatr:333524
    DOI: 10.22004/ag.econ.333524
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    References listed on IDEAS

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