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Price Discovery in the United States Dairy Industry

Author

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  • Bolotova Yuliya V.

    (Department of Agricultural Sciences, College of Agriculture, Forestry and Life Sciences, Clemson University, Clemson, SC 29634, USA)

Abstract

The organized Exchange spot (cash) cheese market is a private industry institution that has historically performed a primary price discovery function in the U.S. dairy industry. In addition to affecting cheese prices in contract cheese market, the Exchange spot cheese prices have influenced prices paid for milk at the farm level that are set within the system of Federal Milk Marketing Orders (FMMOs). The effects that the Exchange spot cheese market has on FMMOs milk pricing attract increased attention in light of the recent concerns about increasing milk price volatility and its effect on the dairy farm profitability. While the design of milk pricing within FMMOs has evolved over the last three decades, the effects of the Exchange spot cheese prices on FMMOs milk pricing have intensified. The research analyzes the conduct and performance of the Exchange spot cheese market during three FMMOs milk pricing regimes (Minnesota-Wisconsin price regime, Basic Formula Price and modern Multiple Component Pricing regime), with a particular focus on the Exchange spot cheese price behavior.

Suggested Citation

  • Bolotova Yuliya V., 2022. "Price Discovery in the United States Dairy Industry," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 20(2), pages 83-97, December.
    • Handle: RePEc:bpj:bjafio:v:20:y:2022:i:2:p:83-97:n:8
    DOI: 10.1515/jafio-2019-0002
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    Keywords

    cheese pricing; dairy farm profitability; Federal Milk Marketing Orders; milk pricing; regulated pricing; thin market;
    All these keywords.

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture

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