Long‐term dynamics of US organic milk, eggs, and yogurt premiums

Producing organic milk has been an alternative for conventional farmers who are struggling with low prices. However, organic dairy prices recently collapsed along with conventional prices when several large producers entered the organic market. The current study explores the patterns and determinants of organic dairy premiums. We estimate monthly price premiums for organic whole milk, other fluid milk, yogurt, and eggs over the period 2008–2017 using US retail scanner data. The premiums were 56%, 51%, 27%, and 38%, respectively, with annual compound growth rates of 8%, 7%, −1.42%, and −2.86%. We identify the determinants of price premiums with a vector autoregression to account for endogeneity and autocorrelation, and a machine‐learning algorithm—extreme gradient boost—for data‐driven insights. Holding the premiums fixed, growing input costs may induce organic sellers to sell more to compensate for costs. Holding organic sales fixed, organic premiums decrease in conventional share of organic, cost of diesel, electricity, and feed grains in general; but increase in the number of shoppers and wages. [EconLit citations: C55, Q130].