Impact of the Northeast Interstate Dairy Compact on Consumer Prices for Fluid Milk

Bailey, Kenneth W.

doi:10.1111/1467-9353.00048

Cited by 8 publications

(8 citation statements)

References 4 publications

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“…Several economic studies have analyzed the effect of government programs on dairy prices. For instance, there is sizable literature debating the potential effects of the Northeast Dairy Compact on milk prices (Bailey 2003; Balagtas and Sumner 2003). The four main government support programs and pricing mechanisms focusing on the U.S. dairy sector as authorized under the Farm Security and Rural Investment Act of 2002 are: the Milk Price Support Program (MPSP), Dairy Export Incentive Program (DEIP), Milk Income Loss Contract (MILC) program, and the Federal Milk Marketing Order (FMMO) 3 .…”

Section: Sources Of Asymmetric Price Adjustmentsmentioning

confidence: 99%

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Threshold Effects and Asymmetric Price Adjustments in U.S. Dairy Markets

Awokuse¹,

Wang²

2009

Canadian J Agri Economics

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"Recent volatility in food prices and the growing disparity between prices at various stages of the marketing channel has generated much interest among agricultural producers, consumers, and policy makers. This study examines the effect of nonlinear threshold dynamics on asymmetric price transmission for three U.S. dairy products (butter, cheese, and fluid milk) using threshold error correction models. The empirical result suggests that price transmission of changes between producer and retail stages of the marketing chain is asymmetric for butter and fluid milk, but not for cheese prices. Also, this paper's findings indicate that conclusions about price asymmetries depend on the model specification assumptions made about symmetry and threshold effects. Thus, previous studies that assumed symmetric behavior and ignored threshold effects may be misleading." Copyright (c) 2009 Canadian Agricultural Economics Society.

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Section: Sources Of Asymmetric Price Adjustmentsmentioning

confidence: 99%

“…4 4 Other studies provide more details on the history and operations of various dairy programs (Sumner and Cox 1998; Bailey 2003; Sumner 2005). …”

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confidence: 99%

Threshold Effects and Asymmetric Price Adjustments in U.S. Dairy Markets

Awokuse¹,

Wang²

2009

Canadian J Agri Economics

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“…and~3! econometric modeling of the reaction of milk prices to institutional changes or marketing programs~e+g+, Cotterill & Franklin, 2001;Bailey, 2003;!+ This study uses a combination of methods to analyze retail milk pricing in major retail markets in California and neighboring states, including graphical and descriptive analysis and formal econometric modeling and hypothesis tests+ Our conclusions regarding competition are based on a preponderance of evidence rather than on the results of a single analytical approach+…”

Section: Analytical Models and Approachesmentioning

confidence: 99%

Supermarket fluid milk pricing practices in the western United States

Carman

Sexton

2005

Agribusiness

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This study analyzes retail milk pricing by supermarkets and marketing margin behavior for four fluid milk products in nine large metropolitan markets in the Western United States. Multiple empirical approaches are utilized to investigate retailer pricing behavior, and, on balance, these methods provide significant evidence of noncompetitive price behavior in each of the markets. Correlations of retail price changes indicate considerable pricing independence among retailers across cities, while rankings of retail prices by milk product provide significant evidence that prices are not based primarily on costs, as would be true if pricing were competitive. Estimated retail price responses to farm price changes are consistent with monopoly pricing behavior for several of the milk products in several of the markets. [EconLit Citations: L660, L810]. © 2005 Wiley Periodicals, Inc. Agribusiness 21: 509-530, 2005.

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“…Researchers and policy makers have pointed to one of two culprits as the cause of supra-normal retail prices: (a) the de facto exercise of market power through public policies such as the Northeast Dairy Compact (NEDC) that increase the price of raw milk paid to farmers (Bailey, 2003;Balagtas and Sumner, 2003;Cotterill and Franklin, 2001;Lass et al, 2001) and (b) the exercise of private market power--the ability of firms to control price or quantity in the marketplace--by Boston supermarkets (Cotterill, 2003;Kilman, 2003;Cotterill and Dhar, 2003;Mohl, 2002).…”

Section: Introductionmentioning

confidence: 99%

“…In comparison, Bailey (2003) concluded that the NEDC's impact was much higher at 20.7 cents per gallon. Dhar (2001) found price increases ranging from 7 to 17 cents for different brands of milk at the supermarket level in the Boston area.…”

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confidence: 96%

Retail oligopoly power, dairy compact, and Boston milk prices

2005

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This paper assesses the impacts of the Northeast Dairy Compact (NEDC) and retail oligopoly power on fluid milk prices in Boston. Empirical results reveal that price increases due to oligopoly power outweighed those caused by the NEDC by nearly seven times. In fact, markups are estimated at approximately 25% of the retail milk price, translating into approximately a little less than $0.75/gallon. We also estimated that only around two-thirds of the raw milk price changes were passed forward to consumers. This helps explain why consumer prices have come down only little after elimination of the NEDC. In fact, the new milk income loss contract program, which basically provides partial price subsidies to farmers, has contributed to low raw milk prices that have generated substantial benefits to milk processors and retailers, modest benefits to farmers and consumers, all at the expense of taxpayers.

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Impact of the Northeast Interstate Dairy Compact on Consumer Prices for Fluid Milk

Cited by 8 publications

References 4 publications

Threshold Effects and Asymmetric Price Adjustments in U.S. Dairy Markets

Threshold Effects and Asymmetric Price Adjustments in U.S. Dairy Markets

Supermarket fluid milk pricing practices in the western United States

Retail oligopoly power, dairy compact, and Boston milk prices

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