Farm and Retail Milk Price Relationships in New York
Published : Jul 2008
Authors : A. Novakovic and E. Washburn
Food prices in general and dairy prices specifically have increased rapidly since early 2007, increasing some 4-6% on an annual basis. This is far less than the 10-20% inflation of the early 1970s, but it is stunning nonetheless. This has prompted many inquiries and concerns as to the causes, likely duration, and so on. Among the concerns often expressed is the extent to which retail price changes can be justified by or correlated with changes in prices received by farmers for the raw products. Marketing costs, most notably those that are energy related, are also increasing, but the relationship between retail and farm level prices remains of special interest. This paper does not attempt to explain the causes of recent price changes. Its purpose is only to describe the price changes for beverage milk products and compare them to farm price changes, with a specific focus on markets in the Northeast, especially New York. Among the basic findings are: • Nationally, farm and retail prices both increased about 90¢ per gallon from the low points of 2006 to the high points of 2007 • The “farm share” of the retail price ranged from 38% to 55% during 2006 to 2008 and this range is more or less observed in all markets • Patterns of monthly changes are similar but not identical in major city markets in New York, Pennsylvania and New England. Although reduced somewhat from the 2007 peaks, prices remain high and variable in 2008.

