Fluid Milk Market Channel Pricing: Monopolistic Pricing by Retailers Hurts Processors, Farmers, Consumers, and Federal Market Order Pricing

Fluid milk market orders are routinely criticized by many because they force consumers to pay higher fluid milk prices. The Northeast Dairy Compact was also attacked as a cartel that if eliminated would result in lower prices to consumers. The fluid milk processors through their trade group, the International Dairy Food Association, and the supermarket chains, through the Food Marketing Institute, aggressively push this viewpoint in Washington and more recently in the state houses in New England. In fact, what one has is the pot calling the kettle black. Soon after the Dairy Compact’s demise raw milk prices plummeted 50 cents per gallon. According to IDFA economists’ model, retail prices should have dropped 90 cents per gallon in New England. They dropped only 10 cents. Now raw milk prices have increased 35 cents per gallon, and the IDFA model predicts as much as a 63 cent increase in the retail price. To date prices have increased 10 cents at leading supermarket chains. The crude model that IDEA used to defeat the Compact forecasts so poorly that it is worse than useless