The myth that retail fluid milk prices never go down when farm milk prices do is very pervasive in the dairy industry. In late 2011, Robert J. Gray, a senior policy advisor to a dairy producer group, made such a claim in public comments submitted to The Wall Street Journal, which led me to research the issue in my December 2011 column, “Retail Milk Prices Do Track with Farm Milk Costs.” Then a press release from the National Milk Producers Federation last summer made a similar claim, and I responded in my July 2012 column, “The Farm-to-Retail Milk Price Myth Revisited.”
Just this past month, Representative Collin Peterson (D-MN), the ranking member of the House Committee on Agriculture, made this comment at the mark-up for the 2013 Farm Bill: “You tell me the last time that you remember anybody in the IDFA, the processor community, lowering their prices. Every time the prices go up at the farm level, we get a price increase. But when the prices go down, for example when they went from $21 to $10 a hundredweight, when we were at $21 they went up; when they went to $10, nothing went down. Not anything.”
Figure 1 shows just how much of a myth this is by using data published by the U.S. Department of Agriculture’s Agricultural Marketing Service on the cost of milk used by processors of fluid milk products and the U.S. Bureau of Labor Statistics on the average retail price per gallon for whole milk. During the large drop in farm milk prices between the summer of 2008 and late-winter 2009 mentioned by Representative Peterson, the farm cost of milk to fluid milk processors dropped by about 94 cents per gallon, while the retail price of whole milk dropped by even more, over 98 cents per gallon
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