Applying the pricing mechanism to address imbalances in the dairy industry: Regional issues

Abstract

Subject. This article discusses the issues of development of the raw milk market. Objectives. The article aims to analyze the impact of the process of linking capital and profit on the performance of agricultural organizations considering the Saratov Oblast as a case study. Methods. The harmonization of the provisions of the neoclassical concept of price elasticity of supply and the classical theory of reproduction forms the methodological basis of the study. Results. The article finds that a significant increase in the cost of a tonne of raw milk arises due to unequal exchange with the agro-industrial complex branches and the financial and credit sphere, the withdrawal of the producer's surplus as a result of the abuse of the dominant position by processors, and a decrease in the incentive to effective management. Conclusions. The scarce raw milk market generates a wide range between the estimated and actual price of milk, which makes it possible for the processor to vary the amount of production consumption to restrain the movement towards equilibrium in the market. A weak incentive to increase the volume of milk sales in all categories of farms does not allow considering the price as an adequate tool for solving the problem of shortage.