Milk Pricing – Past, Present, the 1980's

Abstract

Because pricing is the fundamental coordinator of activities in the milk production, assembly, processing, and distribution system, it will be in the forefront of dairy policy issues in the 1980's. As the industry has become concentrated in fewer and larger firms, group bargaining – undergirded by government milk pricing programs – largely has replaced direct negotiations between individual producers and fluid milk processors. The price of manufacturing grade milk – the basic mover of all milk prices – still is established in the open market and based on competitive bidding among dairy products manufacturers. It is uncertain how long competitive prices will determine milk values because an increasing proportion of the United States milk supply is being produced, priced, and marketed as Grade A milk under federal milk marketing orders. Administered pricing of the manufactured dairy products industry likely will evolve if present trends continue.