Stability in Organic Milk Farm Prices: A Comparative Study

Abstract

The organic milk pay price is more stable year round and increases every year. However, the conventional milk price varies within the year and from year to year. As an emerging segment of the milk industry, consumer demand for organic milk is increasing rapidly. The growth in demand relative to supply provides organic milk producers and processors large premiums over the conventional milk price. Many conventional dairy farms have converted to organic operations for the more stable price. The objective of this study is to understand the stability of organic milk price relative to conventional milk price, differences in pricing mechanisms between organic milk and conventional milk, and shed light on the policy implications for organic milk and conventional milk markets. Farm price and retail price of organic milk and conventional milk are compared and analyzed. The comparative stability and volatility of the farm and retail price of organic milk and conventional milk are investigated. Seasonality and volatility of milk price are examined. The supply and demand patterns and profit margins are compared between conventional and organic milk. Additionally, we explore the market structures of the organic milk industry. Our analysis develops hypothesis for future work on the organic milk pay price phenomenon.