IDEAS home Printed from https://ideas.repec.org/a/ags/aaeatr/333524.html
   My bibliography  Save this article

Market Power in the U.S. Dairy Industry

Author

Listed:
  • Bolotova, Yulia V.

Abstract

The motivations for this case study are developments in the U.S. dairy industry involving implementation of a herd retirement (HR) program by the National Milk Producers Federation (NMPF) and the Cooperatives Working Together (CWT) in the period from 2003 to 2010. This program was part of a broader private supply management initiative, which aimed to balance milk supply and milk demand and to stabilize and strengthen milk prices received by dairy farmers. The HR program, which intended to decrease milk supply, raised legal issues leading to antitrust lawsuits filed by buyers of manufactured dairy products against dairy cooperatives. These buyers argued that the HR program was a form of illegal conspiracy aiming to increase prices for raw milk and manufactured dairy products. The lawsuits resulted in large settlements. This case study introduces economic, business, and legal issues related to implementation of the HR program. The case study presents a theoretical framework that may explain market and price effects of the HR program using the perspectives of dairy farmers and buyers of raw milk and manufactured dairy products. In addition, the case study presents a basic market and price analysis based on publicly available data reported by the U.S. Department of Agriculture. The case study is suitable for a variety of undergraduate and graduate courses taught in agricultural economics and agribusiness programs, as well as extension and outreach audiences. A teaching note includes teaching guidance, as well as answers to discussion and multiple-choice questions.

Suggested Citation

  • Bolotova, Yulia V., 2023. "Market Power in the U.S. Dairy Industry," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 5(2), March.
    • Handle: RePEc:ags:aaeatr:333524
    DOI: 10.22004/ag.econ.333524
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/333524/files/AETR_2022_025R%20Proof%20Final.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.333524?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ling, K. Charles, 2011. "Cooperative Theory, Practice, and Financing: A Dairy Cooperative Case Study," Research Reports 280109, United States Department of Agriculture, Rural Development.
    2. John Siebert & Conrad Lyford, 2009. "U.S. Dairy Industry Supply Control: Managing the Cooperatives Working Together Program," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 31(4), pages 999-1013.
    3. Hoy F. Carman & Richard J. Sexton, 2005. "Supermarket fluid milk pricing practices in the western United States," Agribusiness, John Wiley & Sons, Ltd., vol. 21(4), pages 509-530.
    4. Manchester, Alden C. & Blayney, Donald P., 2001. "Milk Pricing In The United States," Agricultural Information Bulletins 33612, United States Department of Agriculture, Economic Research Service.
    5. Dohlman, Erik & Foreman, Linda F. & Da Pra, Michelle, 2009. "The Post-Buyout Experience: Peanut and Tobacco Sectors Adapt to Policy Reform," Economic Information Bulletin 56628, United States Department of Agriculture, Economic Research Service.
    6. Liebrand, Carolyn Betts & Spatz, Karen J., 1993. "DARIMAC: An Export Marketing Agency-In-Common for Dairy Cooperatives," Research Reports 279980, United States Department of Agriculture, Rural Development.
    7. Ling, K. Charles, 2012. "The Nature of the Cooperative," Cooperative Information Reports (CIR) 280514, United States Department of Agriculture, Rural Development.
    8. Yuliya V. Bolotova, 2016. "Agricultural Supply Management and Market Power: Evidence from the U.S. Dairy and Potato Industries," Agribusiness, John Wiley & Sons, Ltd., vol. 32(4), pages 563-568, November.
    9. Bolotova, Yuliya, 2014. "Agricultural Supply Management and Antitrust in the United States System of Agribusiness," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 17(3), pages 1-24, September.
    10. Seipel, Michael F. & Heffeman, William D., 1997. "Cooperatives in a Changing Global Food System," Research Reports 280003, United States Department of Agriculture, Rural Development.
    11. Gale, H. Frederick, Jr., 1990. "Econometric Analysis Of Farmer Participation In The Dairy Termination Program In North Carolina And Virginia," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 22(1), pages 1-9, July.
    12. Bolotova, Yuliya V., 2019. "Teaching Competition Topics: Applications of Seller Market Power in Agricultural Industries," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 1(2), December.
    13. Bolotova, Yuliya V. & Novakovic, Andrew M., 2015. "An Empirical Analysis of Wholesale Cheese Pricing Practices on the Chicago Mercantile Exchange (CME) Spot Cheese Market," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 18(3), pages 1-18, September.
    14. Gale, H. Frederick, 1990. "Econometric Analysis of Farmer Participation in the Dairy Termination Program in North Carolina and Virginia," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 22(1), pages 123-132, July.
    15. Bolotova, Yuliya V., 2015. "Agricultural Supply Control: Lessons from the U.S. Dairy and Potato Industries," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 30(4), pages 1-8, December.
    16. John Siebert & Conrad Lyford, 2009. "U.S. Dairy Industry Supply Control: Managing the Cooperatives Working Together Program," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 31(4), pages 999-1013, December.
    17. Lidan Ha & Guisseppi Forgionne, 2006. "Econometric Simulation for E-Business Strategy Evaluation," International Journal of E-Business Research (IJEBR), IGI Global, vol. 2(2), pages 38-53, April.
    18. Manchester, Alden C. & Blayney, Donald P., 1997. "Structure of Dairy Markets: Past, Present, Future," Agricultural Economic Reports 33929, United States Department of Agriculture, Economic Research Service.
    19. Ling, K. Charles, 2012. "The Nature of the Cooperative A Dairy Cooperative Case Study," Research Reports 280112, United States Department of Agriculture, Rural Development.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bolotova Yuliya V., 2024. "Private Supply Management and Market Power in the U.S. Dairy Industry," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 22(1), pages 1-17.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bolotova, Yuliya, 2020. "The Price Effects of Milk Supply Control in the U.S. Dairy Industry," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304209, Agricultural and Applied Economics Association.
    2. Bolotova Yuliya V., 2024. "Private Supply Management and Market Power in the U.S. Dairy Industry," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 22(1), pages 1-17.
    3. Bolotova, Yuliya V., 2017. "An Analysis of Retail Fluid Milk Pricing in the Eastern United States," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252744, Southern Agricultural Economics Association.
    4. Yuliya V. Bolotova, 2016. "Agricultural Supply Management and Market Power: Evidence from the U.S. Dairy and Potato Industries," Agribusiness, John Wiley & Sons, Ltd., vol. 32(4), pages 563-568, November.
    5. Bolotova, Yuliya V., 2021. "Market Power in the United States Potato Industry," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 3(4), October.
    6. Bolotova, Yuliya, 2018. "Teaching Competition Topics in Undergraduate Courses in Agribusiness Programs: Applications of Seller Market Power," 2018 Annual Meeting, August 5-7, Washington, D.C. 274503, Agricultural and Applied Economics Association.
    7. Bolotova, Yuliya V., 2022. "Market Power in the U.S. Dairy Industry," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322754, Agricultural and Applied Economics Association.
    8. Bolotova, Yuliya V., 2024. "Market Power in the U.S. Peanut Industry," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 5(4), January.
    9. Bolotova, Yuliya, 2022. "Fluid Milk Pricing and Market Power in the U.S. Dairy Industry," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322069, Agricultural and Applied Economics Association.
    10. Bolotova, Yuliya, 2014. "Agricultural Supply Management and Antitrust in the United States System of Agribusiness," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 17(3), pages 1-24, September.
    11. repec:ags:aaea22:335471 is not listed on IDEAS
    12. Bolotova, Yuliya V., 2022. "Price-Fixing in the U.S. Broiler Chicken and Pork Industries," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 4(4), September.
    13. Paudel, Krishna P. & Gauthier, Wayne M. & Hall, Larry M. & Westra, John V., 2006. "Willingness to Participate in Dairy Programs to Reduce Manure Related Problems in Louisiana's Major Dairy Production Region," 2006 Annual Meeting, February 5-8, 2006, Orlando, Florida 35259, Southern Agricultural Economics Association.
    14. Ganc, Marzena, 2018. "Level of the current liquidity ratio versus financial efficiency of dairy cooperatives," Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej 276386, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).
    15. Russell L. Lamb, 2002. "A Market-Forces Policy for the New Farm Economy?," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 24(1), pages 15-30.
    16. Bolotova, Yuliya, 2015. "The Effects of FMMOs Pricing Regimes on Milk Price Behavior and Dairy Farm Profitability," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196779, Southern Agricultural Economics Association.
    17. Bolotova, Yuliya V. & Novakovic, Andrew M., 2015. "An Empirical Analysis of Wholesale Cheese Pricing Practices on the Chicago Mercantile Exchange (CME) Spot Cheese Market," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 18(3), pages 1-18, September.
    18. Benson, Geoffrey A., 1992. "North Carolina Dairy Termination Program Participants' Plans," Archive 259721, North Carolina State University, Department of Agricultural and Resource Economics.
    19. Nubern, Chris A. & Purcell, Wayne D., 1997. "Competitiveness of Dairy Producers in a Deregulated Market," Staff Papers 232553, Virginia Polytechnic Institute and State University, Department of Agricultural and Applied Economics.
    20. Lukasz SATOLA & Tomasz WOJEWODZIC & Wojciech SROKA, 2018. "Barriers to exit encountered by small farms in light of the theory of new institutional economics," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 64(6), pages 277-290.
    21. Bolotova, Yuliya V., 2018. "An Analysis of Price Behavior in the United States Peanut Industry," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266537, Southern Agricultural Economics Association.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaeatr:333524. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.