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Private Supply Management and Market Power in the U.S. Dairy Industry

Author

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  • Bolotova Yuliya V.

    (Assistant Teaching Professor, Department of Economics, Iowa State University, Ames, USA)

Abstract

This research analyzes the U.S. cheese industry dynamics (changes in wholesale cheese prices, milk price, margins, and the nature of wholesale cheese pricing) in light of a herd retirement program implemented by the Cooperatives Working Together (CWT) in the period of 2003–2010, which led to an antitrust lawsuit filed by cheese buyers against a group of dairy cooperatives and a large settlement. Presuming that they had a Capper-Volstead Act immunity, the CWT cooperatives acted in a cartel-like manner to decrease milk supply to increase and stabilize milk prices received by dairy farmers. While the program may have modestly increased seller market power of dairy farmers, seller market power of dairy cooperatives involved in cheese manufacturing decreased. This is because the cost of milk used in cheese manufacturing increased at a higher rate than wholesale cheese prices, which caused wholesale cheese margins to decrease.

Suggested Citation

  • 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.
    • Handle: RePEc:bpj:bjafio:v:22:y:2024:i:1:p:1-17:n:1003
    DOI: 10.1515/jafio-2023-0004
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    References listed on IDEAS

    as
    1. 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.
    2. Bolotova Yuliya V., 2022. "Price Discovery in the United States Dairy Industry," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 20(2), pages 83-97, December.
    3. 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.
    4. 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.
    5. Ling, K. Charles, 2014. "Marketing Operations Of Dairy Cooperatives, 2012," Research Reports 279798, United States Department of Agriculture, Rural Development.
    6. 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.
    7. Ling, K. Charles, 2011. "Cooperative Theory, Practice, and Financing: A Dairy Cooperative Case Study," Research Reports 280109, United States Department of Agriculture, Rural Development.
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    10. 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.
    11. Ling, K. Charles, 2012. "The Nature of the Cooperative A Dairy Cooperative Case Study," Research Reports 280112, United States Department of Agriculture, Rural Development.
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    14. Yuliya V. Bolotova & Andrew M. Novakovic, 2012. "The Impact of the New York State Milk Price Gouging Law on the Price Transmission Process and Supermarket Pricing Strategies in the Fluid Whole Milk Market," Agribusiness, John Wiley & Sons, Ltd., vol. 28(4), pages 377-399, September.
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    More about this item

    Keywords

    ; Cost pass-through; monopoly; oligopoly; Sherman Act;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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