Retail Milk Prices in New England, New York, and Seattle: An Unresolved Issue

Last November, the Food Marketing Policy Center conducted a survey of retail milk prices in Connecticut, Massachusetts, Rhode Island, and parts of southeast New York (Cotterill, et al., 2002). That look at the price distribution over space aided in answering several questions regarding milk pricing in the region, such as whether prices varied amongst states, channels, chains, and types of milk. Results of The November study indicated that milk prices in New England were high relative to prices in New York, raw milk prices, and estimated costs of processing and distribution. In November 2002, supermarket chains in New England, which dominate grocery store sales, charged an average of $3.01 per gallon of milk (Cotterill et al., 2002 p. 11). Milk sold in convenience stores, wholesale clubs (Sam’s Club, BJ’s, and Costco), and limited-assortment stores (Price Rite, Save-A-Lot, and Midland Farms) was less expensive than in supermarkets, but compared to New England stores, New York supermarket prices were even lower. Chain supermarkets in New York charged $2.42 on average (Cotterill et al., 2002 p. 8). Clearly, differences in processing and handling costs amongst channels and states could not account for all of this pricing discrepancy. While it was originally believed that both processors and retailers are exercising market power, processing cost information obtained from Diary Technomics in March 2003 indicates that retailers are the ones who are charging consumers unconscionably excessive prices for milk. (Cotterill, et al., 2003a).