Geographic Structure of Milk Prices, 1960-61

Introduction: Distance from major supply areas to markets is a key factor in the geographic structure of prices of many farm products. In marketing milk for fluid use, for instance, dealers' buying prices in local markets are influenced by distance of market from the closest major supply area. Under conditions of unrestricted movement of milk, differences in Class I prices would reflect transfer costs between markets. Price-distance analyses of actual prices paid by dealers are useful in identifying markets where Class I prices deviate from the average relationship between dealers' buying prices and distance. In addition to distance from major milk supply areas, other reasons for differences in prices dealers pay are (1) the Federal, State, and local milk regulations; (2) the supply and demand situations in the local markets; and (3) the bargaining positions of producers and distributors. This report deals primarily with the price-distance relationship.