Geographic Pattern of Fluid Milk Prices: A Computer Analysis

Excerpts from the report Preface: The markets for fluid milk have remained essentially local longer than those for most other agricultural commodities. Distinctive forms of classified price plans and of Class I price structures have been maintained in such markets. The research model reported herein applies reactive programming techniques to data for the Federal order markets. It shows what the geographic pattern of Class I prices in the orders would be if milk flowed between markets wherever Class I prices differed by more than hauling costs. Like any such model, this one involves assumptions about hauling costs, marketing responses, and perfect knowledge. The most basic assumption is that most local market distinctions have vanished. In fact, milk is processed from and distributed over much wider territories than it was before World War II. Thus, local market price influences have lessened, but are by no means gone. The model is, therefore, a research tool which may serve to indicate some of the major differences between actual prices and prices based on a free-flow pattern.