COMPONENT PRICING OF MILK TO FARMERS: A MORE EQUITABLE WAY

This paper demonstrates that multiple-component pricing of milk to farmers is more equitable than butterfat differential pricing because butterfat and nonfat components are not produced in fixed proportions. Conditions are derived for directly calculating producersÂ’ multiple-component prices, and for determining the expected relationship between butterfat differential and multiple-component prices. Prices for 274 Oregon producers are calculated under these alternative price regimes. Producers with protein tests less than the pool average are overpaid under butter fat differential pricing and, consequently, experience price declines under multiple-component pricing. Concomitantly, high-test producers are underpaid and experience price increases.


Issue Date:
1978-12
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/32558
Published in:
Western Journal of Agricultural Economics, Volume 03, Number 2
Page range:
121-130
Total Pages:
10




 Record created 2017-04-01, last modified 2017-08-25

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