Vertical Price Transmission in U.S. Dairy Products

This study investigated U.S. dairy price linkages by focusing on vertical market differences with price regulation and market location for farm-towholesale and farm-to-retail with product differentiations for milk, butter, cheese, and ice cream. Price linkage models were estimated with least squared or instrument variables, depending on causal relations. In long-run responses, wholesale prices are 1.2 times as strongly linked to farm prices and adjust 2.5 times quicker than the prices of retailers. Asymmetric response in fluid milk prices indicate that wholesale prices more strongly reflect rising farm prices while retail prices more strongly reflect falling farm prices. Elasticity of farm share of retail price is more elastic than that of farm share of wholesale price.