What Determines the Price of Milk?


Quick Answer

The United States government sets the price of milk that the milk processors pay for raw milk. The price is set each month, and it can go up and down, depending on the availability of cows, the price of fuel, and the price of grain feed and fertilizer.

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What Determines the Price of Milk?
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Full Answer

Once the factors that determine the price of milk are input into a formula, the monthly price for raw milk is determined. Raw milk is the milk that is right out of the cow and still in the bulk tank at each dairy farm. The price is usually higher in the summer and lower in the winter, because cows give more milk in the winter. Cows don't produce a lot of milk when they consume less food, and many cows don't like to eat during the hot summer days. The more milk that is available, the lower the price, which is the result of supply and demand.

Milk pricing is regulated because it is a perishable product, and it must be harvested daily. Without regulations, there would be no way to assure an adequate supply of milk. All dairy products, including cheese and yogurt, are separated into fluid and manufactured categories because prices for these products are determined differently.

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