Stephenson_Lecture_Presentation

Stephenson_Lecture_Presentation - A Story of Milk Price...

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A Story of Milk… Price Volatility and Risk Cornell Program on Dairy Markets & Policy
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What is Special About Milk? Highly perishable Bulky Produced 365 days a year Relatively fixed production assets Relatively inelastic supply Many more sellers than buyers Relatively inelastic demand
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Early Milk Price Volatility U.S. All Milk Price $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933
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Government Involvement Chaos from the Great Depression required “ Orderly Marketing of Milk ”. Orderly milk supply to fluid markets. Orderly production of milk. Orderly assembly and distribution of milk. Orderly and equitable relations between producers and milk plants. Orderly relationships between prices in different markets. 1800 1800 1988 2000 1933
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Government Involvement ‘Marketing Agreements’ became ‘Marketing Orders’. Markets were local until the 1950s and accounted for little of the national milk supply. By the 1960s, Marketing Orders had grown closer together and national supply and demand was important. Implemented by surveying milk prices in unregulated market ( M-W ) 1800 1800 1988 2000 1933
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In 1930, Land O’ Lakes experimented with seasonal price instability. In 1941, the price support program was implemented. Secretary of Agriculture has had authority to set a target price for milk between 75–90% of parity. To accomplish this goal, the CCC stands ready
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Stephenson_Lecture_Presentation - A Story of Milk Price...

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