Milk Pricing:

New Method for Setting Farm Milk Prices Needs to Be Developed

RCED-90-8: Published: Nov 3, 1989. Publicly Released: Nov 22, 1989.

Additional Materials:

Contact:

John W. Harman
(202) 512-5138
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a congressional request, GAO determined whether the Minnesota-Wisconsin (M-W) price series was a reliable and appropriate adjuster of milk prices and whether it needed to be improved.

GAO found that: (1) the M-W price is becoming gradually less reliable as a measure of national supply and demand conditions for milk used for manufacturing, does not provide a valid pricing mechanism over the long term, and is affected by local conditions; and (2) grade-B milk production and the number of grade-B purchasing plants in Minnesota and Wisconsin have declined significantly since the M-W price series was introduced. GAO evaluated five alternatives to the current price series, including: (1) a regulated grade-A manufacturing price series; (2) a deregulated grade-A price series; (3) a product formula; (4) an economic formula; and (5) an administratively determined price. GAO found that: (1) the first two options would reflect national prices that would be generally unaffected by local conditions, but a deregulated grade-A price series would treat some producers unequally; (2) a product formula would be superior to an economic formula; and (3) an administered price alternative would not incorporate the desired price mechanism characteristics.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: USDA established an alternative pricing series effective August 1994.

    Recommendation: In view of the declining importance of grade-B milk, the Secretary of Agriculture should initiate efforts to develop and test an alternative pricing series.

    Agency Affected: Department of Agriculture

 

Explore the full database of GAO's Open Recommendations »

Sep 16, 2020

Sep 14, 2020

Aug 10, 2020

May 7, 2020

Apr 13, 2020

Dec 23, 2019

Dec 6, 2019

Nov 12, 2019

Oct 28, 2019

Sep 9, 2019

Looking for more? Browse all our products here