I’ve observed that the retail price of milk fluctuates broadly, at least around here.
On one day a gallon of 2%, Roundys brand will be $3.79 a gallon. The next week it will be $2.69. Then the next week it’s $3.39. Then the next week it’s $3.89. Then the next week it’s on sale for $1.79. That’s a heck of a sale! Then it shoots up to $2.69, $3.79, then back on sale at $1.88.
I’ve kept track of these prices over the last 2 months.
It’s milk, not gasoline. So? Is there a supply side reason this happens, or is it just the store (same store for every price) using the price of milk as a sales flyer draw? $1.79 from $3.89 is a big drop. Even without the sale, why the bounce around to such prices?
Had the price gone from $3.79 down to $1.88 and back, it would. But the prices have been all over the place, some only a bit lower than original, and some actually higher.
I worked in a medium sized retail store as a kid, a store that had 3 loss leaders every week. The product was put on a crazy sale for a while and that was it. The price did not bounce all over the place like this.
Could the holidays have played a part? Every school is closed for a couple of weeks and are buying hundreds of gallons less, while people with kids probably don’t buy a whole lot more. The highest demand for milk is when school starts, so there would surely be some change when school is out for Thanksgiving/Christmas.
Also, depending on where you live weather can be a factor. We don’t get much snow, so when they forecast a couple of inches, the milk and bread racks empty quickly as people rush to “stock up.”
Then there’s expiration date. I would assume stores have different prices when they’re stocked full of the freshest milk vs when they have half empty shelves of milk that only has 5 days left.
This fluctuation is by no means universal. The Pennsylvania Milk Marketing Board sets minimum prices for most fluid dairy products and sour cream. Stores can sell these products for more than the minimum, but they can’t sell for less than that. In practice, the grocery and convenience chains don’t charge more for milk, although mom-and-pop stores sometimes do.
The logic for this law is that it ensures that dairy farmers are paid fairly, and that grocers have the opportunity to make a reasonable profit. Milk and tobacco are the only two products that I know of that have a minimum price set. The law also requires dairies to be inspected by the state and requires a license that all but the smallest dairies are required to have. Basically, then, the state does this to protect dairy farmers and the milk-drinking public from each other. Pennsylvania: We don’t know why we do this, but it seems like a good idea.
But around here, stores don’t even advertise the price of milk, which defeats the point of pricing it as a loss-leader.
Let’s not forget that milk comes from cows, and cows don’t all produce the same amount of milk from day to day. They’re on their own schedule, which doesn’t necessarily coincide with consumer demand.
Milk prices aren’t generally set at the store level for anything but the smallest stores. That is done at headquarters. Milk deliveries also come several times a week if not most days and are rotated so you shouldn’t have lots of milk about to expire in a store. It is always coming in and being sold out from oldest to newest.
Milk is subject to weird and complicated federal and state subsidies, taxes, and other programs in the US. I think there is little that is natural in its pricing.
The price of milk is set by both state and federal governments. In fact, I just downloaded a 24 page document that explains in simple and clear language how milk prices are set. And, I have a bridge I can sell you in Brooklyn.
I gave up reading the document after a few sentences. My understanding is that both states and the federal government set milk prices. If I understand how it works the federal government sets the price based upon Wisconsin dairy prices because somehow that’s supposedly a “free market”, then calculates the shipping to various parts of the U.S. to determine the minimum price. If milk falls below the minimum price, the government buys the surplus which is then sent to the school lunch program and various other federal programs.
Various states set milk prices based upon a complex formula which involves the various phases of the moon, the tides, the day of the week, the biorhythm chart of the head of the Department of Agriculture, and who has contributed the most money to their last election campaign (NOTE: Not all of these items have equal weight in the formula).
I’m sure there’s some supply and demand involved in setting the price of milk, but with all the various rules, set orders, and regulations, I can pretty safely say no one has any idea why the price of milk goes up or down.
Is there a supply side reason this happens, or is it just the store (same store for every price) using the price of milk as a sales flyer draw? $1.79 from $3.89 is a big drop. Even without the sale, why the bounce around to such prices?