This article uses monthly price data to estimate farm-retail price response equations
for three California
market areas. The results indicate that there is a strong direct relationship between
retail and farm-level milk
prices-retailers increase and decrease their prices equally in response to f.o.b.
price increases and decreases.
While the total retail response to farm price increases and decreases is equal, the
timing of the adjustments
is not. Farm price increases during a given month led to retail price increases during
month while farm price decreases were not fully reflected in retail prices until
the following month.