With high price and low cost there should be room for some extra profit. Beware, high profits will entice new producers and herd expansion, and of course surplus production. Volatile prices are a management headache but, at the same time, a real ally to an industry. We may have something to learn from the egg industry. For them a profit of one half to one cent a dozen is adequate and yet their market can vary as much as twenty cents a dozen.
Most existing producers are profitable over the long run.
Well, first it makes bankers and lending institutions less willing to put money into startup operations. Second, the price becomes a reliable indicator of the true value of milk. The price would reflect a relatively constant ratio between cost of production and milk price. Prices become real, and dairymen don't need to waste time sitting around hoping that things will get better. The price of milk is a little like the float valve on a small cattle drinking tank.