21.2 lbs whole milk 5. E. 12.0 lbs whole milk 6. How Milk Prices Are Established When a consumer reaches into the supermarket dairy case for a carton of milk, it's the last step in a long process that began in the pasture of a dairy farm. By the time that carton of milk finally goes through the supermarket checkout, a lot of things have happened to determine the price the clerk rings up on the cash register. How the Milk Pricing System Developed Because milk production is a natural process of the dairy cow, the supply cannot be turned off and on to keep pace with demand.
Production fiuctuates seasonally but demand remains fairly constant.
The problem is to make sure that everyone who needs milk gets it. If we have unlimited production, the supply becomes too plentiful and the price drops. When this happens the dairy farmer no longer has an incentive to stay in business. So the farmer cuts back on production, prices go up, and the supply goes down. The consumer and the processor both feel the pinch.