Opinion ID: 787330
Heading Depth: 3
Heading Rank: 1

Heading: The Dairy Industry

Text: 4 In the dairy industry, dairy farmers, also referred to as producers, produce and sell raw milk to handlers. Handlers, in turn, prepare the milk product for resale to consumers or serve as intermediaries to those who do. Consumer dairy products, such as fluid milk beverages, ice cream and cheese, can all be produced from Grade A or fluid grade raw milk. 2 In the consumer market, however, milk beverages generally command a higher price than non-fluid products, which are known also as manufactured dairy products. For this reason, the market into which dairy farmers sell their product more highly values (and pays a premium price for) Grade A milk ultimately used to produce beverage milk. This market premium based on end use creates an incentive among producers to divert their Grade A product to fluid milk handlers. 3 Were this incentive not controlled, lower market prices would result, harming milk production revenues. 4 5 The dairy industry also is characterized by daily and seasonal fluctuations in supply and demand. Consumer demand fluctuates significantly on a daily basis, primarily due to consumer buying patterns; milk production, on the other hand, is relatively constant on a daily basis. Conversely, milk production varies seasonally based on the animals' nutritional health. In fall and winter months, less milk is produced, but in spring and summer months, more milk is produced. To meet consumer demand in the winter, producers must maintain large herds; these same herds over-produce in the summer. Given milk's perishable quality, the supply must go to market at least every other day. Historically, handlers were thus able to obtain summer supplies at bargain prices.