IV. RECENT CHANGES IN MILK PRICES GEOGRAPHIC PATTERN OF RETAIL PRICES The recent increases in retail milk prices began in mid-1965 and registered the sharpest advances in July and August of this year. There were, however, significant variations in the timing and scope of price increases in various sections of the country. In part, the magnitude of the price increases is explained by the underlying factors responsible for raw milk price increases. Before examining this question and changes in processor and retailer margins, we first review the geographic pattern of retail price changes. The earliest price increases occurred in the Midwest, the largest milk producing area of the country. As shown in figure 9, retail milk prices increased in Kansas City as early as the summer of 1965. In Cleveland milk prices were relatively low in the middle of 1964 but have increased steadily since that time and have "caught up" with prices in two other cities in the same part of the country-Indianapolis and Detroit. In Chicago and Minneapolis prices were fairly stable or on the low side through 1964 and 1965, but increases occurred early in 1966 and have continued. Prices in Milwaukee rose substantially in 1966. In the East, milk prices in New York, Boston, and Philadelphia apparently have considerable seasonal variation, being high in the winter months and low in the summer months. For these cities, it would appear that the price increases began in the summer of 1965 but have continued through 1966 to date, rising contrary to the usual seasonal pattern. In three other cities-Pittsburgh, Baltimore, and Washington, D.C.-the upward movement began early in 1966, but the increases were much more marked in Washington and Baltimore than in Pittsburgh. In Denver milk prices fell sharply in mid-1965, apparently as a result of a price war. They recovered quickly, however, and remained very stable until the summer of this year when they rose sharply. In two Texas cities, Dallas and Houston, there has been a very sharp rise since mid-1965. In the Far West milk prices remained fairly stable in both San Francisco and Los Angeles until August 1966 when they rose substantially. In Portland, Oreg., and Seattle sharp increases occurred during the summer months of 1966. In Honolulu milk prices have been and still are the highest offall cities surveyed, but prices have tended to decline since mid-1965. Source: Prepared from data furnished by the Bureau of Labor Statistics. Appendix table 8. Changes in out-of-store milk prices from August 1965 to August 1966 in a longer list of cities throughout the country are depicted in figure 10. The cities are arranged in ascending order according to the retail prices prevailing in the earlier period. On the average, retail prices for these 39 cities increased from 47.4 cents per half gallon to 51.5 cents a rise of 4.1 cents or 8.6 percent. The range in price changes has been wide, from an increase of 10.2 cents per half gallon (in Dallas) to an actual decline of 0.4 cent (in Hartford). It would appear, however, that the greatest increases occurred where prices Source: Prepared from data furnished by the Bureau of Labor Statistics. Appendix table 3. were lowest previously. Two comparisons are made in table 10, one covering the full year interval and the other the period January to August 1966. In both time periods, substantially greater increases occurred in the cities where the prices had been lowest. In the 12 cities with the lowest prices the increases were almost twice as large as those in other cities. A similar picture emerges in respect to the January to August 1966 changes, although the margin of difference had narrowed somewhat between the cities with the lowest prices and other cities. |