An Empirical Analysis of Wholesale Cheese Pricing Practices on the Chicago Mercantile Exchange (CME) Spot Cheese Market

Yuliya Bolotova and Andrew M. Novakovic

International Food and Agribusiness Management Review, 2015, vol. 18, issue 3, 18

Abstract: The CME spot cheese market performs a number of key functions in the United States dairy industry. The CME spot cheese prices are used as reference prices in contract cheese market, and they also influence milk prices at the farm-first-handler level set within a public pricing system, the Federal and State Milk Marketing Orders. The CME spot cheese market performs a critical price-discovery function in the United States dairy industry. This research evaluates the nature of pricing practices used by CME cheese wholesalers during the period of 2000-2014. The analysis focuses on the farm-to-wholesale price transmission process, which reflects the nature of cost pass-through. The empirical evidence presented in the article indicates that pricing strategies of cheese sellers in the analyzed market are consistent with the ones predicted by the profit-maximization models of oligopolistic behavior. The overall empirical evidence may suggest that cheese sellers on the CME spot cheese market used an output (cheese) price stabilization method during the analyzed period of time.

Keywords: Agricultural and Food Policy; Demand and Price Analysis; Financial Economics; International Relations/Trade; Livestock Production/Industries; Resource/Energy Economics and Policy; Risk and Uncertainty (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:ifaamr:208403

DOI: 10.22004/ag.econ.208403

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