A Model of Dairy Product Inventory Behavior

Stephen E. Miller

Review of Agricultural Economics, 1994, vol. 16, issue 3, 453-463

Abstract: This article tests the hypothesis that inventory behavior for American cheese, butter, and nonfat dry milk is consistent with dynamic cost minimization by dairy manufacturers. Results indicate that firms choose their dairy product inventories so as to minimize quadratic output and inventory carrying costs, subject to autoregressive cost shocks. There appears to be relatively rapid adjustment of commercial dairy product stocks to desired levels, with 95 percent of that adjustment taking place within six months.

Date: 1994
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