Milk Is Too Cheap

Regulators from the Massachusetts Department of Agricultural Resources zealously enforce a 1941 law that prohibits retailers from selling milk below cost. The law was originally intended to help level the playing the field between small stores and large chains, but now serves to keep the price of milk artificially high. Just last week, state regulators asked the Market Basket supermarket chain why they were selling milk for only $2.59 per gallon. From the Boston Globe:

David McLean, operations manager for the Tewksbury-based chain, said the company would be adjusting its price upward to $2.89 a gallon and may go even higher this week when wholesale prices are scheduled to rise.

“We will be making an adjustment,” he said. “Naturally, we respect what the regulations are.”

McLean declined to say what Market Basket was paying for the milk it sells. The third-largest supermarket chain in Greater Boston by sales volume, it has a reputation for low prices.

Have a heart, Massachusetts regulators. Though milk helps to drive retail sales, protecting consumers by demanding high prices is counterintuitive.

State aims low despite high costs of milk [Boston Globe]
(Photo: Yogi)

Comments

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  1. bnet41 says:

    MA has some odd regulations. I never understood some of their stuff. Pricing fixing can be a bad thing usually. It’s the same with the car insurance, and now health insurance.

  2. banned says:

    Lame. They ban you from selling too high, and too low? Someday you’ll have to call someone and ask what you can charge for products.

  3. Fitz21and1 says:

    I used to work at a Market Basket in high school, and I can tell you their generic prices were generally low enough to make you step back and go “Wait, how is it this cheap?” so I’m not surprised they’re below this threshold.

    That said, who is this law protecting again? Supermarkets? No, if they made more money selling at a higher price they would, but apparently not if they already had a lower price.

    Consumers? My wallet says hello.

    Farmers? Reducing demand on a product doesn’t help the supplier.

    Government? Milk, like all non-prepared foods in MA, has zero sales tax.

    Cows? …Ok, maybe.

  4. AtomikB says:

    Selling milk and other products at a loss is an unfair practice that harms small retailers. MA is right to protect small stores by preventing large stores from dumping milk below cost.

  5. moniker42 says:

    As I’ve always understood it, the price of milk in the United States is determined by the distance away from a specific city in Wisconsin, though I’m not entirely sure that’s true anymore. It could just be a popular myth around here.

    There is a saying in here in Wisconsin.

    “Happy Cows come from Wisconsin”

    Personally, I happen to know exactly where my milk comes from, to the farm. Though, I rarely ever drink dairy, and the milk that I do get, in Madison, is unpasteurized.

    Happy cows do not fucking come from California.

  6. Yourhero88 says:

    How does this make any sense? Who the heck are these people to say that milk is too cheap when it’s already ridiculously high to begin with.

    It’s not gasoline for goodness’ sake!

  7. Lars says:

    This law is intended to protect small retailers and small dairy farmers. While New England has few functional dairy farms remaining, by guaranteeing a minimal price that farmers can be paid for their product Massachusetts (and New England as a region if memory serves) guarantees small dairy farmers some price stability and guaranteed income. We used to protect farmers ability to turn at least a modest profit, but most USDA policy now is to favor cheap production over sustainable prices.

  8. Starfury says:

    Milk at Safeway in the SF Bay are is about $3.05 a gallon if you buy 2 of them otherwise the price is over $4 per gallon. Cheaper to run the car on milk than gas anymore.

  9. Kornkob says:

    I believe that the Eau Claire Regulation, which made milk worth more the further from Eau Claire Wisconsin it was, was eliminated in the late 90s.

    If I recall correctly, the Eau Clair Reg was supposed to protect local milk produces from then awesome milk production power of central Wisconsin and Minnesota. The Rule went in in the 50s or 60s when the highway system and refrigerator trucks made it possible to ship fresh milk great distances rapidly.

    /am from Wisconsin
    //not a farmer but grew up with several
    ///still think Wisconsin cheese tastes better

  10. bluemeep says:

    Here in Orlando, it’s freakin’ five bucks a gallon. Our household has been cutting back on it’s calcium considerably lately…

  11. orielbean says:

    To the person talking about Mass car insurance “price fixing” – you are incorrect. Look at NJ’s system, and even Mass in the 80’s. When the regulator let all the “competition” in to sell more insurance, the rates went out of control and many people got denied coverage. They do serve a useful purpose for things you must have, like car / health insurance. When corners get cut in both of those industries, the consumer alone is the one who suffers.

  12. badlydrawnjeff says:

    Wow, Massachusetts screwing over its citizens. Shocking, really. *eyeroll*

  13. DeeJayQueue says:

    @bluemeep: eat more Tums.

  14. alk509 says:

    The law prohibits the sale of milk below cost. In other words, if they’re going after DeMoulas, it’s because they’re selling their milk at a loss in order to get people in the store. As much as I hate paying more for things, that’s unfair competition, and it should be stopped.

  15. MENDOZA!!!!! says:

    @ orielbean

    more competition = higher prices?
    did I miss this part in Econ 101?

  16. alk509 says:

    @alk509: For those not familiar wth MA supermarkets, DeMoulas = Market Basket. :-)

  17. badlydrawnjeff says:

    @alk509: Yes, certainly, providing a product to someone at a cost you can afford to offer it at is “unfair.”

    Dear god, it’s thinking like this that caused me to move from Massachusetts.

  18. nweaver says:

    Price controls on milk are endemic in the US, dating back to the depression, and the dairy lobby fiercely opposes eliminating them, since they believe there isn’t that much elasticity in demand (so they make more money with artificial price floors, which could not be done without a government mandate as it would violate antitrust statutes)

  19. MENDOZA!!!!! says:

    dairy lobby? whah?
    I mean, how many dairy farmers are there?

  20. Hoss says:

    @Lars: I believe you are thinking of the cartel known as The Northeast Dairy Compact which establishes minumim milk prices in participating states. This is the protection for small farms. Link: [www.dairycompact.org]

  21. lincolnparadox says:


    When I lived in Wyoming, WalMart sold gas at a 50-cent discount if you brought a receipt from the store. They were always selling gasoline at a loss, but they figured that they could get away with it because the gasoline law that preventing this practice was a city law, and WalMart was built on county land.

    The nice thing about Wyoming is that everything moves quickly. The County commissioner decided to adopt the city ordinance at the next County meeting. WalMart had to sell gasoline “at cost or higher.”

    Still, two of the family owned gas stations in town closed down during that period of time. Three to four weeks with no sales is enough to kill a family-owned business.

    For the consumer, these laws seem improper. But, without competition, we will always be paying higher prices.

  22. alk509 says:

    @badlydrawnjeff: You should probably go ahead and move out of the country altogether – laws just like this one are ubiquitous in every state of the union, and at the federal level…

    Say hi to Chile for me! :-)

  23. JustAGuy2 says:

    @orielbean:

    Actually, the MA insurance price regulation results in good drivers paying higher rates than they would, while poor drivers get a discount. Average rates aren’t materially off what they run in other states with similar accident/theft rates, it’s just that good drivers get screwed because they don’t get the discounts that the free market would give them – instead, they subsidize more dangerous drivers.

  24. bnet41 says:

    @orielbean:
    Yea, I don’t think what you said really makes sense. People in MA can’t get with the discount carriers and often pay more than people in other states with DUI’s. Price fixing is a bad idea. Should the state go through every item at Wal-Mart and set a minimum price? Mass. has too much regulation, and they only seem to want to add more.

  25. Mom2Talavera says:

    I have no problem spending 5$ for a gallon of milk from a local organic farm….especially if my daughter is going to drink it. I avoid factory farm milk(moo cow fuck milk) like the plague.

    /The bright side to these high prices is that people are laying off the milk! Too much milk(dairy) isn’t healthy.

  26. consumeristlegs says:

    Predatory pricing is a *bad* thing. This article:

    [thismatter.com]

    is a LONG read, but very informative, and it’s applicable to this situation where large retailers can afford to take a hit in one area in order to get customers. I guess it’s different in that I don’t expect they would reach the point where they would be able to price gouge (the way MS did/does with office) though…

  27. Anitra says:

    I live in Mass – I didn’t know about this regulation, but it makes sense, given our local government. They pass a lot of confining regs aimed at “leveling the field” for small retailers.

    For most people I know, the main effect is this: you buy your milk and booze from the local convenience store – the milk is cheaper, and most (chain) grocery stores can’t carry beer or wine.

    I don’t know if it’s good or bad… but I probably wouldn’t stop at convenience stores if I wasn’t buying milk from them.

  28. Cyco says:

    I live in Houston and just bought milk the other day. Paid 5.22 for a gallon. The Wal-Mart brand wasn’t much cheaper. It’s crazy how much prices are jumping. I would LOVE to pay 2.50 for a gallon. It’s no wonder people would rather buy a coke than something more healthy.

  29. mopar_man says:

    It’s amazing how the prices are different across the country. Here in the UP of MI, 1% milk is around $3.50/gallon. $0.10 less for skim, $0.10 more for 2%. Not long ago milk was below $3.

  30. seawall says:

    For those of you who don’t live in Massachusetts, there’s a state law that everything has to be 10x more annoying and inconvenient than in the rest of the nation. Car insurance is out of whack. Brand new cars must be inspected annually for emissions. The state thinks that people having wine with dinner will lead to drunk driving, and therefore, it severely restricts liquor licenses. The traffic departments don’t install left turn signals, let alone left turn lanes. Parking rules are enforced zealously, while traffic violations are permitted in front of cops. Cops are required to supervise every major and minor road repair – even filling a pothole. Residents are breaking the law if they don’t buy private health insurance. Some motor vehicle registries accept certain types of ID to get a license plates, others say that they’re not valid. You have to pay a deposit on cans and bottles, only to be forced to bring them to a supermarket where the costly machines that accept them are always broken. And they dictate the prices of consumer goods. There is no end to the surprises of how the state screws over its citizens.

  31. nequam says:

    @seawall: Massachusetts sucks for the following reasons: It has auto inspections, bottle deposits, and milk-price regulations just like plenty of other states. My pants are a little tight. I don’t like the color yellow. Also, there is a dog that lives near me that barks. One time a person was rude to me near the VT border. Plus, it is hell on earth. Also, the state forces you to go outside when its raining if you want to go anywhere.


    Seriously, though, auto insurance here is out of whack. But this milk thing is not a catastrophe, especially when you consider the much higher prices people appear to be paying in other states.

  32. MENDOZA!!!!! says:

    Do what I did, quite bitchin’ and move down south. The people are nicer, things are cheaper, and the local government is not run by communists.
    Huzzah!

  33. yahonza says:

    Actually, predatory pricing is mythological. Its virtually, maybe actually, impossible from an economic point of view to lower your prices below costs long enough to force out competitors.

    It makes a good scare story though, which is the basis for laws of this sort.

    Good article on the topic here:

    [cafehayek.typepad.com]
    (folow the link to the article)

    It is, on the other hand, quite possible to lower your prices below your competitor’s costs by being more efficient. That’s competition, and that’s what keeps prices in line.

    The mass. law is actually designed to raise prices artificially to benefit smaller competitors who are less efficeint (at consumers’ expense, of course).

  34. llanim says:

    Whence the $5 gallon of milk? Milk is more expensive because the corn to feed the cows is more expensive because the only alternative fuel George W. Bush is supporting with real money is corn-based ethanol (because he loves the agro-business lobby). So corn farmers jack up their prices because they have a new demand, dairy farmers pay the higher price because they still have to feed their cattle, and we pay higher milk costs.

  35. lihtox says:

    @Cassifras: It’s true; we communists can’t stand the godawful weather down here. Oh for a proper summer again!

  36. nequam says:

    @yahonza: But couldn’t a large supermarket succeed by selling milk at below cost and recovering the shortfall by increasing the prices of other goods? Example: If a small store sells milk but not fresh meat, a supermarket could corner the milk market by taking a loss on each gallon of milk. Since the small competitor does not sell meat, the supermarket has no competition (at least with the small store) on meat and can charge a higher price for it and still sell it to the customers who are drawn in by the low milk prices. Am I missing something? (Not rhetorically, I’m actually curious).

  37. miborovsky says:

    If you set your prices higher than everyone else, you’re PRICE GOUGING.
    If you set your prices the same as everyone else, you’re COLLUDING.
    If you set your prices lower than everyone else, you’re engaging in PREDATORY PRICING.

    Let’s all become commies and give stuff away for free?

  38. Grrrrrrr, now with two buns made of bacon. says:

    For those of you who don’t live in Massachusetts, there’s a state law that everything has to be 10x more annoying and inconvenient than in the rest of the nation.

    @seawall: LOL! I think you just hit the nail right on the head. You can be sure that if Market Basket were selling milk for too much, or just enough..that there are probably laws against that too.

  39. PrinceTuesday says:

    @ATOMIKB

    I have to disagree. Any store should be able sell a loss leader to get people into thier store. This is not limited to just supermarkets. Anyway, protecting small retailers should not be the government’s job. With your logic, Home Depot should be forced to close at 5:00 PM, just like the corner hardware store does.

  40. McKay says:

    @Cassifras: I don’t know how many dairy farmers there are, but there are some huge dairy companies (Dean Foods) and cooperatives (Dairy Farmers of America) that lobby as well as anyone. For example, take a look at this or this. A Google search on dairy lobbying turns up all kinds of heart-warming lobbyist escapades.

    Also, as Nweaver pointed out, this price floor junk isn’t just in Massachusetts. All over the country, the federal milk marketing system keeps prices artifically jacked up for consumers. Getting the government to enforce your cartel is pretty sweet.

  41. Fitz21and1 says:

    @nequam: I really enjoy watching the car insurance commercials that end “not valid in Massachusetts” and list no other states. The gripe about liquor laws is valid too; I’m living in CT now, a state known for its antiquated blue laws, and they’ve got booze in the supermarkets, and haven’t heard of a “dry town”, while my hometown has no local economy because it fears alcohol and thereby has no restaurants.

  42. nequam says:

    @Fitz21and1: Bridgewater, CT is dry. Wilton was too until recently.

    On a higher note, Belmont, MA just got wet! Still, 12 dry towns in MA (some states have much higher numbers). But these are local issues, not state issues.

    As you may know, voters themselves defeated a measure that would have brought beer and wine into grocery stores. By a wide margin, too IIRC. I had voted for the measure. My point, however, is that it wasn’t a mean, oppressive gov’t that made that decision, it was the voters.

    Oh, and I agree with a few things SEAWALL said, but some of it was crazy.

  43. legerdemain says:

    @Cassifras: I live down south. In Louisiana, similar stupid dairy price laws cause us to miss out on the Baskin Robbins’ and Ben N Jerry’s Free Scoop days.

  44. ShadowFalls says:

    The sad part is: the cheapest place to get milk in my area is CVS Pharmacy… all the grocery stores want close to $4 for their store brand. At CVS, at least it is T.G. Lee.

  45. yahonza says:

    @nequam:

    That doesn’t sound too plausible to me. If the supermarket sells meat and the mom and pop store doesn’t, why do they need lower prices on milk to draw customers away? Seems to me they could get away with charging more for the milk, since a trip to the supermarket save you time over a trip to the mom and pop AND the supermarket, to get both milk and meat.

    Besides, wouldn’t the mom and pop just start selling meat? Why should that be part of the equation?

  46. nequam says:

    @yahonza: Good point! I guess I picked a bad example. Or maybe there is no good example.

  47. vladthepaler says:

    The store needs to put up a great big sign next to the milk saying that they’d really like to sell the milk cheaper, but their elected representatives say they have to charge a higher price. And here are their phone numbers.