Change in Hay-To-Milk Price Responsiveness with Dairy Industry Expansion

Abstract

The dairy industries in California, Idaho, and New Mexico expanded rapidly during the early 2000s. This study focuses on the expansion effects on milk-To-hay price responsiveness. Dairy industry expansion makes hay markets tighter, with less available marketable supply in most periods. The empirical models account for the expansion effect as well as those from hay exports and low stocks-To-use ratios that also cause changes in hay market demand characteristics. The results show that hay-To-milk price responsiveness increased after dairy expansion in all analyzed states. Low stocks-To-use and high exports dampened the responsiveness, but were not statistically significant for all analyzed states.