MADISON, Wis. -- A new study from the University of Wisconsin indicates that consumers are willing to pay more for specially labeled milk -- a decision which, in turn, lowers milk prices in general.
Two researchers arrived at the conclusion after recording actual buying behavior during a five-year period in 12 key metropolitan markets.
Jeremy Foltz, assistant professor of agricultural and applied economics and extension at UW-Madison, and Tirtha Dhar, research associate with the university's Food System Research Group, found that consumers pay up to $1.50 per gallon more for milk labeled rBST-free, and $3 per gallon more for milk labeled organic.
The purchases are not necessarily motivated by income either. The researchers found that a small increase in the price of standard-brand milk is enough to compel many buyers to switch to specially labeled milk, such as organic. Once consumers switch to this higher-priced market, they generally do not switch back, they stated.
The introduction of specialty milk, such as that labeled organic or rBST-free, helped drive the cost down of the entire category. The pair found the presence of such milks in the marketplace decreased the price of standard-brand milk by 2¢ per gallon. When projected to national sales, the savings represent approximately a $130 million-per-year benefit that consumers receive from the existence of specially labeled milk in the market -- even though they may not purchase it, the study concluded.
"Our study clearly shows that all consumers gain significant benefits from milk labeling," said Foltz. "Weakening the standards or outlawing them altogether would reduce those benefits."
Foltz's comments were made in response to a lawsuit brought this past July by Monsanto, the chemical company that makes rBST, against a family-owned dairy in Maine that uses labels noting its products are free of rBST. Monsanto claims the labels imply that the artificial growth hormone is potentially harmful.