While a tempting logic, in my understanding of the dairy market this is not correct. To my knowledge, here in Finland the big retail chains initiate auctions for the milk contracts, which are highly competed. If a producer tries to raise the price, they will likely not sell any milk at all. On top of that, milk is an important loss leader for the retail chains. The price is kept as low as possible, and it might even be sold at a loss, to tempt customers who will then compensate for this loss with the rest of their shopping basket. Against this, it would be very incorrect to assume that nobody bats an eye if the price of milk increases ten cents.
While a tempting logic, in my understanding of the dairy market this is not correct. To my knowledge, here in Finland the big retail chains initiate auctions for the milk contracts, which are highly competed. If a producer tries to raise the price, they will likely not sell any milk at all. On top of that, milk is an important loss leader for the retail chains. The price is kept as low as possible, and it might even be sold at a loss, to tempt customers who will then compensate for this loss with the rest of their shopping basket. Against this, it would be very incorrect to assume that nobody bats an eye if the price of milk increases ten cents.