Under recent dairy policy reforms, farm-level milk prices are determined by a multiple component pricing scheme that derives monthly dairy product class prices from weekly NASS survey prices for only the first two weeks of each month. This pricing rule may provide incentives for strategic behavior by dairy sector participants that could induce dairy product price volatility. This paper employs a series of nonparametric approaches to examine evidence of such price manipulation in CME weekly average dairy product prices. Empirical evidence suggests that no such week-of-month effects exist in levels of prices, and only very weak evidence of week-of-month effects in price volatility was found. Together, results suggest dairy product markets are competitively arbitraged rendering price manipulation infeasible. From these results, no evidence suggests that price manipulation might lie behind recent changes in price volatility observed in dairy markets.


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