Abstract
AbstractThe impacts of generic dairy advertising on retail, wholesale, and farm dairy markets are estimated in this study at the national level. The results indicate that generic dairy advertising had a major impact on retail, wholesale, and farm markets for the dairy industry. The main conclusion of the study is that farmers are receiving a high return on their investment in generic dairy advertising, i.e., an average rate of return of $3.40 for every dollar invested over the period 1984–95. Moreover, the return on investment in advertising was higher in the most recent year, almost double the average for the previous 11 years.
Highlights
Dairy fanners pay a mandatory assessment of 15 cents per hundred pounds of milk marketed in the continental United States to fund a national demand expansion program
The purpose of this study was to analyze the impacts of generic dairy advertising paid by the mandatory 15 cent per hundredweight dairy checkoff program on retail, wholesale, and farm dairy markets
Markets for butter and frozen products are included in the model, but are treated as being exogenous since the focus is on fluid milk and cheese advertising
Summary
Dairy fanners pay a mandatory assessment of 15 cents per hundred pounds of milk marketed in the continental United States to fund a national demand expansion program. Generic advertising under the dairy checkoff resulted in a 0.5 percent increase in the overall demand for milk used in all dairy products compared to what would have occurred in the absence o(this national program. The lower and upper bounds for each market variable were estimated by re-simulating the two scenarios through setting the fluid milk and cheese advertising coefficients in the retail demand equations to the lower and upper bounds of a 90 percent confidence interval. For the entire period 1984.3-97.4, the marginal BCR of the mandatory checkoff program averaged 8.3 This means that, on average for this period, if farmers would have invested an additional dollar into generic advertising, producer surplus (profit) would have increased by $830. This is not surprising since: (I) fanners receive a price premium for milk going into Class I products, and (2) the estimated demand response to milk advertising is more elastic than the estimated cheese demand response to cheese advertising
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