Dairy Price Support Program Research Articles

Implications of Dairy Imports: The Case of Milk Protein Concentrates

Imports of milk protein concentrates (MPCs) are increasingly entering the United States with minimal trade restrictions. MPC is a general reference to a dried protein product derived from milk using a technology known as “ultra filtration.” Two questions are addressed in this article. First, did the combination of relaxed import restrictions, low world prices for protein, and relatively high domestic support levels for nonfat dry milk encourage imports of MPCs? Second, did increased imports of MPC displace domestic use of nonfat dry milk and thereby increase government purchases under the dairy price support program? This study has implications for U.S. trade policy.

How should milk be priced in the future? (1996)

Milk pricing will continue to change. Clearly, the dairy industry will continue the trend toward MCP. The federal dairy price support program will terminate at the end of 1999. Changes will occur in federal order pricing. The FAIR ACT of 1996 requires some changes. Pricing provisions must be market oriented. The U.S. dairy industry must be competitive internationally. Federal order provisions must provide less rather than more regulation. Federal order prices must be minimum prices allowing for industry pricing above those prices. Markets are national. Hence, California should be a part of the same pricing system. Compacts such as the Northeast Interstate Compact should not be allowed.; Dairy Day, 1996, Kansas State University, Manhattan, KS, 1996;

Market Conduct under Government Price Intervention in the U.S. Dairy Industry

The degree of market power exercised by fliud and manufactured processors in the U.S. dairy industry is estimated. Appelbaum's quantity-setting conjectural variation approach is cast into a switching regime framework to account for the two market regimes created by the existence of the dairy price support program: (a) government supported regime (market price is at the support price) and (b) market equilibrium regime (market price is above the support price). The model is also used to test whether government price intervention has a pro-competitive or anti-competitive influence on market conduct.

Price and Quantity Effects of Canada's Dairy Advertising Programs

An equilibrium-displacement model is combined with econometric estimates of key model parameters to identify the impacts of Canada's dairy advertising programs on prices and quantity. Results suggest increased advertising of fluid milk enhances the farm value of milk but has minimal effect on government costs of the dairy price-support program. Owing to government intervention in the butter market, increased butter advertising has no effect on the farm value of milk, at least in the short run, but is highly effective at reducing government costs. Advertising is most effective,ceteris paribus, in markets where retail demand and wholesale supply for the specific dairy product are relatively price inelastic.

Analysis of Seasonal Milk Price Incentive Plans

U.S. milk production varies throughout the year, with production being highest in the spring and lowest in the fall. On average from 1982 to 1992, milk production was 7 percent higher in the second quarter compared to the fourth quarter of the year. Milk production seasonality is mainly due to two related factors. First, a greater proportion of cows freshen in the spring than during the rest of the year because of the availability and quality of pastures (Kaiser, Oltenacu, and Smith). Second, cow productivity tends to be highest in the spring, due to the quality and availability of pasture. Seasonality in production is a problem for many processors of manufactured dairy products because plants and equipment used to satisfy spring production levels may operate at less than capacity for much of the year. Seasonality also adds to the cost of federal dairy programs because the government, under the dairy price support program, acts as a seasonal balancer of supply and demand by removing excess supplies of cheese, butter, and nonfat dry milk from the market. Evening out these seasonal imbalances in milk production would reduce the costs of the price support program and lessen the costs to processors dealing with excess capacity. In the past, several federal and state milk marketing orders have employed seasonal price incentive plans to encourage more even milk production throughout the year. These seasonal price plans are designed to discourage spring production and encourage fall production. For example, the Louisville Plan, which has been used in several markets, places an assessment on the milk price in the spring, and then adds back the proceeds and interest in the fall. There are other plans as well, but most operate by making he spring milk price lower and the fall milk price higher than it would be in the absence of the program. The purpose of this article is to examine the impacts of a hypothetical seasonal priceincentive plan on milk production seasonality in t United States.' Seasonal milk production is compared with alternative levels of price differentials that are deducted from the spring milk price and added to the fall milk price. Understanding the impact of seasonal price incentive plans on cow and heifer numbers, production per cow, and milk production, requires a dynamic milk supply-response model with biological constraints. Hence, a secondary bjective is to develop a quarterly dynamic milk supply-response model that explicitly accounts for both biological constraints on dairy cattle and economic factors that influence dairy herd size. The model is similar to an annual dynamic milk supply-response model developed by Chavas and Klemme. A system of nonlinear equations for numbers of heifers and cows, and production per cow is specified according to constraints on the age structure of the cohort and farmers' seasonal adjustment decisions on culling and replacing cows. A quarterly-based supply-response model with biological constraints on dairy herd size is needed to simulate the impact of seasonal price differentials on seasonality because farmers will adjust seasonal culling and replacement decisions in response to such programs. This article differs from previous research (e.g., Hall, Oltenacu, and Milligan; Prindle and Livezey; Caine and Chin-Hwa Sun is an Associate Professor in the Institute of Fisheries Economics at National Taiwan Ocean University. Harry M. Kaiser and Olan D. Forker are Associate Professor and Professor, respectively, in the Department of Agricultural, Resource, and Managerial Economics at Cornell University. The authors thank Tim Mount and Les Myers for valuable comments on earlier drafts of this paper. Financial support from the Commodity Economics Division, Economic Research Service of the United States Department of Agriculture is gratefully acknowledged. IIdeally, it would be more appropriate to consider seasonality at a more regionally disaggregated level. Unfortunately, not all of the data required for the model are available at the regional level.

An Analysis of Policy Alternatives to the Dairy Price Support Program

This paper investigates the impacts of alternative federal dairy policies on the U.S. dairy sector. In addition to the current dairy price support program, five alternatives are investigated: (1) immediate deregulation, (2) gradual deregulation, (3) target price-deficiency payment program without supply control, (4) target price-deficiency payment program with supply control, and (5) mandatory supply control. An econometric model of the national dairy industry is used to simulate quarterly equilibrium price and quantity values at the farm and wholesale levels for each policy over the period 1980–90. Consumers are better off under both immediate and gradual deregulation, as well as the target price-deficiency payment scenarios because prices are lower, enabling them to consume more dairy products. Farmers, as a group, are better off under the two target price-deficiency payment program and supply control scenarios, where milk prices and producer surplus are highest.

An Optimal Control Framework for Inter-regional Dairy Policy Analysis

AbstractAn eleven-region stochastic coefficient econometric model was estimated and used in an optimal control framework to evaluate the effectiveness of the dairy price support program and marketing orders in reducing and stabilizing government purchases of dairy products. The results showed significant pressure on the reduction of the support price both in the presence and absence of Class I differentials. The optimal control model also showed that the drop in price support levels did not dramatically alter the regional distribution of milk production.

Economic Trends in Milk Pricing and Marketing

This paper discusses several contemporary issues relating to the pricing and marketing of milk and dairy products. We begin at the consumer side of the marketing system, looking at trends in consumption of dairy products and their implications for dairy farmers. We then turn to farm milk pricing institutions, separately examining the current status and fate of the dairy price support program and federal milk marketing orders. Finally, we discuss an assortment of other issues that will influence farm milk prices during the next ten years

An Economic Analysis of the U.S. Generic Dairy Advertising Program Using an Industry Model

The market impacts of generic dairy advertising are assessed using an industry model which encompasses supply and demand conditions at the retail, wholesale, and farm levels, and government intervention under the dairy price support program. The estimated model is used to simulate price and quantity values for four advertising scenarios: (1) no advertising, (2) historical fluid advertising, (3) historical manufactured advertising, and (4) historical fluid and manufactured advertising. Compared to previous studies, the dairy-industry model provides additional insights into the way generic dairy advertising influences prices and quantities at the retail, wholesale, and farm levels.

The Nutritional Impact of the Dairy Price Support Program

This paper examines the impact of the dairy price support program and its resultant higher prices on nutritional intake, especially calcium. This assessment is particularly important because calcium is one of the two nutrients whose average intake is below the Recommended Dietary Allowance. A demand system with emphasis on dairy products is estimated, and in conjunction with data on the nutritional content of various foods, impacts on nutritional intake are measured.

An Economic Evaluation of the Food Security Act of 1985: The Dairy Title

This article examines the impact of the Food Security Act of 1985 on the nation's milk market. Market equilibrium variables for the duration of the Bill, 1986 through 1990, are simulated based on a previously estimated econometric model of the national dairy sector. Forecasts of cow numbers, production per cow, milk production, milk prices, commercial disappearance, and government removals and costs of the dairy price support program are presented and analyzed. The results provide quantitative evidence of the market impact of the Farm Bill, which should be useful to policy makers and industry leaders in shaping future dairy policies.

Price Enhancement, Returns Variability, and Supply Response in the U.S. Dairy Sector

AbstractDairy producers operating in the U.S. have been protected against market price variability by the federal price support program for over 35 years. During the late 1970s tax outlays to operate this program grew at a rapid rate. While many authors have addressed the economic implications of the existing dairy price support program, few have explicitly considered the relationship between risk aversion, capital investment, milk production, and support price policy in this process. This paper considers the role of uncertainty and risk-averse behavior and suggests that these elements are crucial to an economic analysis of the current program and future dairy policy issues.

Economic Issues and Implications of a United States Milk Quota Program

Interest in adoption of a national mandatory milk quota program has grown considerably in the last 2 yr primarily due to mounting dairy surpluses and burgeoning costs of the dairy price support program. If this type of program were to be adopted, all segments of the dairy industry would be affected. This article examines the potential economic issues and implications of such programs on current and future generations of dairy farmers, milk handlers, government, and consumers. In part, it is argued that a national mandatory milk quota program would most likely raise farm milk prices, reduce milk surpluses, provide windfall gains to current producers, reduce government budgetary costs, increase retail prices for consumers of dairy products, increase costs of production, encourage the use of substitutes for dairy products, and slow adoption of new technologies by farmers. Although the political climate in Congress and the Administration is not very receptive, support for these programs has grown during the past year among farmers and the dairy lobby. At the very least, there undoubtedly will be political pressure for a national mandatory milk quota program in the near future.

Do Changes in Farmer‐First Handler Exchange Eliminate the Need for Government Intervention?

At the last meeting of this association, the fiftieth anniversary of the Agricultural Adjustment Act of 1933 (AAA) was commemorated by a session in which the history of the act and its legacy were discussed. In many ways this paper is a continuation of that discussion, focusing on public intervention in milk pricing. The federal dairy price support program is the principal program responsible for the level of milk prices; dairy import quotas play an auxiliary role. Federal milk marketing orders, similar state controls, and to some extent federal policy toward dairy cooperatives relate primarily to pricing practices. This paper is not intended to evaluate these specific programs and policies. Rather, our objective is to explore generally the justification for and purposes of government intervention in milk and dairy product markets and to discuss whether current or expected conditions warrant the continuation of these

The Dairy Price Support Program: A Study of Misdirected Economic Incentives

The Dairy Price Support Program: A Study of Misdirected Economic Incentives

Effects of Removing the Dairy Price-Support Program

Effects of Removing the Dairy Price-Support Program

The Cost of the U.S. Dairy Price Support Program: 1949-74

The Cost of the U.S. Dairy Price Support Program: 1949-74