IDEAS home Printed from https://ideas.repec.org/p/ags/cudarb/123016.html
   My bibliography  Save this paper

An Analysis of Alternatives to the Dairy Price Support Program

Author

Listed:
  • Kaiser, Harry M.

Abstract

The U.S. dairy industry has operated under a price support program since 1949. Between 1949 and 1980, the dairy price support program generally operated without incurring large government costs and was an effective price stabilizer. However, since 1980, the dairy industry has experienced chronic excess production relative to consumption and consequently government purchases under the price support program have been excessively large (particularly in the mid-1980s). The tremendous increase in government costs of the dairy price support program and a growing dissatisfaction with the program by farmers has prompted proposals to modify or replace this program. This paper examines the potential market impacts of five different dairy policy scenarios. The five policies are: (1) a baseline price support program scenario, (2) an immediate deregulation scenario where the price support program is eliminated, (3) a gradual deregulation scenario where the support prices for dairy products are decreased by 10% per year, (4) a target price-deficiency payment program scenario, and (5) a mandatory supply control program scenario. A 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. The results indicate that there are gainers and losers for each policy option. Consumers are better off under the deficiency payment program and both deregulation scenarios because prices are lower, which enables them to consume more dairy products. On the other hand, consumer are worse off under supply control where, with the exception of butter, wholesale prices are at their highest. Farmers, as a group, are better off under the control and deficiency programs. Farm milk prices and producer surplus are highest under these two policies. Producers suffer the most in the immediate deregulation scenario where both the farm price and producer surplus are at their lowest levels. Tax payers are best off under immediate deregulation and supply control, while substantially worse off under the deficiency payment program. These results suggest that the relative political weight that politicians give to consumers, farmers, and tax payers will be quite important in shaping future dairy policy legislation.

Suggested Citation

  • Kaiser, Harry M., 1993. "An Analysis of Alternatives to the Dairy Price Support Program," Research Bulletins 123016, Cornell University, Department of Applied Economics and Management.
    • Handle: RePEc:ags:cudarb:123016
    DOI: 10.22004/ag.econ.123016
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/123016/files/Cornell_Dyson_rb9309.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.123016?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jeffrey T. LaFrance & Harry de Gorter, 1985. "Regulation in a Dynamic Market: The U.S. Dairy Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(4), pages 821-832.
    2. Liu, Donald J. & Kaiser, Harry M. & Mount, Timothy D. & Forker, Olan D., 1991. "Modeling The U.S. Dairy Sector With Government Intervention," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(2), pages 1-14, December.
    3. Charles W. Bausell & Scott L. Smith & David A. Belsley, 1992. "An Analysis of 1980s Dairy Programs and Some Policy Implications," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(3), pages 605-616.
    4. H. E. Doran & J. J. Quilkey, 1972. "Harmonic Analysis of Seasonal Data: Some Important Properties," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 54(4_Part_1), pages 646-651.
    5. Bruce L. Dixon & Calvin R. Berry & Dwi Susanto, 1991. "Supply Impact of the Milk Diversion and Dairy Termination Programs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 633-640.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nicholson, Charles F. & Resosudarmo, Budy P. & Wackernagel, Rick, 2001. "Impacts Of The Northeast Interstate Dairy Compact On New England Milk Supply," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 30(1), pages 1-11, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. D’Antoni, Jeremy M. & Mishra, Ashok K. & Blayney, Donald, 2013. "Assessing participation in the Milk Income Loss Contract program and its impact on milk production," Journal of Policy Modeling, Elsevier, vol. 35(2), pages 243-254.
    2. Kaiser, Harry M., 1994. "An Analysis Of Policy Alternatives To The Dairy Price Support Program," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 23(2), pages 1-13, October.
    3. Kaiser, Harry M., 1999. "Impact of Generic Fluid Milk and Cheese Advertising on Dairy Markets, 1984-1998," Research Bulletins 122684, Cornell University, Department of Applied Economics and Management.
    4. Kaiser, Harry M., 1997. "Impact of National Generic Dairy Advertising on Dairy Markets, 1984-96," Research Bulletins 122805, Cornell University, Department of Applied Economics and Management.
    5. Kaiser, Harry M., 1997. "Impact Of National Generic Dairy Advertising On Dairy Markets, 1984-95," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 29(2), pages 1-11, December.
    6. Paudel, Krishna P. & Gauthier, Wayne M. & Hall, Larry M. & Westra, John V., 2006. "Willingness to Participate in Dairy Programs to Reduce Manure Related Problems in Louisiana's Major Dairy Production Region," 2006 Annual Meeting, February 5-8, 2006, Orlando, Florida 35259, Southern Agricultural Economics Association.
    7. Liu, Donald J. & Kaiser, Harry M. & Forker, Olan D. & Mount, Timothy D., 1990. "An Economic Analysis Of The U.S. Generic Dairy Advertising Program Using An Industry Model," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 19(1), pages 1-12, April.
    8. Liu, Donald J. & Kaiser, Harry M. & Mount, Timothy D. & Forker, Olan D., 1991. "Modeling The U.S. Dairy Sector With Government Intervention," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(2), pages 1-14, December.
    9. Nubern, Chris A. & Purcell, Wayne D., 1997. "Competitiveness of Dairy Producers in a Deregulated Market," Staff Papers 232553, Virginia Polytechnic Institute and State University, Department of Agricultural and Applied Economics.
    10. Kaiser, Harry M., 1998. "Impact of National Generic Dairy Advertising on Dairy Markets, 1984-97," Research Bulletins 122690, Cornell University, Department of Applied Economics and Management.
    11. Kaiser, Harry M., 2000. "Impact of Generic Fluid Milk and Cheese Advertising on Dairy Markets," Research Bulletins 122670, Cornell University, Department of Applied Economics and Management.
    12. Kaiser, Harry M., 1995. "An Analysis of Generic Dairy Promotion in the United States," Research Bulletins 122997, Cornell University, Department of Applied Economics and Management.
    13. Jeffrey T. LaFrance, 1990. "Incomplete Demand Systems And Semilogarithmic Demand Models," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 34(2), pages 118-131, August.
    14. Hayley H. Chouinard & David E. Davis & Jeffrey T. LaFrance & Jeffrey M. Perloff, 2010. "Milk Marketing Order Winners and Losers," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(1), pages 59-76.
    15. Epperson, James E. & Huang, Wan-Tran, 1992. "The Potential For Intraseasonal Market Flow Management Of Southeastern Sweet Potatoes," Journal of Food Distribution Research, Food Distribution Research Society, vol. 23(2), pages 1-8, June.
    16. Kaiser, Harry M., 1990. "Bovine Somatotropin and Milk Production: Potential Impacts for the U.S," Staff Papers 121538, Cornell University, Department of Applied Economics and Management.
    17. Lohr, Luanne & Park, Timothy A., 1992. "Certification And Supply Response In The Organic Lettuce Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(2), pages 1-13, December.
    18. Russell L. Lamb, 2002. "A Market-Forces Policy for the New Farm Economy?," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 24(1), pages 15-30.
    19. LaFrance, Jeffrey T., 1999. "U.S. Food and Nutrient Demand and the Effects of Agricultural Policies," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt52h9v4dq, Department of Agricultural & Resource Economics, UC Berkeley.
    20. Tauer, Loren W. & Kaiser, Harry M., 1990. "Optimal Agricultural Policy with Biotechnology: Bovine Somatotropin and the Dairy Sector," Staff Papers 121536, Cornell University, Department of Applied Economics and Management.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:cudarb:123016. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/dacorus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.