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U.S. Milk Markets Under Alternative Federal Order Pricing Policies

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  • McDowell, Howard
  • Fleming, Ann
  • Spinelli, Felix

Abstract

Federal milk marketing orders regulate about 80 percent of the Grade A milk marketed and about 70 percent of all milk marketed in the United States. The orders regulate fluid milk markets through classified pricing and pooling of revenues, and affect consumer and producer milk prices, interregional marketing patterns, and U.S. Government purchases of surplus dairy products. This study compares the U.S. milk markets under 1988 provisions against three alternative policies using an interregional trade model comprising 15 regions. The three policies--minimal regulation, multiple-base pricing, and multiple-base pricing with reconstitution--allow market forces to have greater effect on prices and marketing patterns. Minimal regulation allows market conditions to determine any Grade A price differential above manufacturing milk prices. Multiple-base pricing replaces the single-base (central Wisconsin) with price basing in all regions with sufficient fluid milk supplies. Reconstitution is simulated by modifying multiple-base pricing with the possibility of shipping fresh milk concentrates for reconstituting into fresh fluid products without penalty.

Suggested Citation

  • McDowell, Howard & Fleming, Ann & Spinelli, Felix, 1990. "U.S. Milk Markets Under Alternative Federal Order Pricing Policies," Staff Reports 278357, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerssr:278357
    DOI: 10.22004/ag.econ.278357
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    References listed on IDEAS

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    1. Henry W. Kinnucan & Olan D. Forker, 1987. "Asymmetry in Farm-Retail Price Transmission for Major Dairy Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(2), pages 285-292.
    2. Schiek, William A. & Babb, Emerson M., 1989. "Impact of Reverse Osmosis on Southeast Milk Markets," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 21(2), pages 63-75, December.
    3. Ippolito, Richard A & Masson, Robert T, 1978. "The Social Cost of Government Regulation of Milk," Journal of Law and Economics, University of Chicago Press, vol. 21(1), pages 33-65, April.
    4. Buxton, Boyd M., 1985. "Factors Affecting U.S. Milk Production," Agricultural Economic Reports 307971, United States Department of Agriculture, Economic Research Service.
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    Cited by:

    1. Tsunemasa Kawaguchi & Nobuhiro Suzuki & Harry M. Kaiser, 2001. "Evaluating class I differentials in the new federal milk marketing order system," Agribusiness, John Wiley & Sons, Ltd., vol. 17(4), pages 527-538.
    2. Lopez, Rigoberto A. & Altobello, Marilyn A. & Shah, Farhed A., 1994. "Amenity Benefits and Public Policy: An Application to the Connecticut Dairy Sector," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 26(2), pages 485-496, December.
    3. Suzuki, Nobuhiro & Kaiser, Harry M. & Lenz, John E. & Forker, Olan D., 1994. "An Analysis Of U.S. Dairy Policy Deregulation Using An Imperfect Competition Model," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 23(1), pages 1-10, April.
    4. Jean‐Paul Chavas & Thomas L. Cox & Edward Jesse, 1998. "Spatial allocation and the shadow pricing of product characteristics," Agricultural Economics, International Association of Agricultural Economists, vol. 18(1), pages 1-19, January.
    5. Cox, Thomas L. & Chavas, Jean-Paul & Jesse, Edward V., 1994. "Regional Impacts of Reducing Dairy Price Supports and Removing Milk Marketing Orders in the U.S. Dairy Sector," Staff Papers 200580, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    6. Chavas, Jean-Paul & Cox, Thomas L. & Jesse, Edward V., 1993. "Spatial Hedonic Pricing and Trade," Staff Papers 200574, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    7. Schiek, William A., 1994. "Regional Impacts Of Federal Milk Marketing Order Policy Alternatives," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 23(2), pages 1-11, October.
    8. Kawaguchi, Tsunemasa & Suzuki, Nobuhiro & Kaiser, Harry M., 1997. "Impact of Federal Marketing Orders on the Structure of Milk Markets in the United States," Research Bulletins 122809, Cornell University, Department of Applied Economics and Management.

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    Keywords

    Livestock Production/Industries; Marketing;

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