Milk Marketing Orders And Milk Sanitation Regulation: Re-Evaulating Marketing Orders' Welfare Effects

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Milk Marketing Orders And Milk Sanitation Regulation: Re-Evaulating Marketing Orders' Welfare Effects

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Balagtas, Joseph V.
Sumner, Daniel A.

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Joseph V. Balagtas

Abstract

This research shows that the existing literature on milk marketing orders misses an important effect. Previous work ignores the interaction of marketing orders with milk grading regulation. We model this interaction and show that producer benefits from marketing orders have been smaller than previous work suggests, and, under some conditions, may even be negative. Additional costs of producing fluid grade milk, omitted from previous welfare analyses, reduce producer benefits from marketing orders. Estimates of the additional cost indicate that this previously unmeasured effect is a significant component of the total welfare effect of marketing orders. An econometric model is developed to explain the variation in the fluid grade share of milk across states and time as a function of marketing order policy. Regression results support the hypothesis that marketing orders have encouraged the shift towards production of fluid-grade milk.

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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2004 Annual meeting, August 1-4, Denver, CO with number 20399.

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Date of creation: 2004
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Handle: RePEc:ags:aaea04:20399

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Keywords: Marketing;

References listed on IDEAS
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Cox, Thomas L & Chavas, Jean-Paul, 2001. " An Interregional Analysis of Price Discrimination and Domestic Policy Reform in the U.S. Dairy Sector," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 83(1), pages 89-106, February. [Downloadable!] (restricted)
Ippolito, Richard A & Masson, Robert T, 1978. "The Social Cost of Government Regulation of Milk," Journal of Law & Economics, University of Chicago Press, vol. 21(1), pages 33-65, April.
Kaiser, Harry M. & Morehart, Mitchell J., 1994. "A Regional Comparison Of Farm Costs And Returns Among Top Dairy Producers," Staff Papers 13647, University of Minnesota, Department of Applied Economics. [Downloadable!]

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