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Price Enhancement, Returns Variability, And Supply Response In The U.S. Dairy Sector

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  • Thraen, Cameron S.
  • Hammond, Jerome W.

Abstract

Dairy 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.

Suggested Citation

  • Thraen, Cameron S. & Hammond, Jerome W., 1987. "Price Enhancement, Returns Variability, And Supply Response In The U.S. Dairy Sector," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 19(2), pages 1-10, December.
    • Handle: RePEc:ags:sojoae:30207
    DOI: 10.22004/ag.econ.30207
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    File URL: http://ageconsearch.umn.edu/record/30207/files/19020083.pdf
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    References listed on IDEAS

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    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. Meyer, Jack & Ormiston, Michael B, 1985. "Strong Increases in Risk and Their Comparative Statics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 425-437, June.
    3. Young, Douglas L., 1982. "Relevance Of Duality Theory To The Practicing Agricultural Economist: Discussion," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 7(2), pages 1-6, December.
    4. Chavas, Jean-Paul & Pope, Rulon D., 1982. "Hedging And Production Decisions Under A Linear Mean-Variance Preference Function," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 7(1), pages 1-12, July.
    5. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    6. Chambers, Robert G., 1982. "Relevance Of Duality Theory To The Practicing Agricultural Economist: Discussion," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 7(2), pages 1-6, December.
    7. Thraen, Cameron S. & Hammond, Jerome W., 1983. "Price Supports, Risk Aversion And U.S. Dairy Policy: An Alternative Perspective Of The Long-Term Impacts," Economic Reports 13034, University of Minnesota, Department of Applied Economics.
    8. Eeckhoudt, Louis & Hansen, Pierre, 1980. "Minimum and Maximum Prices, Uncertainty, and the Theory of the Competitive Firm," American Economic Review, American Economic Association, vol. 70(5), pages 1064-1068, December.
    9. Halter, A.N., 1982. "Relevance Of Duality Theory To The Practicing Agricultural Economist: Discussion," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 7(2), pages 1-2, December.
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    Citations

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    Cited by:

    1. Bozic, Marin & Gould, Brian W., 2009. "The Dynamics of the U.S. Milk Supply: Implications for Changes in U.S. Dairy Policy," Staff Papers 53818, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    2. Graham, John D. & Stennes, Brad & MacGregor, Robert J. & Meilke, Karl & Moschini, Giancarlo, 1990. "The Effects of Trade Liberalization on the Canadian Dairy and Poultry Sectors," Working Papers 244045, Agriculture and Agri-Food Canada.
    3. 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.
    4. Thomas L. Cox & Jean-Paul Chavas & Edward Jesse, 1994. "Regional Impacts of Reducing Dairy Price Supports and Removing Milk Marketing Orders in the U.S. Dairy Sector," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 377, Wisconsin-Madison Agricultural and Applied Economics Department.
    5. Jackson Jeremy Jay & Thraen Cameron S. & Bozic Marin, 2013. "Conflict over Cooperation: Why So Much Disagreement over the Proposed Dairy Market Stabilization Program?," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 11(1), pages 1-10, November.
    6. Marin Bozic & Brian W. Gould, 2009. "Has Price Responsiveness of U.S. Milk Supply Decreased?," Working Papers 0902, The Institute of Economics, Zagreb.
    7. Newton, John & Thraen, Cameron S. & Bozic, Marin, 2013. "Whither Dairy Policy? Evaluating Expected Government Outlays and Distributional Impacts of Alternative 2013 Farm Bill Dairy Title Proposals," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 153750, Agricultural and Applied Economics Association.

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    Keywords

    Livestock Production/Industries;

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