Consumer and Welfare Losses from Milk Marketing Orders

By Dardis, Rachel; Bedore, Bonnie | The Journal of Consumer Affairs, Winter 1990 | Go to article overview

Consumer and Welfare Losses from Milk Marketing Orders


Dardis, Rachel, Bedore, Bonnie, The Journal of Consumer Affairs


Consumer and Welfare Losses from Milk Marketing Orders

The regulation of the U.S. dairy industry has two major components. First, a Federal milk marketing order system exists that regulates the markets for Grade A fresh fluid milk. This system has been in effect since the passage of the Agricultural Adjustment Act of 1937. Second, there is a price support program under which the Commodity Credit Corporation (CCC) purchases butter, cheese, and nonfat dry milk at announced support prices, and the government stores and distributes stocks of these products. This program supports the price of Grade B milk, which m ay only be used for manufactured milk products, and surplus Grade A milk.

Under the Federal Milk marketing order system, Grade A milk is priced according to its use and a higher price is charged for milk used for fluid consumption than for milk used for manufactured milk products. Individual prices are set for various regions of the United States. The regulations that set prices for specific regions are called milk marketing orders. They establish minimum prices for 80 percent of the Grade A milk sold in the United States and also establish the methods by which farmers are reimbursed for Grade A milk. Farmers receive a "blend price," which is a weighted average of prices paid for different classes of milk in their region.

The milk marketing system is further restricted by policies for reconstituted milk. Although the technology for reconstituting milk has been available since the 1953s, reconstituted milk is used in only a few areas because of USDA policies that make it more expensive than fresh milk.

The purpose of this study is to measure the consumer and welfare losses from milk marketing orders in 1985. Losses are based on potential changes in prices and quantities when milk marketing orders are eliminated and replaced by a competitive system. There are no changes in the dairy price support program. In addition, consideration is given to the impact of marketing orders on the sale of reconstituted milk and the effects of existing reconstituted milk policies on consumers. The results of this study should be of interest to consumer educators and consumer policy analysts who are concerned with the impact of regulations on consumers and the economy as a whole.

BACKGROUND: MILK MARKETING ORDERS

A Federal milk order is a regulation promulgated by the Secretary of Agriculture, published in the Federal Register and codified in the Code of Regulations. It defines a particular geographic region that is subject to government regulation (MacAvoy 1977, p. 2).

Milk marketing orders apply only to Grade A milk. Grade A milk is milk that meets local sanitary and health requirements so that it may be used for fluid consumption. Ungraded or Grade B milk is milk that is not subject to local health regulations and can only be used in the production of manufactured milk products. Grade A milk that is produced in excess of fluid milk requirements can also be used in the production of manufactured milk products. Approximately 85 percent of all milk produced is Grade A and of this only 45 percent is used for fresh fluid milk products. The remainder is diverted into manufactured uses (USDA 1984, p. 24).

In markets where producers (farmers) have chosen to be covered by Federal orders, milk marketing orders establish the minimum prices that handlers must pay for raw Grade A milk and the prices that are received by the producers of milk. Milk handlers pay classified prices that are determined by use (class) to which the handler ultimately puts the milk. Milk marketing orders may have two or three classes of milk established. Class 1 milk products include fluid forms such as fresh whole milk, skim milk, and buttermilk. Class 2 products include soft manufactured products such as sour cream and cottage cheese. CLass 3 products are more solid manufactured products such as cheese, butter, and milk powders. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Consumer and Welfare Losses from Milk Marketing Orders
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.