production controls is the reduction of government costs and the level of antagonism among traders in the world market for dairy products even though smaller farm preservation is undoubtedly also a factor. In the United States, the pressure for controls results from a combination of the desire to lower government costs, raise milk prices and preserve a moderately sized, dairy farm structure. The lack of consensus is the result of diversity and regionalism that is developing within the US dairy industry. Both Republican and Democratic administrations are opposed to production controls because they run counter to freer trade objectives and reduce competitiveness.
This discussion also raises important issues regarding the role of producer-oriented institutions in an economic environment of freer trade. The answer is quite simple. Under conditions of free trade, producer-oriented institutions, such as cooperatives or marketing boards, should do whatever is required to keep farmers competitive in the marketplace. This involves promoting progressiveness in both production and marketing. It begins with support of progressive, basic and applied research at universities. It includes facilitating the transfer of technology to farmers as a means of leveling the playing field. It involves providing milk processors with services (such as forage quality testing, soil testing and cow milker training), product development, minimum quality standards and aggressiveness in exporting as well as in domestic marketing. It is only through such progressive institutions that an industry expects to remain competitive. This is the case regardless of which long-run policy scenario is pursued.
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