An Economic Evaluation of the Food Security Act of 1985: The Dairy Title (original) (raw)
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1994
Policy analysis of the U.S. dairy industry is of interest to dairy economists and analysts, both inside and outside government. A workshop on modeling the U.S. dairy industry was held by the NC-198 regional research committee on October 31, 1991. Five papers were presented, covering theoretical and empirical issues related to modeling the U.S. dairy industry for policy analysis. The theoretical issues covered related to statistical estimation of model parameters. Alternative dairy industry simulation models, spatial equilibrium models, and a study based on the linkage of existing models were discussed.
Contemporary Issues in Economics of Dairy Markets and Policy
2014
Milk production occurs in every state and the highly perishable nature of the product means that every state also has some processing capacity. It is ubiquitous. Dairy farming and all of the downstream activity and economics also is sufficiently different from other forms of agriculture that dairy has evolved its own set of institutions and policies. Perhaps it is not surprising then that the issues and problems of the dairy sector over the years present their own story and have their own academic literature. Inelastic demand and low short-term price responsiveness of milk supply make dairy markets very volatile. Macroeconomic shocks, biofuels policy and increased exposure to international trade, have combined to make dairy profit margin shocks particularly detrimental in the last decade. The policy response came in the form of the Agricultural Act of 2014 which introduced the Margin Protection Program for Dairy Producers and enabled California to join the Federal Milk Marketing Ord...
An Analysis of Policy Alternatives to the Dairy Price Support Program
Agricultural and Resource Economics Review
This paper investigates the impacts of alternative federal dairy policies on the U.S. dairy sector. In addition to the current dairy price support program, five alternatives are investigated: (1) immediate deregulation, (2) gradual deregulation, (3) target price-deficiency payment program without supply control, (4) target price-deficiency payment program with supply control, and (5) mandatory supply control. An econometric model of the national dairy industry is used to simulate quarterly equilibrium price and quantity values at the farm and wholesale levels for each policy over the period 1980–90. Consumers are better off under both immediate and gradual deregulation, as well as the target price-deficiency payment scenarios because prices are lower, enabling them to consume more dairy products. Farmers, as a group, are better off under the two target price-deficiency payment program and supply control scenarios, where milk prices and producer surplus are highest.
Political Economic Analysis of U.S. Dairy Policies and European Community Dairy Policy Comparisons
The primary goal of this research w as to endogeniza government behavior, i.e., to identify variables that influence US policymakers' choice of the support prise for manufactured dairy products (M DP). This was accomplished by the development of two m o d e ls-a behavioral model and a criterion function model. A secondary .goal was to compare US and European Community (EC) dairy policies and resultant impacts on each respective dairy industry. The behavioral model consisted of two components: (1) a commodity component describing supply, demand, stocks, and government costs and (2) a policy component specifying economic and political variables which may affect policymakers' decisions. Alternatively, the criterion function model was a constrained optimization model, where policymakers maximized total welfare, equalling a weighted welfare sum for processors, consumers and taxpayers, where the weights measure the political influence of each special interest group. Model constraints consisted of a commodity component. The criterion function model follows a theoretically appealing economic paradigm, where the estimated policy equation is analytically derived. The disadvantage of this approach is that restrictions must he imposed in order to analytically solve for political weights. Alternatively, the behavioral model directly specified and estimated its policy equation, allowing for a large set of variables to be empirically tested for their influence on the support price level for M D P . Empirical results of both models indicated that taxpayers' interest in minimizing government costs dominated. In the behavioral model, government cost variables, such Ill as the Federal budget deficit, the share of government expenditures on the dairy program, the difference between the support price and the world price, and the expected additions to government stocks, appeared to influence policymakers' decisions. In the criterion function model, taxpayers' political influence weight dominated relative to that of processors and consumers. Also, political variables, e.g.. inertia and farm income, appeared to influence policymakers' decisions in the behavioral model. Empirical results of the behavioral model yielded statistically significant estimates, which supported existing empirical findings. In contrast, imposition of theoretical restrictions overly simplified the criterion function policy equation, making the support price a function of only one v a ria b le -n e t change in government stocks. Statistical results were insignificant for this variable, indicating that it did not influence policymakers. In addition, this research compared dairy policies and industry characteristics of the US and the EC. Both regions guarantee producers a minimum price, which is two to three times greater than the world price. High domestic prices encourage overproduction, generate a surplus, and result in large government expenditures. iv @ Copyright by Mary Ann Marchant, 1989 ACKNOW LEDGEM ENTS v As I celebrate the ending of my student life and the beginning of my academic career, I wish to thank all who have assisted me in completing this stage of my life: faculty, staff, family and friends. Thank you, Jim, for being such a supportive husband throughout this process. To my committee members, Drs. Alex McCalla, Colin Carter, and L.J. (Bees) Butler, thank you for your guidance and careful scrutiny of my dissertation. Alex, you've been a superb chairman of this dissertation. Thanks for sharing your economic intuition, quick feedback (which was most appreciated given your busy schedule and world travels), ability to always make time to see me, and your valuable professional advice. Colin, thank you for your critical review of early drafts of this dissertation. As a result, this final version is a much better product. Bees, thanks for sharing your knowledge of the dairy industry, one o f the most complex agricultural industries in the United States. In addition, I would like to thank the US departm ent of Agriculture, Economic Research Service for funding this research. Also, I appreciate the assistance of the data services and word processing staffs, particularly, Jerry Nishimoto, Betty Farias, and Regina
Current Outlook for Dairy Farming, Dairy Products, and Agricultural Policy in the United States
1991
Dairy farming is a key component of the U.S. farm economy. Receipts from the sale of dairy products exceeded $19 billion in 1989 and accounted for about 12 percent of total cash receipts from farm marketings (USDA, 1991). Just over 202,000 or 10 percent of all U.S. farms have milk cows, and about 138,000 are classified as dairy farms in the Census of Agriculture because sales of dairy products are the principal source of farm income; these dairy farmers own or lease less than 5 percent of total U. S. farmland but generate 19 percent of net cash income from farm marketings (U.S. Dept. of Commerce, 1989). Processing, packaging, and movement of fluid milk and other dairy products to final consumers adds substantially more value to the American dairy subsector. The purpose of this paper is to discuss the current outlook and situation for the U.S. dairy sector and highlight some longer term trends in the structure and organization of the industry. A concluding section of the paper mentions some factors and policy considera tions which we believe will influence the dairy industry in the years ahead. CURRENT STATUS OF NATIONAL DAIRY MARKETS AND PRICES Since 1983 when the U.S. government initiated the first of seven reductions in the Federal support price for milk, farm prices for milk have shown increasing volatility. In the span of the last two years, milk prices have reached record heights and experienced record declines. Following the record high national benchmark (M-W
Modeling the US dairy sector with government intervention
Western journal of agricultural …, 1991
An econometric framework for estimating a two-regime dairy structural system is presented. Failure to account for switching between regimes due to government price intervention raises the problem of selectivity bias. Further, since a structural system of equations is involved, the problem is not limited to the market associated with the intervention. Rather, bias from a single source can distort all equations in the system. The ramifications of not correcting for the bias in policy analyses are investigated.
A time-series analysis of the effects of government policies on the U.S. beef cattle industry
Journal of Policy Modeling, 1993
countries. In the United States, complex policies have been elaborated in an effort to change or regulate producer and consumer prices, farm incomes, and a host of other aspects of the food and fiber system. Within this complex array of policies, the U.S. beef cattle industry appears to be relatively free of government influence. A single policy, an import quota, has been used to stabilize prices and protect producer incomes (Henry. ( 1981). and Martin and Heady (1984). In general, these studies show that eliminating the quota (or setting it at a higher level) would lead to decreases in beef prices ranging from 2 to 6 percent.
An Overview of NEMPIS: National Economic Milk Policy Impact Simulator
1992
The purpose of this paper is to document and describe a computer program which simulates the impact of alternative dairy policies and technologies on important dairy market variables such as farm and retail prices and quantities. Several policy and technology scenarios are simulated to illustrate the output of the program. The model, which is called the National Economic Milk Policy Impact Simulator (NEMPIS), is general in specifications of the duration of the simulation period, policy instruments, and technological choices. The computer software is available to anyone, provided that they send the author an IBM compatible formatted floppy disk. The model should be of interest to economists, policy makers, and dairy scientists interested in analyzing farm and retail market impacts due to federal policies and/or alternative technologies
2013
In this analysis we compare the total expected government outlays and distribution of benefits under newly proposed dairy margin insurance programs to those under existing counter-cyclical payment programs. We combine simulation and structural modeling techniques to forecast milk price and dairy income-over-feed-cost margins. Using the price forecasts we employ Monte-Carlo experiments to evaluate the total expected government outlays for a sample of 5000 representative farms given a constant relative risk aversion utility framework. We find that expected outlays favor large farm operations and are an order of magnitude higher than those under existing programs. Under the current policy framework (MILC), farms with less than 100 cows (76% of farms) account for 42% of net payments and farms over 1000 cows (2% of farms) account for 6% of net payments. Under the new policy regime farms with fewer than 100 cows will get 17-21% of net program benefits, and farms over 1000 cows will get 36...