An interregional analysis of price discrimination and domestic policy reform in the U.S. dairy sector

Abstract

The U.S. dairy sector has experienced several reforms in both government price support and classified pricing under state and federal milk marketing orders. An interregional spatial market equilibrium model of the U.S. dairy sector is used to provide quantitative measures of the aggregate and regional impacts of alternative domestic deregulation scenarios. The model simulates the allocation of farm milk used in the production of nine dairy products in a way consistent with milk component balances for milk fat, protein, and carbohydrate both within and across regions. Results suggest current policies induce substantive aggregate and regional distortions relative to an unregulated policy context.