Dairy pricing policy, production, and water quality: Application to the Chesapeake Bay watershed

Abstract

This study assesses the economic and water quality impacts of implementing a dairy pricing policy under Federal Milk Marketing Order system designed to alleviate milk prices plummet occurred at the beginning of pandemic. Using a 12-region, positive mathematical programing model of livestock production in the Chesapeake Bay watershed, we find that pricing policy induces significant expansions in dairy sectors, generates higher level of total net revenue in regions having large base-period dairy sectors. For water quality, we find that policy leads to an increase in nitrogen emissions but a decrease in phosphorus emissions for the livestock industry as a whole in most studied regions.