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Federal Milk Orders and their Effect on Milk Procurement

Division of Economics, National Milk Producers Federation, Washington, D. C.

ABSTRACT

Federal orders affect milk procurement to the extent that supplies for individual markets are responsive to changes in relative prices paid producers, as determined on the basis of a use classification. This classification and the pooling provisions are the backbone of federal milk orders, and they are designed to fit the market structure.

Since federal orders regulate milk prices on the basis of the individual marketing area, a certain amount of conflict of interest is unavoidable between regulated markets, and between regulated and unregulated handlers. There is also a divergence of interests between groups of producers who regularly supply a market and those who are potential sources of supply. The latter is true with or without federal orders, wherever dairy farmers are striving to improve incomes by reaching out for better markets.

Other than in the response of milk supplies to price, federal orders are not designed to affect the procurement of milk.