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Analysis of Regional Milk Prices and Production Costs

Department of Agricultural Economics, Purdue University, West Lafayette, IN 47907

ABSTRACT

This research was to analyze relationships between milk prices and production costs as sources of change in the level and geographic distribution of United States milk production. Milk prices and direct and total costs of production from 1974 to 1980 were estimated as a function of distance from the upper Midwest by ordinary least-squares regression. Milk prices and costs increased with distance of production areas from the upper Midwest, but the increases were less than transportation costs. The cost and price changes during 1974 to 1980 provided a strong incentive for increased milk production in all regions. Changes in milk prices and cost of production did not encourage production expansion in higher cost regions relative to expansion in the upper Midwest.