Paying for Marketwide Service in Fluid Milk Markets

摘要

Functions in marketing raw milk have shifted from processors to cooperatives in the past 25 years. The change has usually produced more efficient milk markets, but some cooperatives are not paid for the marketwide benefits of their services. The Food Security Act of 1985 explicitly authorized for the first time payments under Federal marketing orders to those performing marketwide services. The services, including balancing day-to-day supplies and demand, obtaining supplemental milk, and disposing of the surplus, benefit the public but some producers or processors may not share the costs. A number of means of dealing with the problem exist. The difficulty lies in devising a compensation method accurately reflecting costs related to the public benefits without providing incentives for actions hurting market efficiency.