Federal Price Regulation of Close Substitutes for Fresh Drinking Milk: History, Economic Analysis and Welfare Implications

摘要

The Secretary of Agriculture has received a proposal to deregulate reconstituted milk which is currently priced under Federal Milk Marketing Orders. (Reconstituted milk is nonfat dry milk + butterfat + water that is recombined by the bottler). A shortrun analysis of possible price changes was made using two approaches: (1) an Ingredient Cost Approach and (2) a farm price + processing + storage + transportation. Costs were also estimated for different product compositions (% butterfat and % solids-not-fat) for reconstituted milk. In the short run, the unregulated cost of producing reconstituted milk was estimated to be $.07 to $.14 a gallon below the U.S. average fresh drinking milk in 1979. Savings varied regionally.