Summary
Findings:Part I. Operation and Impact
of the Compact
Over-Order
Price Regulation
Milkshed
Composition and Farm Size
·There
are roughly 4200 farms in the New England milkshed receiving Compact over-order
producer payments.About 1300 of
these farms are located in New York.The
farms in the milkshed remain, on balance, small family farm operations
- almost three-quarters have fewer than 100 cows in their herds.
Producer
Payments
·The
regulation has paid the New England and New York milkshed producers in
total amount of $146.4 million.The
average per farm annual payment was $8,289 between 1997 and 2000, ranging
from a low of $3,900 in 1998 (when the underlying federal market order
price was higher) to a high of $14,600 in 2000 (when the market order price
was lower).
Price
Stability
·The
Compact has stabilized the monthly pay price received by farmers supplying
the New England milkshed.The federally
established blend price varied from a low of 11.46 to a high of 17.79 between
1997 and 2000, or a range of $5.83, with Compact price regulation, the
range dropped to $4.54, varying from a low of $12.75 to the same high of
$17.79.
Farm
Profitability
·Producer
payments made the difference between operating in the red and the black,
in many cases. For the typical New England Farm, the producer payments
accounted for 100% of net earnings in 1997, 1999 and 2000. On average,
over the first four years, the typical farm would have experienced a net
loss of ($2,277) without operation of the Compact. With the Compact, average
annual net earnings were $6,092.An
analysis of 200 of New England’s most credit worthy farms indicates that
the producer payment made up 69 percent of these farms’ cash margin, on
average over the four years.
Farm
Viability
·Though
harder to quantify, different analyses indicate that the producer payments
have helped keep farms in business. One analysis finds that the price regulation
470 fewer farms would be characterized as having severe financial stress
with operation of the Compact. Consistent with those findings, another
analysis estimates that about 383 farms would go out of business without
operation of the Compact.
Milk
Production
·Production
data indicate the price regulation did not result in unwarranted surplus
production; by contrast, the data indicate that overall production in New
England between 1997 – 2000 increased by less than one percent (0.28%)
while milk production in the United States as a whole increased by seven
percent (7.41%).
Retail/Procurement
Price Impact
·The
over-order obligation increased the floor procurement price of milk by
$0.116. The impact of this increase in procurement price on the margin
for retail milk is less certain; the majority view of the developing literature
is that some portion, but not all, has been passed on to consumers.
Per
Capita/Household Impact
·Assuming
half of the increased cost attributable to the over-order obligation (or
6 cents) is passed through to consumers, the price regulation resulted
in an average annual cost of about $1.38 per person.The
average annual cost for the average low-income household would be about
$2.50; for the average household of 2.5 people the impact would be about
$3.50 a year.This amounts to about
1/1000 percent of food payment expenditures.
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