Missouri dairy farmers have been under financial stress during most of the 1990s. This stress is reflected in declining cow numbers and milk production. With this loss in milk production there is a loss in statewide economic activity. The Missouri dairy industry generates substantial income in rural areas of the state, which in turn results in a major contribution to total state-wide economic activity.
Missouri dairy farmers are concerned about their economic future. Some have expressed concern about volatile milk prices, the scheduled demise of the federal dairy price support program and federal order reform. Those changes represent pricing uncertainty in the minds of many producers.
Objectives of the Study and Review Committee
The objective of this study is to develop an objective and comprehensive analysis of the economic implications of Missouri joining a proposed Southern Dairy Compact. More specifically, the objective is to analyze how dairy compacts affect Missouri dairy producers and consumers.
A multi-region U.S. dairy industry model was developed that reflects milk and dairy product supply, demand and prices, as well as federal and state marketing orders. A complete national analysis was needed to address the objectives of this study since 1) Missouri cannot form her own compact, and 2) compacts affect national dairy commodity markets. Thus dairy compacts were analyzed at the national level and then at the state level.
Request and Funding for This Study
Mr. John Saunders, Director of the Missouri Department of Agriculture, requested the University of Missouri to study the economic impact of Missouri joining a proposed Southern Dairy Compact. Director Saunders asked the Commercial Agriculture Program, under the direction of Dr. Rex Ricketts, to lead the study and work with the Food and Agricultural Policy Research Institute (FAPRI), under the direction of Dr. Abner Womack. These two teams have been directed to carry out an objective policy study that examines the statewide impact of a dairy compact. This study was conducted by faculty at the University of Missouri with marginal supplemental funds provided by the dairy processing industry.
Ken Bailey is an Extension Associate Professor in the Social Science Unit, and Jose Gamboa is an undergraduate research assistant in the College of Buisness and Public Administration, University of Missouri.