Management of milk production in the U.S. to help dairy farmers’ bottom line has been debated for years. But a persistent downturn in milk prices since 2015 is bringing the issue to the forefront.

To get a better understanding of the impacts of supply management, the Wisconsin Farmers Union asked two leading dairy economists to evaluate the effects of three proposed programs had they been implemented in the 2014 Farm Bill.

The long slog in depressed milk prices hasn’t led to a decrease in milk production, Chuck Nicholson, adjunct associate professor at Cornell University’s Charles H. Dyson School of Applied Economics and Management, said in a podcast on the analysis.

“A number of programs going back a long number of years have been recommending that we ought to think about doing something about milk production growth,” he said.

The analysis looked at how different supply-management programs might have affected milk prices and farm income from 2014 to 2020, compared to the status quo.

He and Mark Stephenson, director of Dairy Policy Analysis and the Center for Dairy Profitability at the University of Wisconsin-Madison, ran models of the programs.

Two programs include market access fees — from $0.015 to $3 per hundredweight of milk — for dairy farmers who exceed a specified allowable annual growth in production.

One version operates on a continuous basis, assessing a payment on milk production above allowable growth and distributing the funds to farms that constrain milk production.

The other version of that program operates in a similar fashion but is triggered by the milk-feed price ratio.

The third program the economists evaluated would be activated when the margin between milk prices and feed costs is below a specified trigger for one or two months. The program would pay a much lower price for milk beyond a specified reduction.

“The bottom line on what we found was generally pretty positive in terms of thinking about what these programs can do,” Nicholson said.

They reduced price variation, enhanced prices, increased net farm operating income, reduced the rate of farm exits and reduced government expenditures.

One downside was decreased domestic consumption, depending on the dairy product and the program, he said.

Basically, the two programs with market access fees increased milk prices but also maintained some price variability. They also offered a refund for farmers who constrained milk production growth.

Milk prices with the marginal milk price program were lower but in line with the baseline and more stable.

The models for those programs — which included the refund for producers who restricted growth — showed an all-milk price of $19.59 and $19.98 per hundredweight, respectively, compared with a baseline price of $17.

The model for the marginal milk program produced a price of $16.98.

“The bottom line on all this based on our work is that these programs seem to have some benefits,” he said.

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