Excerpt from A Study of Alternative Methods for Controlling Farm Milk Production and Supporting Prices to Farmers for Milk and Butterfat: Letter From Secretary of Agriculture, Transmitting a Report Giving Information With Respect to Various Methods of Production Control and Various Methods of Price Support Which Could Be Made Applicable to Milk and Butterfat and Their Products

In appraising alternative methods for supporting dairy prices, it is of interest to consider the Situation that probably would prevail in the absence Of a price-support program. With milk production showing some signs Of stabilizing and continued high levels Of employment and incomes, prices to farmers for manufacturing milk and butterfat over the next 2 or 3 years probably would average moderately below the present support level, possibly in the neighborhood Of 70 percent of parity, if the support program were terminated. The average price for all milk, including fluid milk, would Show a higher percentage of parity. These price projections assume that present Government stocks would be liquidated so as not to compete with current produc tion and that import controls would be continued. Some Of the specific effects of discontinuing the support program are roughly indicated in table 1, -and would include a decline in cash receipts from the sale Of dairy products, an increase in consumption, and wider seasonal changes in prices than recently. For some period, relatively greater declines could be expected in prices for manufacturing milk than for fluid milk, which are stabilized by many factors not closely related to the support program. In 3 or 4 years some Increases In relative prices Of beef cattle are likely, which would have a deterring effect on milk production and thereby would help improve the dairy price picture. Even with no support program, it is probable that domestic prices would continue above world prices so there would be no. Significant increase in exports. On the other hand, large imports would occur if import controls were removed, and prices and incomes would be depressed below levels indicated in table 1.

Prices to farmers for milk and butterfat can be maintained above an equilibrium level by one of three general approaches: (1) Imposing restrictions on production or marketings; (2) the Government (or some other agency) buying and withholding from the market a portion Of the supply; and (3) permitting all output induced by above equilibrium prices to flow into consumption and make payments to compensate for the difference between price actually received and the support Objective.

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