The Impact of the Milk Diversion Program on Milk Production in New York
Boynton, Robert D.; Novakovic, Andrew M.
The purpose of this paper is two-fold: first, to summarize the results of the recent sign-up under the new Milk Diversion Program for New York, by counties and regions and second, to interpret these results and analyze their implications. The Milk Diversion Program (MDP) is one of four components of the Dairy Production Stabilization Act of 1983 (DPSA), which also included an initial 50¢/hundredweight cut in the support price (with authorization for other adjustments in 1985), a 50¢/hundredweight nonrefundable assessment on milk marketed, and a national dairy promotion program funded by dairy farmers. For further details on the DPSA, see Novakovic 1983. The basic feature of the MDP is cash payments to farmers who signed a contract agreeing to market less milk between January 1, 1984 and March 31, 1985 than they did during a specified base period. Participating farmers can receive a payment of $10 per hundredweight on the difference between actual marketings and base marketingshowever, an individual farmer's actual marketings for this period must be at least 5% less than his/her base marketings to qualify for the program and no payment will be made for reductions of more than 30% below base marketings. Beyond this, there are a host of specific provisions and restrictions in the MDP, which establish eligibility and compliance criteria. The interested reader is ref erred to Boynton and Novakovic [ 1984a] for further details. Given their understanding of the MDP and their best estimates of the relative benefits of participating versus not participating, farmers across the country had from November 29, 1983 (when the DPSA became law) until January 31, 1984 to decide whether or not they wished to participate in the MDP. If they chose to participate they also had to decide on the size of their marketing reduction below their base (this will be referred to as the "diversion level") and how they would achieve this level of marketings. Each farmer was confronted with a unique set of circumstances and economic factors which affected these decisions. The kinds of decisions farmers had to make and the factors affecting their choices are discussed elsewhere by Boynton and Novakovic [1984b] • The next section of this paper summarizes the participation decisions that New York farmers made.
A.E. Ext. 84-03
Charles H. Dyson School of Applied Economics and Management, Cornell University