Are Dairy Farmers Getting Their 15 Cents Worth?

Since 1984, dairy farmers have been contributing 15 cents for each cwt. of milk they sell to fund state and national advertising to increase milk product consumption. The main reasons for this generic advertising program are to reduce government surpluses of dairy products and to raise farm prices. The funds available to state and national dairy promotion organizations from this assessment have averaged over $200 million annually since 1984. A relevant question to ask, given the large amount of money involved, is: are dairy farmers getting their 15 cents worth? I recently tried to answer this, as well as other questions, using a model developed to simulate quarterly farm prices from 1980 through 1987 with and without generic dairy advertising (prior to 1984, there was some advertising funded in some of the states). Here are some of the answers I found. Does generic advertising reduce government purchases of surplus dairy products? Compared with no advertising at all, the current program has reduced government purchases of dairy products under the price support program by 37 percent. Government purchases averaged 3 billion pounds of milk equivalent per quarter with advertising in the simulation, and 4.75 billion pounds without advertising. Hence, it appears that dairy farmers are taking an active role in reducing milk surpluses by funding the generic dairy promotion program. This is the main benefit of the program to taxpayers because government costs of dairy programs are lower with generic advertising.