Summary: U.S. dairy farmers produced 167.7 billion pounds of unprocessed, raw milk in 2000. Federal and state dairy programs influence the minimum prices paid to farmers for raw milk. These prices are based on how the raw milk is to be used. Minimum prices set for raw milk to be used for making drinking milk (fluid milk) are higher than those for milk used for manufacturing cheese, butter, and other dairy products. About 70 percent of the raw milk produced in the United States is regulated under the U.S. Department of Agriculture's (USDA) federal milk marketing order program. The 1996 farm bill established another pricing program -- the Northeast Interstate Dairy Compact (NEDC) -- which is run by a commission that sets a minimum price for raw milk sold as fluid milk in six New England states. The NEDC works in conjunction with federal and state dairy programs to establish an alternative minimum price for raw milk in the Compact states. When the monthly NEDC minimum price exceeds the federal marketing order or state minimum price, the NEDC price becomes the minimum price. Congress is now considering legislation that would reauthorize and expand the NEDC and establish additional interstate dairy compacts. This report reviews the potential economic impacts of different compact alternatives.
