A spatial equilibrium analysis of regional structural change in the U.S. dairy industry
1996
Yavuz, F. | Zulauf, C. | Schnitkey, G. | Miranda, M.
During the past 25 years, regional distribution of U.S. milk production has changed as production in the South and West has grown. While previous studies of the regional distribution of U.S. milk production have examined the impact of supply, demand, and/or policy variables, this is the first study to evaluate all three types of variables in the same study. Thus, the question of which of these variables is most important can be examined. To evaluate this question a static equilibrium model of spatially separated markets is constructed. Differential changes in supply factors among regions had by far the largest impact upon regional distribution of U.S. milk production over the 1970-1991 analysis period. To illustrate its dominance, the average absolute change in a region's share of production due to differential changes in supply factors was 1.11 percentage points. The comparable averages for the two next most important variables, the changing mix in per capita consumption of dairy products and the declining real support price for milk, were 0.19 and 0.17 percentage points, respectively. Changes in the regional distribution of population and per capita income, as well as changes in Class I fluid milk differentials, had minimal impacts. These findings suggest that supply is the major factor influencing changing regional distribution of U.S. milk production. The impact of changes in government policy, despite continuing expressions of public concern, are secondary in importance to the impact of regional differences in supply factors.
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