IMPLICATIONS OF RAISING THE NONFAT SOLIDS STANDARDS FOR BEVERAGE MILK

An econometric model of the dairy industry was used to estimate the effects on farmers, consumers, and taxpayers of nationwide adoption of the California nonfat solids standards for fluid milk. It was estimated that adoption of the California standards would raise farm-level milk prices by 1 to 5 percent in the short run and by 1 to 2 percent in the long run. The average retail price of fluid milk would rise by 9 to 13 cents per gallon. Dairy program costs fall under most scenarios, but could rise if surpluses fall to levels that would trigger increases in the support price.