MILK SUPPLY RESPONSE IN DELAWARE

Milk supply response by dairy farmers in Delaware was analyzed employing d1stnbuted lag price structures for number of milk cows and milk production per cow. A polynominal distributed lag model is fitted to quarterly data with deflated prices for the period 1966 to 1978. The variations in the number of milk cows is explained by about 98 percent. Farmers react positively to milk prices after l-2 years, while wages and feed prices have a negative impact on cow numbers. Milk production per cow shows positive adjustments to milk prices after 6 to 15 months. Technology and feed prices influence also milk production (R l =.87). While the short-run price elasticity of milk production is only .2, the long-run aggregate elasticity grows to 2.8 percent. Intermediate-run projections of milk supply were also performed with the model.