Options for Changing Milk Marketing Orders

GAO discussed the current and future impact of the federal milk marketing order system on dairy programs. GAO noted that the system: (1) established a uniform pricing system; (2) encouraged farmers to produce grade A milk; (3) made it profitable to transport milk from surplus to deficit areas; (4) discouraged milk shipments from one surplus area to another; and (5) fostered local production of milk. GAO also noted that: (1) the pricing provisions contributed to excess production of milk and treated some producers unfavorably; and (2) technological advancements have the potential of significantly increasing milk output while reducing production costs. In addition, GAO noted that lessened government influence on milk prices could decrease the growing dairy surplus by: (1) establishing new basing points in various regions to minimize the influence on regional production patterns; (2) removing down-allocation and compensatory payment provisions to make reconstituted milk competitive; and (3) eliminating the grade A and distance differentials in federal orders. GAO believes that Congress may wish to direct the Secretary of Agriculture to: (1) monitor the conditions that result from pricing policy changes; and (2) if necessary, help the industry to adjust.