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Dairy policy proposal cost studies summarized


With lots of alternative dairy policy cost comparisons being tossed about, Marin Bozic, assistant professor in Dairy Foods Marketing Economics in the Department of Applied Economics at the University of Minnesota, has compiled a blog post summarizing five recent studies. Click here to find “What We (Think We) Know About the Effects of New Dairy Policy: Review of Academic Studies on 2013 Farm Bill Dairy Subtitle.” 

Based on studies listed, here’s Bozic’s take-away:

• Both dairy policy proposals are likely to be effective in providing catastrophic margin insurance. (Newton et al., 2013)

• If effective, the stabilization program could reduce duration of low-margin episodes. (Newton et al. 2013)

• Both policy proposals could end up costing substantially more than the CBO scored them. Dairy Freedom Act is likely to cost more than the DSA.  (Brown, 2013)

• New dairy policy will redistribute program benefits toward states with large farms. The effect is strong for both competing proposals relative to the current policy, but could be more pronounced for the DSA (Woodard and Baker, 2013)

• Design of both margin insurance and the stabilization program is fragile, and subject to strategic manipulations by participants (adverse selection and moral hazard). (Newton, Thraen and Bozic, 2013)

• If risk in the dairy sector is substantially reduced, average milk prices will decline. (Nicholson and Stephenson, 2011)