| Changes in regional distribution of milk production since 1960 and especially since 1980 has underpinned an increase in regional discord within the U.S. dairy industry. The objective of this study is to analyze the impact of demand, supply, and government policy factors on regional structural change in the U.S. dairy Industry.;A spatial equilibrium model is constructed of the U.S. dairy industry. The model consists of ten regions among which milk products are shipped. Both production and processing stages are included. Government price support program and federal milk marketing orders are imposed into the model. The model is solved using quadratic programming procedures.;The stylized model's performance is acceptable with regard to estimating the share of U.S. milk production by region for the base years of 1960, 1970, 1980, and 1991 as well as the change in regional production shares between these years. Results from the model also are robust to alternative specifications of the region's supply elasticities.;Change in regional supply factors caused the largest change in regional share of milk production over the 1960-1991 period. The average absolute change in regional production share caused by supply changes was 2.39 percentage points. In contrast, changes in per capita consumption of milk products (i.e., from fluid milk to cheese), regional shifts in population, and per capita income were associated with average absolute changes in regional production shares of 0.81, 0.05, and 0.01 percentage points, respectively. Changes in milk support prices over the 1960-1991 period caused an average absolute change in regional milk production share of 0.26 percentage points.;The impact of supply factors on regional share of milk production slightly decreased from the 1960's to 1970's, but increased in the 1980's. Changes in supply factors caused the Corn Belt to lose production share over the 1960-1991 period, and the Lake States and the Northeast to lose production shares beginning in the 1970's. In contrast, supply factors caused the Pacific region to continuously gain production share over the 1960-1991 period. |
