Abstract for: Dynamic Analyses of Proposed Supply Chain Coordination Programs for the US Dairy Industry

The current degree of coordination in the US dairy supply chain results in substantial price variation, primarily due to large amplitude cycles. Partial and voluntary programs by industry have had a limited impact to date on cycles in farm milk prices, milk production and farm profitability. Industry organizations interested in policy have been discussing mandatory programs to improve supply chain coordination and limit the degree of cyclical variation. Our analyses with an SD model of the global dairy supply chain suggest that a set of programs designed around the idea of improving the coordination between milk supplies and dairy product demand could attenuate—to some degree—cyclical variation in these outcomes. Our analyses suggest that if proposed configurations of Growth Management Programs had been implemented a decade ago, they would have reduced price variation, enhanced farm milk prices and profitability for most farms, and decreased government expenditures. The programs would have also slowed the growth in US dairy product exports and increased consumer prices for dairy products. Opinions of industry stakeholders differ markedly about the extent to which cyclical variation is sufficiently problematic to merit policy action. Our analysis provides information relevant to the ongoing policy debate about future courses of action.