The Effects of Federal Milk Orders on the Economic Performance of U.S

producers during 1965-75generated Grade A milk supplies in excess of fluid needs and reserves for the federal order system. As required by specified norms, USDA has adopted federal milk order provisions which reduce pronounced seasonality of milk production and lessen certain types of erratic and extreme price variation. If federal milk orders were eliminated and cooperatives and state agencies were barred from replacing the orders, then fluid milk markets characterized by lower Class I differentials, greater milk price variability, and smaller Grade A milk surpluses might emerge. Key words: economic deregulation, federal milk orders, price discrimination. When Senator Edward Kennedy spoke at a 1975conference on milk prices and the market system, he remarked that "milk marketing regulation has... gone astray. (Moreover), the need to lighten the burden imposed by unnecessary federal regulation challenges all of us-consumers, scholars, producers, reg-ulatory agencies and legislators-to rethink and revise our federal milk marketing system" (p. 13). Some rethinking of the type called for in the Senator's remark has occurred. In their study of benefits and costs asso-ciated with federal and state regulation of milk markets, Ippolito and Masson concede that milk orders increase the incomes of Grade A milk producers who sell milk under the orders, but point out that the devices also reduce the incomes of manufacturing milk producers and fluid milk consumers. It is not clear, they suggest, that such transfers of income can be legitimately claimed as a social benefit. More-over, they claim that most of the other classic alleged benefits of regulation (e.g., price sta-bility and orderly marketing) are of question