Factors Influencing the Production of Milk in South Dakota

The production of milk on farms in South Dakota during 1958 totaled 1,454 million pounds. This resulted in a cash income of nearly thirty-three millions of dollars. Although this represents less than five percent of the source of South Dakota cash farm income, it still is a sizeable industry. The problem: Each year the production of milk increases or decreases in accordance with certain factors which may or may not be identifiable. The total production of milk represents the decisions of thousands of farmers, and to determine objectively all the factors involved in the decision making process would be impossible. However, it is considered feasible to determine those factors which are most important in the decision making process. Table I shows that there is little uniformity in the movement of prices received for dairy products and changes in milk production. The Index of Prices Received for Dairy Products increased in twenty of the thirty-three years, and total milk production increased in eight of these years, and total milk production increased in eight of these years and decreased in twelve. The Index decreased in eleven of the thirty-three years, while during the same period, milk production increased in seven years and decreased in four. When the Index did not change, as it did in two of the years in the study, total milk production increased in both years. One of the more common reasons given for a variation in the total production of milk is that as a reduction in dairy prices occurs, production is increased, and conversely as an increase in dairy prices occurs, production is decreased. According to Heady a historic explanation given to account for agriculture’s failure to contract output during depression or its “assumed” inability to expand output in high price or food emergency periods includes: (See more in Text…) Additional reasons given for the lack of responsiveness to price changes are the length of the period involved in agricultural production; it is a highly competitive industry; agricultural costs are composed largely of fixed costs; and many others. Because of the difficulty of measuring the influence of prices on future production, many have concluded that trends in production are largely independent of past prices. The objectives of this study are to isolate those factors which are pertinent to the production of milk on South Dakota farms, determine whether production of milk is responsive to these factors and to prove or disprove the theory that as the price of milk decreases in South Dakota, the farmer increases production to maintain a constant income and its corollary that as the price of milk increases, the farmer reduces production