The Impact of the Repeal of South Dakota Marketing Act on the Producer, Processor, Retailer, and Consumer

Between 1966 and 1978, was under state price-fixing regulations specified by the South Dakota Dairy Marketing Act of 1966. These price regulating practices were justified on the assumption that the unregulated market system within the state, if allowed to function alone, would not operate in the best interests of the state’s citizens. Among the conditions in the dairy industry that give rise to the need for regulation are variations in the supply and demand for fluid milk during the year. Moreover, as milk is a perishable product, it cannot be stored for extended periods of time. Also, production of fluid milk can neither be reduced nor expanded quickly when surpluses or shortages occur. This usually results in price instability in the market. As a result of the perceived deficiencies in the unregulated milk market, the 1966 legislation was enacted. Goals of the legislation were to set minimum wholesale and retail pries acceptable to processors and consumers, respectively, to prohibit sales below cost and to regulate trade practices. Few people would dispute the contribution of the act in helping to assure and adequate and dependable supply of fluid milk in the market. But price regulation also generated negative side effects. Some of the arguments against the South Dakota Dairy Marketing Act were that the act resulted in artificially high milk prices for the consumers and that it stabilized the blend price producers received from processors at a level higher than would have occurred under an unregulated market. This study is designed to examine the impact of state regulations on four important participants in the dairy industry—the producer, the processor, the retailer and the consumer. The study is limited to effects in the fluid milk market and ignores other industry segments. Thus, the study is not a complete analysis of the impact of the Dairy Industry Market Act on the state’s dairy industry