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Agricultural Regulations and Trade Barriers

June 1, 2009
By Chris Edwards

This article, written by Cato Institute director of tax policy studies Chris Edwards for Downsizing Government, explains the politics of federal milk and sugar subsidies and regulations, and how those industries can be reformed.

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This article, written by Cato Institute director of tax policy studies Chris Edwards for Downsizing Government, explains the politics of federal milk and sugar subsidies and regulations, and how those industries can be reformed.

“The Federal Milk Marketing Order system sets minimum domestic prices for milk products. Two-thirds of the milk produced in the United States is sold under federal marketing orders. Most of the rest is produced under similar state schemes, such as California’s,” Edwards writes. “The federal system is structured around four classes of milk product: fluid milk, ice cream and yogurt, cheese, and butter and dry milk. On the basis of various formulas, the USDA sets separate regional prices for fluid milk and one nationwide price for each of the other three types of dairy product. Processors are required to pay farmers the same price whichever consumer product their fluid milk ends up in.”