Doyle A. Eiler

Producer Returns from Increased Milk Advertising

Each year many agricultural commodity groups spend millions of dollars advertising and promoting generic products. However, empirical analyses of particular generic promotion ventures are scarce (Clement, Henderson, and Eley; Hochman, Regev, and Ward; Nerlove and Waugh). Advertising and promotional monies are often obtained from producers on a voluntary contribution basis, but a major criticism of voluntary programs is that in an atomistic industry the individual producer has little incentive to advertise since his particular share of the increased commodity demand is small. A major argument for mandatory participation is that of equity; however, little economic evidence is available to address the potential profitability of such expanded programs. Since market experimentation is costly, the historical promotional experience of a particular commodity group can provide an important economic input for use by other producers contemplating expanding their own advertising programs. For many years New York State dairy producers have voluntarily contributed to advertise and promote the generic product milk. Prior to May 1972, about 60% of the producers were voluntarily contributing at the rate of 3c per hundredweight. In May 1972, a New York State Dairy Promotion Order became effective with a mandatory assessment rate of 5r per hundredweight levied on milk produced in the state. The voluntary contributions generated about

Determinants of Milk Advertising Effectiveness

1.5 million annually compared to some

Research Needs of the Regulated

4 million available annually after the implementation of the Dairy Promotion Order. With the additional funds, several types of milk promotion activities were expanded. This paper focuses on the program area which has experienced the greatest funding increase-media advertising. Specifically, this paper assesses the effect on producer returns, by market, of the expanded fluid milk advertising effort made possible under the New York State Dairy Promotion Order. The selected model is reviewed, an interpretation of the estimated coefficients is presented, and, finally, an estimate of the returns to producers is presented followed by some implications of the analysis. Methodology

THE PERFORMANCE AND COSTS OF ALTERNATIVE ROUTE DEVELOPMENT PROCEDURES

An analysis of the net returns to dairy farmers from generic fluid milk advertising is made in terms of the ability of advertising to increase the blend price of milk in excess of the cost of advertising. The evaluation of the economic effectiveness of generic fluid milk advertising programs extends beyond the measurement of the direct sales response to advertising. Specifically, the class I-class II price differential and the class I utilization rate are found to be extremely important factors influencing the effectiveness of generic milk advertising programs, while the impact of the price elasticity of supply is relatively minor.

IMPACT ON MILK ASSEMBLY COSTS OF DAILY MILK PICK-UPS

As analysts peering back from the receiving end of the regulatory funnel, we are struck by the number of factors of major importance which typically are omitted or treated only superficially in contemporary regulatory analysis. The companion feature, equally striking in light of these omissions, is the degree of certainty with which many members of our own profession present their policy recommendations. To be sure, a balance has to be struck between complexity and capacity in any analytic model. Our point is that important considerations are being neglected for reasons completely unrelated to capacity considerations. We will focus our attention on three specific areas which are sorely in need of greater research attention. They are: consumer input in the regulatory process, jurisdictional overlap of regulatory agencies, and the current use of industrial organizational analysis as a source of normative regulatory policy recommendations.