UNITED-STATES DAIRY POLICY ALTERNATIVES UNDER BOVINE SOMATOTROPIN

A dynamic optimal control model is constructed to study US dairy polic y alternatives under bovine somatotropin (bST). The results indicate t hat the adoption of bST might be slower than that indicated by the ear ly surveys. Even if adoption is widespread, the government can have th e potentially large milk surplus problems under control with a combina tion of price support, generic milk advertising, and a cow buy-out. Wi th bST adoption, the government would set lower support prices and wou ld increase assessment for milk advertising, compared with the no-bST case.The higher the adoption rates, the lower the support prices and t he higher the advertising assessments. It is found that bST adoption i s socially beneficial; consumers gain at the expense of producers. The government can, however, help producers by giving a larger policy wei ght to producers in setting the optimal levels of policy variables. Fi nally, it is found that the current levels of generic advertising are too low, and the allocation of advertising between fluid milk and manu factured products is not optimal.