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Abstract
Milk supply response by dairy farmers in Delaware was analyzed
employing d1stnbuted lag price structures for number of milk cows and
milk production per cow. A polynominal distributed lag model is fitted to
quarterly data with deflated prices for the period 1966 to 1978. The
variations in the number of milk cows is explained by about 98 percent.
Farmers react positively to milk prices after l-2 years, while wages and feed
prices have a negative impact on cow numbers. Milk production per cow
shows positive adjustments to milk prices after 6 to 15 months. Technology
and feed prices influence also milk production (R l =.87). While the short-run
price elasticity of milk production is only .2, the long-run aggregate
elasticity grows to 2.8 percent. Intermediate-run projections of milk supply
were also performed with the model.