Commodity Credit Corporation (CCC) purchases of milkfat have greatly exceeded CCC purchases of nonfat milk solids on a milk-equivalent basis since 1988. USDA has responded by reducing the purchase price of butter and increasing the purchase price of nonfat dry milk twice in 1990 and twice in 1992. This article examines the effects of changing the relative purchase prices of butter and nonfat dry milk on CCC dairy product purchases and dairy program costs. The results indicate that balancing CCC purchases of milkfat and nonfat solids on a milk-equivalent basis and minimizing CCC dairy product purchase costs lead to nearly the same dairy program costs.


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