This paper outlines the current U.S. dairy industry situation and comments on the problems it faces. It postulates that the industry. while successful in providing good cheap milk and milk products, has done so through politically determined rather than economic prices. It shows the apparently strong financial situation of the average dairy farm. The paper states that herds will continue to get bigger and become fewer while governmental funding of output increasing technologies exists. It argues that governmental purchases of the surpluses and artificial disposal of these surpluses must also continue while supply increases faster than demand. The paper outlines changes in dairy policies and suggests that the declining power of the dairy lobby and governmental efforts to reduce federal and trade deficits will prevent any sustained increases in milk prices. The conclusion is that current government policies hinder dairy industry unity.