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Abstract

While policies define minimum farm-level milk prices based on end use, milk for fluid consumption is often priced above these minimums even in the presence of excess fluid quality milk. Cooperative action through marketing agencies-in-common facilities these over-order premiums. We examined the premiums that resulted from voluntary agreements in Michigan. The premiums enhanced farm price and offset minimum price variation. A critical consideration is the distribution of premiums across participants. Formal policies like state marketing orders and compacts may replace or complement voluntary premium agreements. As a replacement, these formal policies trade off flexibility in both premium level and distribution for stability.

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