Economic Research Institute Study paper
Utah State University
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A number of dairy producers in Utah and probably elsewhere denounced the milk tax last summer as being counterproductive. The claim (usually made by small producers) was that financial obligations of providing for debt service and family living dictated that they must increase production if price fell. Discussions with a number of producers about the Dairy Diversion Program indicates that many who chose not to sign up did so after some analysis. They made the nonparticipation choice because they determined (rightly or wrongly) that their volume of business during the life of the program and thereafter would not provide them with sufficient income. They reasoned that with prices as they are now and with probable decreases after the end of the program that they would not be able to meet financial obligations. They, therefore, have chosen to maintain or expand herd size and production.
Atwood, Jay D. and Andersen, Jay C., "A Backward Bending Supply Response from Some Dairy Producers?" (1984). Economic Research Institute Study Papers. Paper 403.