Preface 



In dairy farming, as in many other agricultural industries, a major 

 problem is that of adjusting future production to prospective demand. 

 While many adjustment problems may be considered from the view- 

 point of the individual farmer, aggregate production response is the 

 key to this problem. The effects of individual adjustments upon aggre- 

 gate production must be estimated. This aggregation of individual ad' 

 justments to find the production response of an industry has been termed 

 the "micro to macro" approach. It entails developing farm adjustment 

 models and farm situations, solving them for optimal adjustments for a 

 series of prices, and aggregating the resultant output to determine an 

 aggregate supply function. 



On the demand side, institutional and transportation costs have 

 tended to preserve the fluid milk markets of the Northeast for local 

 producers. However, there has been substantial net inshipments of man- 

 ufactured milk products from the Lake States area. The future position 

 of dairy farming in the Northeast depends upon changes in both the 

 supply and demand structures for milk. 



This study combines an aggregate supply analysis from the micro 

 to macro approach with a set of synthesized demand relationships which 

 reflect the institutional structure of milk marketing in the Northeast. 

 Two dates, 1960 and 1965, are used in the analysis to point out some of 

 the changes which have occurred over this recent time period. 



It should be recognized that this is a normative analysis and, as 

 such, is concerned with the potential milk supply if all farmers were to 

 adjust in unison to achieve optimal organization in response to prevail- 

 ing milk prices, factor costs, and technology. The study thus considers 

 the changes in the potential supply of milk as indicative of changes to 

 expect in actual milk supplies. Parts of this analysis are comparable to 

 the Lake States Dairy Adjustment Study. 



Since 1960 State Agricultural Experiment Stations in Maine, New 

 Hampshire, Vermont, Mlassachusetts, Connecticut, New York, New 

 Jersey, Pennsylvania, Maryland, Delaware, and West Virginia and the 

 Farm Production Economics Division, Economic Research Service, U.S. 

 Department of Agriculture, have cooperated in a coordinated study of 

 profitable individual farm and aggregate production adjustments in the 

 Northeast dairy region. 



This report is a joint effort of the members of the Northeast Dairy 

 Adjustments Committee. The Committee membership is listed by insti- 

 tution as follows: 



