Effects and Administration of the 1984 Milk Diversion Program

RCED-85-126: Published: Jul 29, 1985. Publicly Released: Jul 29, 1985.

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GAO reviewed the Department of Agriculture's (USDA) temporary milk diversion program to: (1) determine how milk producers decided whether to participate; (2) estimate the program's effect on milk production and government dairy purchases; and (3) evaluate USDA effectiveness in administration of the program.

GAO found that: (1) the program tended to attract producers that decreased production after the selected base period and not to attract producers that increased production; (2) while program participants agreed to reduce production by 9.4 billion pounds during the program, 2.2 billion pounds of the reduction occurred before the program's inception; (3) USDA paid a total of $955 million to program participants, of which $220 million was attributable to the reductions that occurred before the program's inception; and (4) production could increase from 1 to 3 percent after the program's expiration. In addition, GAO found that USDA has had difficulty administering the program because: (1) program participants could circumvent their agreements with USDA by selling milk outside normal marketing channels or crediting other individuals with milk sales; and (2) cows certified for slaughter or export under the program could be resold to nonparticipants because dairy cows usually bear no permanent identifying marks and tracking them through marketing channels is impractical.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Congress established a similar program, the Dairy Termination Program, and set the base period as calendar year 1985, the period immediately preceding the program sign-up period.

    Matter: If it reestablishes the program, Congress should select a base period to avoid paying participants for marketing reductions made prior to the program.


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