Milk for drinking was priced higher than that used to produce butter, cheese or other manufactured dairy products. These voluntary, private arrangements broke down under the pressures of the Great Depression, and dairy prices were low and unstable. A series of agricultural acts in the 1930s created a set of government marketing orders that replaced earlier voluntary agreements. In 1933 the government also began to purchase some products to raise prices. The current system contains two basic elements.
Price supports are the base for all other provisions.
The government offers to buy butter, non-fat dry milk and cheese at prices that will maintain the minimum farm milk price levels specified in the prevailing farm bill. Market forces can drive farm prices above this minimum and do so in periods of low production during most years. Since the US support price is above world prices for dairy products, import restrictions, first quotas and now tariffs, have been necessary. Federal milk marketing orders are the second federal policy element. Total revenues for producers are higher when separate prices are specified for milk going into different products for which consumers have different demand.