STATE POLICY REGULATING AND CONTROLLING MILK MARKETS: THE CASE OF NORTH CAROLINA

North Carolina is one of fourteen states directly regulating and controlling milk markets. The regulations are administratively complex and vary from state to state, but the general pattern of regulation follows that set by the comprehensive Federal regulation which began in 1937 with the passage of the Agricultural Marketing Agreement Act. Milk markets in most of the country, including the major producing regions, are regulated and controlled by the United States Department of Agriculture (USDA). As a result of both state and federal controls, virtually no markets are unregulated. The consequences of Federal regulation of milk markets have been studied intensively, notably by Kessel and more recently by Kwoka. Less is known about the form and effects of state regulation. In this paper we analyze the case of milk market regulation in North Carolina. Specifically, we (1) review the ongoing regulation and assess the market structure and conduct of market participants including regulators; (2) review and analyze the economic implications and legal developments in reconstituting milk; and (3) investigate the policy alternatives with the purpose of determining whether there are options which, if adopted, will generate more social gains than associated social losses.