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Government involvement in the production and marketing of milk and dairy products is more pronounced than in any other agricultural product. The U.S. government administers two major programs that affect significantly the production and marketing of milk throughout the United States. These are the Federal Milk Marketing Order Program and the Dairy Price Support Program. In Arizona, in addition to these two major programs, the United Dairymen of Arizona Cooperative operates a base system that determines how cooperative milk revenues are allocated among producer members. This dissertation discusses some theoretical models that provide some insights into the following questions: (1) How would the dairy industry perform without the historically administered prices? (2) What are the benefits and costs associated with the order program and the base system? Then, this inquiry focuses on the Arizona and New Mexico dairy sectors. The two production sectors are quite similar, as are the marketing institutions, except for the existence of the base system in Arizona. Milk supply response in Arizona and New Mexico is investigated. Two ways in which supply adjustments can be achieved are identified and empirically investigated. (1) Creation of new dairy facilities or relocation of dairy facilities from other markets. If the decision to invest in Arizona or New Mexico is assumed as given, it is found that the existence of base system is a significant factor in explaining the location choice of new producers. (2) Expansion in output of existing dairy farms. It is found that dairy farmers in Arizona and New Mexico respond to changes in the farm level price of milk. The last effort of the empirical investigation is on the consumers' welfare losses due to the regulations of the Arizona and New Mexico dairy markets. It is found that the milk marketing orders and the policies of the UDA Cooperative in Arizona and AMPI in New Mexico, on the average, enforce a tax on Arizona's consumers of fluid milk in the amount of 10 million dollars per year, or 13.5 percent of producers' total revenue, and a tax on New Mexico's consumers of fluid milk in the amount of 5.6 million dollars per year, or 12.6 percent of producers' total revenue. (Abstract shortened with permission of author.)

This study examines how Bovine Somatotropin (BST) may impact Arizona dairy producers. The results of dairy scientists experimenting with BST are summarized in terms of reported milk yields and possible changes in feeding and herd management. Dairy enterprize budgets representative of Arizona are constructed to examine how income statements may change if BST is approved. The effects of increased milk supply on Arizona milk prices are estimated using the institutional structure of the Central Arizona Order and the United Dairyman of Arizona. Results of experiments with BST in Arizona are used to generate net returns at several rates of adoption under changing milk prices for three dairy farms in Arizona.