What is a milk shed?

A shed made out of milk. Dua. No i joke its a shed for milking cows.

A milk shed was a contrived land area, like a "watershed", within which produced milk had to be sold. This was one of those anti competitive government regulatory/political things forced down the throats of consumers by organized agriculture, much like the State of Iowa used in prohibiting the sale of colored margarine through the 1950's and much of the 1960's. Thus, a mega milk corporation could not set up dairies in California and ship train loads of milk to Wisconsin and run the local farmers, who when this idea surfaced were in many cases hand milking a few dozen cows. Times change, but there remains Federal meddling in the free market, they have just allowed the milk sheds to grow in size. They even have an administrator and other ways to waste taxpayer money while reducing competition, which one would generally think would be good for consumers. A hint as to the complexity remaining in this can be seen here, at the "Federal Milk Market Administrator" for the Central region (we probably pay a bunch of useless bureaucrats in a number of places to meddle in our "free" markets):

www.fmmacentral.com/PDFdata/msb0900.pdf