Posted on 02/23/2003 1:57:09 PM PST by freepatriot32
Got milk? If so, you've got higher prices, bureaucratic meddling, billions of pounds of surplus dairy products, and complicated mathematical formulas that define how much farmers can charge for the nutritious white beverage.
That's because the production and sale of milk has been regulated by the federal and state governments since the 1930s. And 70 years of regulation has created a bigger mess than 10 gallons of spilt milk on a shag carpet.
Take Massachusetts, for example. In October 2002, the Bay State's Department of Food and Agriculture launched an investigation of Midland Farms, a small chain of grocery stores.
Its alleged crime? Selling milk too cheaply.
According to regulators, the chain was selling milk for only $1.79 a gallon. That was far below the statewide average of $2.99 a gallon.
The 70-year-old Massachusetts Milk Control Law bars retailers from selling milk below cost. So the Agriculture Department turned its lawyers loose, ordering them to force Midland Farms to raise its prices.
Midland Farms President Demetrios Haseotes was stunned. "We're saving people money," he noted.
However, facing the prospect of losing his license to sell milk, Haseotes capitulated. On January 8, Midland Farms agreed to raise milk prices.
So the Massachusetts milk crisis was solved? Not quite.
Six days later, Secretary of State William Galvin introduced legislation that would prohibit the sale of milk at "unconscionably excessive" prices.
Under the bill, it would be a crime to sell milk for any price in excess of 200% of what dairy farmers received for milk. In Massachusetts, that would work out to about $2.34 per gallon.
If the law passes, then Midland Farms could be prosecuted (again) if it raises its milk prices too much -- to, say, the statewide average $2.99 a gallon.
Welcome to what Boston Globe columnist Charles Stein called "old Soviet Union"-style laws regulating milk.
Massachusetts isn't alone. New York already makes it a crime to sell milk at "excessive" prices. Vermont has created a Milk Commission to investigate inflated milk prices. Maine law sets minimum prices for milk (but not maximum prices). And in Connecticut and New Hampshire, legislators are considering bills to outlaw milk "price-gouging."
Why all the laws regulating milk?
After all, as James Bovard noted in a 1991 Briefing Paper for the Cato Institute, farmers who raise cattle for beef -- rather than for milk --labor under a negligible number of state or federal laws. "If the free market works for beef production, why should milk producers be treated differently?" he asked.
To answer that question, we go back to the Great Depression.
In the mid-1930s, Congress was concerned that falling milk prices would bankrupt small dairy farmers. So it passed a "temporary" dairy price-support program.
Under the program, which was eventually formalized as the Commodity Credit Corporation, the federal government bought surplus milk, butter, and cheese from farmers who couldn't otherwise sell them at sufficiently high prices.
Congress also passed the first "federal milk marketing orders," which required wholesalers and retailers "to pay a different price in each region of the country," wrote John McClaughry of the Vermont-based Ethan Allen Institute. The program was designed to keep lower-priced milk (from, say, Wisconsin) from being sold in states with higher milk costs (say, Florida), and thus driving out local diary farmers. Eventually, the program grew to include 31 federal milk territories.
LFinally, to complete its toxic trifecta, Congress passed "strict import controls to keep foreign products from coming in and driving down the price for cheese and butter," wrote McClaughry.
Not surprisingly (to anyone who understands economics), problems soon developed in the heavily regulated industry.
With prices guaranteed by Uncle Sam, dairy farmers produced more milk. Farms got bigger, more-productive cows were bred, and equipment became more efficient. And since the market could not respond to this overproduction with lower prices, milk, butter, and cheese surpluses grew inexorably.
In response, the federal government passed an increasingly desperate series of measures. It was, wrote Bovard, "a classic case of politicians' reacting to the failure of existing government controls by demanding far more intrusive controls."
* In 1981, the federal government began distributing billions of dollars of surplus cheese, butter, and nonfat dry milk to the poor. (Despite the giveaways, the feds still had 577 million pounds of butter, 280 million pounds of dry milk, and 38 million pounds of cheese stockpiled in warehouses a decade later.)
* In 1983, Congress launched a dairy buyout, paying farmers to retire cows from production. By 1985, it had paid $995 million to retire 10,000 dairy cows -- at an average cost of $100,000 per cow. Meanwhile, other dairymen simply increased their production levels.
* In 1986-87, Congress paid dairy farmers $1.3 billion to slaughter cows. Again, other dairy farmers simply increased their production, leaving total milk production exactly where it was before. Even worse, the 1.6 million dairy cows sent to slaughter caused beef prices to plummet, "bankrupting some cattlemen," wrote Bovard.
* In 1991, the USDA started paying U.S. farmers $1 a pound for butter so it could sell that butter in foreign countries for 60¢ a pound. At a time when some Americans couldn't afford to buy milk, "the USDA [spent] over $50 million to dump 140,000 tons of U.S. dry milk on world markets," wrote Bovard.
* In 1996, Congress approved the New England Interstate Dairy Compact (a new spin on the old milk territories), which mandated a 21% price hike for milk in the six-state New England region, wrote Kenneth W. Bailey in Regulation Winter 2001) -- creating a "price-fixing cartel that artificially protected farmers in compact states while lowering prices in non-compact states."
* In 1999, the Secretary of Agriculture announced "reforms" to the federal programs. He reduced the number of federal milk territories from 31 to 11, and announced a new method to compute the "basic formula price" for milk. And what a formula it was!
Get out your calculator. It went as follows: "Basic Formula Price (BFP) = {last month's average price paid for manufacturing grade milk in Minnesota and Wisconsin + [current grade AA butter price X 4.27 + current non-dry milk price X 8.07 - current dry-buttermilk price X 0.42] + [current cheddar cheese price X 9.87 + current grade A butter price X 0.238] - [last month's grade A butter price X 4.27 + last month's nondry-milk price X 8.07 + last month's dry-buttermilk price X 0.42] - [last month's cheddar cheese price X 9.87 + last month's grade A butter price X 0.238] + (present butter fat - 3.5) X [current month's butter price X 1.38] - [last month's price of manufacturing grade milk in Minnesota-Wisconsin X 0.028]}."
Whew. It was, opined Ed Hudgins of the Cato Institute, "a cross between something invented by the Mafia and the Soviet government."
Meanwhile, no matter what "reform" Congress passed, federal oversight of the dairy industry grew more intrusive. By 1991, milk-marketing rules took up three volumes of the Code of Federal Regulations and required 600 federal employees to administer.
The results of decades of federal meddling in the milk market have been devastating:
* It cost American consumers billions of dollars in higher prices. By the early 1990s, Bovard estimated that "import quotas, price supports, and marketing restrictions cost consumers between $5 billion and $7 billion per year." In fact, he noted wryly, "For the cost of the dairy program, each American family could have bought its own dairy cow."
* It costs Americans even more in taxes. In 1995 alone, wrote Kevin McNew in a Policy Analysis for the Cato Institute (December 1, 1999), taxpayers shelled out $8 billion to dairy farmers through various federal price-support programs.
* It harms the poor and elderly. Because of artificially high dairy prices, "calcium has long been the nutrient that poor people lack most," wrote Bovard. "Higher milk prices have also contributed to osteoporosis [an illness caused by a lack of calcium] in the elderly."
* It encouraged inefficiency in the dairy business. For example, farmers in Australia and New Zealand "can produce milk at less than half the cost that the average American farmer can," noted Bovard. However, Americans can't benefit from foreign efficiency because import restrictions "allow the import of the equivalent of only one teaspoon of foreign ice cream and one pound of cheese per person per year," he wrote.
Ironically, the labyrinth of laws and surfeit of subsidies hasn't even accomplished its original Depression-era goal of protecting small dairy farmers.
Since 1930, the number of American dairy farmers has decreased by 95%, noted Bovard. As larger farms became more efficient, smaller dairy farms couldn't compete (even with federal subsidies.) And as suburbs expanded, vast tracts of farmland became more valuable to developers and homeowners than they were to farmers.
Higher prices. Massive surpluses. Fewer farmers. Seventy years of federal intervention has demonstrated the federal government's "total incompetence at managing the dairy industry," wrote Bovard.
That's why the solution to the milk morass is quite simple, he wrote: "Congress should abolish dairy price supports and milk-marketing regulations at once. The federal government should allow the free market to determine milk prices."
At the same time, state governments should get out of the business of setting prices, and stop prosecuting stores that commit the "crime" of selling milk for too much (or too little) money.
Can the free market provide perishable diary products to consumers at reasonable prices?
Absolutely, said Bovard: There are no federal laws governing the production and sale of eggs, which "share many of the market characteristics of dairy products, including perishability." Yet, over the past three decades, the "real price of eggs has fallen 50%, while the real price of milk has changed little."
Dairy farmers would have to adjust to the new free-market system. The most efficient ones would flourish, while the least efficient would go out of business. But that isn't necessarily bad, wrote Bovard, "in the same way that there is nothing inherently wrong with the decrease in the number of corner grocery stores or village blacksmiths."
That's why, wrote McNew, "Congress could help consumers and efficient farmers by eliminating the federal dairy program."
Got milk? Sure, but you'd get it cheaper with a free-market system.
ok i have a huge headache now does anyone have some aspirin and a glass of mil........er water to wash it down with ?
Hmmm. I would wonder about this. Milk is a persishable for sure. Bringing it over via ship, which is the only way you could get milk overseas (sounds about right) would seem to cut into the shelf life.
Why can't American farmers use this as a selling point? Fresher milk that keeps longer?
1st The article misses a number of pricey “hidden subsidies” that cost at least as much as direct price support. For example: “free” USDA research programs, the “free” agricultural extension service, “free” educational services and research in the land-grant universities [in addition to ag extension], “free” dairy promotions, and so on.
2nd, NZ and Aussie farmers can’t produce Milk for <1/2 of what our farmers can do. The actual $ number is more like 70% of the cost, however, since there has never really been any competitive pressure on the US dairy industry we don’t really know. There are definitely US producers who can produce milk more efficiently than they can in New Zeeland, but they don’t need to, because, as the article correctly points out, we have a socialist dairy economy.
3rd, It isn’t true that corporate farms produce milk more cheaply or more efficiently than family operations. The truth is that in a competitive environment, family farms would not be going out of business. But, since subsidies favor those with high raw production, [who already benefit form economies of scale] we are killing our family farms with the very subsidies that are supposed to protect them, and finally,
4th. the post fails to address the fundamental problem with subsidies of any kind: they hurt everyone. They hurt consumers, yes. They hurt taxpayers, yes. But they hurt dairy farmers more than any other group. Subsidies always do the most harm to the very people who’ve been hoodwinked into believing they’re beneficiaries. If the subsidies would end, about 50-60% of our least efficient farmers would go out of business. This would not only lower costs to consumers, but it would allow those who remained to actually make some money. What the article doesn’t tell you is that the dairy economy is tremendously depressed and has been so for more than 15 years because there are so many bad businessmen, hobby farmers, and just incredibly under-educated people on the [agricultural] public dole. Keeping them there depresses prices and drives good farmers out of business.
Yet, I can’t tell you how many FFA, 4H, DHIA and Holstein Association dinners that I’ve attended over the last 30 years where farmers and farmer’s wives have berated me for being against subsidies. When I point out to them that there have been numerous studies [including an excellent one just recently by the Heritage Foundation] that prove that subsidies hurt dairymen, they simply don’t believe it.
Why is Social Security the 3rd rail of American politics? For the same reason. Because you can't convince old people that Social Security is damaging them. But it is. And price supports, federal milk marketing, and all the rest, are destroying our diarymen as well.
However, this is actually an advantage to US farmers. There aren't enough farmers in NZ to affect the world price nearly as much as would happen if US farmers were able to compete in the world market. If you think our system is socialist [it is] you should see Canada and Europe. Those folks can't compete with NZ and US at all, despite absolutely enormous subsidies, buy-backs, quotas, and price controls.
The government meddling in milk prices has been a major problem and keeps cost of milk to consumers at artificially high prices. My grandmother ran a dairy farm for over sixty years after her husband died. They fought the Roosevelt administration and those later because of the damage that was done to small farmers. State and federal regulations imposed on dairy farmers keep the small farmer from competing with the large dairy producers. It's all about money.
I'm a computer programmer who's been unemployed for 13 months. I've finally found a job in another field which has a future. It's been a miserable year and I'm suffering financially; but economically it makes sense for the country.
The fact is that there are too many programmers, wages are dropping, and so some of us need to get out. Imagine if the government paid companies to keep programmers on staff even if there wasn't any necessary programming to be done.
Sure, my life would have been a lot easier this past year, but thousands of dollars would have been diverted from potentially productive use.
My dear old Dad was actually a lobbyist in Albany for upstate dairymen and is no doubt rolling over in his grave for my saying this, but it is well past time for the government to drop these price supports and regulations.
As you alluded to, the dairymen in upstate NY are still barely scraping by, their numbers continue to drop -- and the successful still benefit from the subsidies.
Former Senator Proxmirer was one of the Saddams of the milk cult that gave us the Mother of All Price Fixing.
BTW, dBeers does the same with diamonds. When ever there is a new strike, dBeers is there to make the deal to keep it off the market to keep the prices high. Diamonds should be $2.99 a gallon, the same price a quarters worth of milk is today.
They aren't because many of them have bought into the myth that we have a "cheap food" policy. They believe that government payments to farmers keep their food prices down. They don't. I would be willing to bet you some serious money that on a pound-for-$ basis, the protein you got from milk cost [a minimum] of 10x what it would have cost to produce it by, [for example] soybean farmers. But then, it wouldn't have been "free".
Just as a lottery is a tax on people who don't understand statistics, subsidies are a tax on people who don't understand economics. Given the state of our government schools, that's about 99.9% of the people of the country.
Farming has a great many rewards, and money should be one of them. Here's hoping the government will get out of the way so it can be.
They think they do. But they benefit on the competitive and cost-side only. They get to drive their competition [and their own equity stake in their farms] into the ground--figuratively and literally. On the supply-side, they're losers as much as everyone else.
The way to success is to produce high-qaulity product and sell it at a profit--not on a quota, or for a subsidy.
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