A first look at the dairy crisis

 
 
Although “oligarchy” may not be a word that springs to the lips of every dairymen, we bet that the top commentary in the collection below, “The Dairy Oligarchy,” will ring a lot truer to them than the three versions of the same McClatchy editorial calling for a “free market” for the dairy industry, presumably to solve the “over-production” problem.
 
The paradox is that dairy prices are determined by government, federal in the case of most states, in California by the state. The idea is that there should be some public benefit, some “government oversight” in the process because in an actual unregulated “free market,” the job of getting supply to correlate with demand had been found to be impossible. That’s why government regulation of prices began in the 1930s. The witless master McClatchy editorialist writes as if the dairy industry was like the oil industry. This is quite an act of institutional amnesia for a newspaper chain whose entire history of growth and expansion has been entwined with the production of perishable agricultural commodities. A media oligarch like the McClatchy Co., who drank so much of the corporate kool-air that its stock has been trading below a dollar for six months, should have the keenest awareness of perishability.
 
Badlands Journal editorial board
 
6-8-09
CounterPunch.com
Drinking the Kool-Aid of Corporate America
The Dairy Oligarchy
By JIM GOODMAN
http://www.counterpunch.com/goodman06082009.html
Dairy farmers are in deep trouble. Milk prices have fallen by half since last year, dropping to a 30-year low. Consumption has fallen in light of the slowing world economy and now there is a huge milk surplus, or so the “experts” tell us.
It's a nice theory, surplus equals low prices, easy to explain and easily accepted by farmers. Farmers want an explanation, they listen to the dairy ”experts”, they drink the kool-aid.
Farm prices, like the rest of the world economy, crashed because of a globalized, unregulated free market system, not because of surplus product. According to New York dairy farmer/market analyst John Bunting “dairy markets are run by an oligarchy-- a few elite players-- with little or no government oversight”. The parallels between the current dairy price crash and the Wall Street financial crash are pointedly exact.
Both crashes were engineered by the same sort of folks, those who promised us they had the Midas Touch but were instead, Bulls in the China Shop.
Just as Wall Street investment bankers took advantage of the removal of regulatory safeguards put in place by the government after the 1930's depression, so did the “elite players” of the dairy industry take advantage when the US Congress scraped parity dairy pricing in 1981.
Until 1981 as Bunting shows, farm and consumer milk prices were perfectly correlated. Since 1981 (according to the Bureau of Labor Statistics) inflation adjusted farm prices have steadily fallen while consumer prices have steadily risen.
Increased 2009 first quarter earnings of Kraft Foods (up 29%) and Dean Foods (up 39%) came, according to The Milkweed, “from dairy farmers' grief”.
If US dairy farmers are overproducing, why are imports of dairy product constantly rising? The National Milk Producers Federation notes “In the past 10 years alone, the value of dairy imports sold in the U.S. has expanded from $800 million, to nearly $3 billion”.
Why have cheese imports increased in the first quarter of 2009 over 2008? Or as Bunting notes, how can free falling milk prices be justified by the following data?
Nearly as much nonfat dry milk was exported in December 2008 as was exported in December 2007.
December 2008 imports of milk protein concentrates were massive.
Imports of casein, another dairy derived protein, also increased in December 2008.
“Butter and other milkfats” imports increased nearly 60% in December 2008 compared with December 2007.
Cheese imports for December 2008 increased 15% over December 2007.
Commercial disappearance of dairy products increased in December 2008 and for the 2008 year increased 2.6% according to USDA data.
Just as US corporations shipped jobs to low wage workers overseas, Kraft and Dean Foods welcome the products of lower wage overseas farmers. Just as low priced foreign textiles, electronics and auto parts put US workers out of their jobs, so are foreign farm imports putting US farmers out of business.
Clearly, supply and demand does not control farm prices, nor do low priced imports mean lower consumer prices. Just as in the financial sector or the manufacturing sector, prosperity is intentionally funneled to the top at the misery and expense of the workers and taxpayers.
Government regulation on behalf of the worker and consumer appears to be non-existent. Yet we continue to listen to the economists, the corporate oligarchs and Congress who keep telling us prosperity is just around the corner, globalization and the free market will deliver us all.
More kool-aid anyone?
Jim Goodman is a dairy farmer and activist from Wonewoc, WI and a WK Kellogg Food and Society Policy Fellow.
 
6-5-09
Sacramento Bee
Editorial: Free market time for state's dairies
http://www.sacbee.com/editorials/story/1920464.html
Farmers can be a hardy lot, working in tough physical conditions, battling the weather, and dealing with an increasingly volatile global economy that sends prices soaring one year and plummeting the next.
But sometimes farms are like many other big businesses, looking to control their markets and minimize risk while turning to government to protect them from competition and the business cycle.
These days, unfortunately, California's massive dairy industry is acting more like the OPEC oil cartel than the friendly family farmer many of us envision when we think of the state's bountiful agriculture industry.
Milk prices have been low lately, and while that's good for consumers, it's not good for farmers. Naturally, they want to do something about it.
But threatening to collude to limit supply – or, worse yet, asking the government to do it for them – is not the right approach.
Last week a group of California farmers started talking about dumping 2 million gallons of milk to drive up prices. Another plan in the works has the government fining farms that expand more rapidly than the industry leaders deem appropriate, say 2 percent to 3 percent a year, and giving that money to farmers who agree to limit their production.
So far both of these approaches seem unlikely to happen. But a herd-reduction program funded by farmers is sending 100,000 cows to slaughter nationwide, and the federal government has stepped up its efforts to increase demand and send milk prices higher.
The U.S. Department of Agriculture has been buying more milk powder at taxpayer-supported prices, and the agency plans to start subsidizing bulk exports of milk powder, butter and cheese.
The sad truth is that many farms expanded too rapidly when prices were high and export markets were healthy. As they made good money in 2007 and 2008, they grew their herds to 9.3 million cows nationally. Yields increased to a record 22 billion gallons in 2008.
Now the worldwide economy has slowed, demand has slackened and prices have dropped. The farmers want relief.
California's dairies amount to a $7 billion industry that is the single largest agricultural sector in the state. They employ thousands of people, pay taxes and have become an integral part of their local economies.
But they also rely on subsidized water to grow the feed that keeps them in business, and their factory-farm methods can be hazardous to the health of the waterways around them. Many critics question whether California is the best place for these huge operations.
Now these farmers want consumers to pay artificially high prices to get them through bad times, warning that letting some of them go out of business will ultimately be bad for us all.
We don't wish ill on any business, but we're not convinced that the plight of the dairy farmer rises to a level of concern requiring government intervention in the economy. Perhaps it is time to end the long history of such meddling and let consumers and the industry find their own equilibrium in a free exchange in the marketplace.
It is time to let the cheese – and the milk from which it comes – stand alone
 
Merced Sun-Star
Our View: Let dairies find own equilibrium
Milk industry is suffering greatly; maybe it's time to look for new solutions.
http://www.mercedsunstar.com/181/v-print/story/883980.html
Farmers can be a hardy lot, working in tough physical conditions, battling the weather, and dealing with an increasingly volatile global economy that sends prices soaring one year and plummeting the next.
But sometimes farms are like many other big businesses, looking to control their markets and minimize risk while turning to government to protect them from competition and the business cycle.
Milk prices have been low lately, and while that's good for consumers, it's not good for farmers, a good number of them here in Merced County. Naturally, they want to do something about it.
But threatening to collude to limit supply or, worse yet, asking the government to do it for them, are not the right approaches.
Last week, a group of California farmers started talking about dumping 2 million gallons of milk to drive up prices.
Another plan in the works has the government fining farms that expand more rapidly than the industry leaders deem appropriate, say 2 percent to 3 percent a year, and giving that money to farmers who agree to limit their production.
So far, both of these approaches seem unlikely to happen. But a herd-reduction program funded by farmers is sending 100,000 cows to slaughter nationwide, and the federal government has stepped up its efforts to increase demand and send milk prices higher.
The impact is very real for Le Grand dairymen Fernando De Silva and Jose Rodrigues who decided to sell off their 424 dairy cows and get out of the business.
The U.S. Department of Agriculture has been buying more milk powder at taxpayer-supported prices, and the agency plans to start subsidizing bulk exports of milk powder, butter and cheese.
The sad truth is that many farms expanded too rapidly when prices were high and export markets were healthy. As they made good money in 2007 and 2008, they grew their herds to 9.3 million cows nationally. Yields increased to a record 22 billion gallons in 2008.
Now the worldwide economy has slowed, demand has slackened and prices have dropped. The farmers want relief.
California's dairies amount to a $7 billion industry that is the single largest agricultural sector in the state. They employ thousands of people, pay taxes and have become an integral part of their local economies.
But they also rely on subsidized water to grow the feed that keeps them in business, and their factory-farm methods can be hazardous to the health of the waterways around them. Many critics question whether California is the best place for these huge operations.
Now these farmers want consumers to pay artificially high prices to get them through bad times, warning that letting some of them go out of business will ultimately be bad for us all.
We don't wish ill on any business, but we're not convinced that the plight of the dairy farmer rises to a level of concern requiring government intervention in the economy.
Perhaps it is time to end the long history of such meddling and let consumers and the industry find their own equilibrium in a free exchange in the marketplace.
It is time to let the cheese -- and the milk from which it comes -- stand alone.
 
6-8-09
Modesto Bee
Dairy farmers shouldn't expect a government bailout
 http://www.modbee.com/editorials/story/735079.html:  
Farmers can be a hardy lot, working in tough physical conditions, battling the weather, and dealing with an increasingly volatile global economy that sends prices soaring one year and plummeting the next.
But sometimes farms are like many other big businesses, looking to control their markets and minimize risk while turning to government to protect them from competition and the business cycle.
California's massive dairy industry is in big trouble. Milk prices have been low lately, and while that's good for consumers, it's not good for dairy farmers. Naturally, they want to do something about it.
 
But it needs to be the right approach that's fair to farmers and consumers. Threatening to collude to limit supply or, worse yet, asking the government to do it for them, are not the right approaches.
Recently, a group of California farmers started talking about dumping 2 million gallons of milk to drive up prices.
Another plan in the works has the government fining farms that expand more rapidly than the industry leaders deem appropriate, say 2 percent to 3 percent a year, and giving that money to farmers who agree to limit their production.
So far, both of these approaches seem unlikely to happen. But it's interesting to us that agricultural interests, not unlike other industries, want government to keep its nose out of their business -- until they need a bailout.
Then there's a herd-reduction program funded by farmers that's sending 100,000 cows to slaughter nationwide.
The federal government has stepped up its efforts to increase demand and send milk prices higher.
The U.S. Department of Agriculture has been buying more milk powder at taxpayer-supported prices, and the agency plans to start subsidizing bulk exports of milk powder, butter and cheese.
The reality is that many farms expanded too rapidly when prices were high and export markets were healthy. As they made good money in 2007 and 2008, they expanded their herds to 9.3 million cows nationally. Yields increased to a record 22 billion gallons in 2008.
Now the worldwide economy has slowed, demand has slackened and prices have dropped. The farmers want relief.
California's dairies amount to a $7 billion industry, and are an important ag sector in the state's economy. They employ thousands of people, pay taxes and are integral parts of their local economies -- including here in Stanislaus County, where they are the largest ag industry.
But now these farmers want consumers to pay artificially high prices to get them through bad times, warning that letting some of them go out of business will ultimately be bad for us all.
As much as we value the dairy industry and the major role it plays in our local economy, and as much as we don't want to see hardworking dairy farmers go under, we believe the government must move very cautiously.
And, perhaps it is time to end the long history of government meddling, and let consumers and the industry find their own equilibrium in a free exchange in the marketplace.