Milk Wars

Well, the politicians have gotten involved in the dispute with Canada over their change Screen Shot 2017-04-27 at 6.43.56 AM.pngto their milk import policies, and as you might expect, there has been a lot of muttering, tut-tutting, bloviating and ranting, with absolutely nothing being done about anything. The president got involved, appearing in Wisconsin briefly where he said many, many things to try to make it sound like he was going to do something, and as soon as he got out of the state and safely back in DC, the Whitehouse immediately disavowed everything he said, blunted or even eliminated entirely the vague threats, and we aren’t going to do this or that, but oh, even though the dispute is about milk we’re going to put a tariff on Canadian wood…. Wood? Really? Oh, well…

The state’s ag secretary is apparently actually doing his job, trying to help the dairy farms that are being dumped by Grassland. But in the long run there isn’t a heck of a lot that can be done at the state level. Fortunately it seems like most of the farmers effected by this have now found other markets for their milk, but the situation is still very concerning, and I expect things will get worse before they get better.

Blaming Canada for this, as many are doing, is silly. These new rules should not have blind sided anyone. From what I’ve been reading, the rules have been in the works for at least a full year, if not longer. Back in November already we were seeing stories popping up about the change in rules and warnings of how it would effect the markets here. So the processor’s claim that they were blindsided by this is a bit disingenuous. If their management didn’t see this coming, they really should be in a different business.

The real problem is the dairy industry itself and the politicians who keep fiddling with it, not any specific country. And the problem is world wide, not limited to the US or Canada. The problem is that dairy farms are producing way, way too much milk. More than the market can absorb. And instead of trying to deal with the situation, the reaction of the whole industry is to try desperately to come up with some kind of market for the stuff, any way they can, even if it destabilizes some other country’s farming industry. Pressuring politicians to institute still more ways to artificially prop up prices.

Canada has done something no other country has, it has actually been trying to deal with the problem of oversupply. It has a fairly strict quota system on milk production to try to keep the market stable. But in order to make it work, they have to restrict imports of dairy products from outside of Canada or the whole system would fall apart as the country is flooded with cheap imports. (The EU tried a quota system but abandoned it a year or two ago)

Is this protectionism? Of course it is. But you have a choice: Do you protect your businesses at home, giving them a level playing field to work with, restrict production so the farms can be relatively profitable, or do you open up your markets to cheap imports, often cheap because of government subsidies, tax breaks and other things that make it cheaper for them to produce the product than you can?

Then the politicians get involved… Price supports, tax breaks, grants, subsidies, government agencies buying up surplus product to artificially prop up prices, mandates that you have to use certain products (Wisconsin still has laws that force restaurants and food service operations to serve butter, for example), the list goes on and on. The end result is that anyone who thinks there is a “free market” for dairy products is living in a dream world.

What’s the solution to the problem? I really don’t know. My father used to say that the system was so screwed up that the whole thing should be scrapped. All of it. Make it a true free market. No government subsidies, no tax breaks, no marketing boards. Leave the health and safety regulations, testing, etc. But get rid of everything else. Turn it into a real free market that has to respond to normal supply and demand rather than a government supported mess where farms are propped up by various programs and price manipulations that encourage overproduction.

Would it help? I don’t know. But it seems to be about the only thing we haven’t tried yet. It’s obvious that all of the quota systems, price supports, surplus buys and everything else isn’t doing any good.

2 thoughts on “Milk Wars

  1. I’m always skeptical of a truly free market. If the world were entirely populated by ethical people it might be fine, but it’s not.
    If the world were entirely populated by smart people, it might be good. but it’s not.
    If the world were entirely populated by people who see community has having more value than themselves it might be good, but it’s not.
    If the world were populated by people with all those traits… probably work.
    The 2007 Mortgage crisis is a prime example of too free a market.

    Can you imagine what future traders would do without restrictions? They already fuck it up. Just imagine.

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    • You do have a point, but the rules, regulations and marketing schemes we have in place right now aren’t protecting anyone and are actually making the whole situation much, much worse. The way the system is set up now the price support system, tax breaks, etc. do little more than encourage people to produce even more milk that there isn’t any market for. Some of these laws go back to 1929 and were intended to deal with a world where there was no home refrigeration, poor refrigerated transport, etc. Different parts of the country have different pricing schemes that were originally intended to encourage milk production in areas where it wasn’t readily available.

      What we really need to do is scrap the whole existing marketing system and start from scratch with something that meets the needs of the consumers and the farming industry. Unfortunately as long as we have politicians that respond not to what the voters need, but to whatever special interest group gave them the most money yesterday, we’re probably never going to see any kind of significant reform

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