Friday, July 2, 2010

Dairy Politics

(click on image to enlarge)

In 1939 the Supreme Court in the Rock Royal case affirmed dairy farmers should get cost of production. The actual words of the Court bear repeating:

By Section 2, 7 U.S.C.A. § 602, it is declared to be the policy of Congress, through the exercise of the powers conferred upon the Secretary of Agriculture, 'to establish and maintain such orderly marketing conditions for agricultural commodities in interstate commerce as will establish prices to farmers at a level that will give agricultural commodities a purchasing power with respect to articles that farmers buy, equivalent to the purchasing power of agricultural commodities in the base period.

In other words "parity."

Then in 1981, Ronald Reagan signed a bill eliminating parity. The hue and cry from all experts was that without the end of parity, dairy farmers would continue to overproduce. Processors and co-ops dumping dairy products did not have to prove anything. The government stood ready to buy dairy products, which met standards.

The only basis for the claim would have been linear projection of recent milk production. So, projecting out the data available in 1981 indicates production would have been 160 billion pounds in 2009.

Trim a fruit tree and you get more, not less, fruit. Dairy farmers took the only option left and produced more - 29 billion pounds more in 2009.

Beware of the scams conjured up by people in high places. Critical thing should not be optional for dairy farmers,there is a high price to pay for being a follower.

1 comment:

  1. YOu need to check out what the court said in full. The Supremes do not conclude that dairy farmers should be paid parity prices as much as it would be to the delight of producers. They are quoting from a law -- the Agrucultural Marekting Agreement Act -- the law from which milk marketing orders come from about the delared policy of congress. The case is about milk marketing orders. If they had concluded what you suggest, then it would seem to follow that the court would also have said where the money would come from for processors to pay farmers their cost of production when the milk is worth less than what it cost to produce. Well they didn't and there ain't no place in the law about milk marketing orders that say farmers should get paid their cost of production.

    The milk marketing oder regulations have minimum prices that get paid to dairy farmers based mostly on what milk products are worth. Parity pring would have milk be worth about $40 per cwt. Making processors pay this to farmers would hardly be in the public interest when we have as milk being produced as we do at much lower prices. Remember when $20 milk was so wonderful! Parity prices have never been the way that minimum milk order prices were set -- they were a referenced starting point method. The law mentioned above says how other pricing methods that deviate from using parity can be used -- and they come from public hearings.

    It is too bad that milk production is now mostly in the hands of the very very large industrial-type farms. These big farms can produce milk at a much lower cost than the little farm and the trend seems likely to continue. No pricing method based on the value of milk products is going to cover everyone's production cost without also giving a better incentive and means for the big farm get bigger and bigger. Parity pricing will accelerate the decline of small scale farming by encouraging the speedier growth in large scale farming. If the U.S. is still producing so much more milk -- 29 billion pounds more as you noted without parity pricing -- imagine how much more milk would get produced at $40 a hundred.

    By the way -- what Reagan did in 1981 about parity -- it had nothing to do with milk marketing orders -- it was about price support programs -- stuff under other laws for other aims and purposes. So its sort of misleading to juxtapose in the way you did.