(click on image to enlarge)
In yesterday's post I quoted a USDA report,"Milk production continues to shift to the western half of the United States." In the above graph the relationship of home price (bubble) and California milk production is obvious.
But, that is not just my opinion. The abstract for a 2003 Rural Sociology article "Dairy Industrialization in the First Place: Urbanization, Immigration, and Political Economy in Los Angeles County, 1920-1970" by Jess Gilbert and Kevin Wehr states:
Rural sociologists are currently debating the pace and extent of industrialization in the dairy sector of the United States. We offer the perspective of historical sociology to this debate, arguing that time and place significantly determine the outcomes of processes such as industrialization. We present an historically grounded
explanation For the rise of industrial dairying, which first occurred in Los Angeles County. Beginning with the immigration of Dutch dairy farmers to Los Angeles (L.A.) in the I920s, a contingent and sequential process--embedded within the local/California political economy—of exploding population growth, rapid urbanization,and skyrocketing land prices led to repeated geographical 'relocations and expansions of large-scale dairies during the next three decades. We conclude that agricultural industrialization is not inevitable but instead is the result of contingent factors (cultural and political-economic) as well as the particular sequencing of events and processes. In thus historicizing the industrialization debate, we seek limited, rather than universal, generalizations.
More recently "Foundations for a Consumer-Driven Dairy Growth Strategy" Prepared by McKinsey &Company for the California Milk Advisory Board Spring 2006 ($2.3 million)stated, "The industry also benefited from a vitalizing cycle of reinvestments, spurred by steadily appreciating land values, useful capital gains tax treatment, and cash accounting."
So, it is really not all about "supply and demand" and the"market." Policy makers and mainstream discussion seems to have ignored the recent reality of "asset appreciation" in their projections.