Monday, December 13, 2010

Eye of the Beholder

(click on image to enlarge)

A commenter complained on Saturday's post that I had not taken ethanol subsidies to task. Ethanol certainly has driven up dairy farm feed costs, adding to other dairy farm concerns.

We truly need fair market prices for all farm products - not subsidies. But, dairy farmers have benefited from subsidies to grain farmers. As can be seen from the graph above corn farmers have lost money most every year. There would be no corn for dairy farmers without subsidies.

Many U.S. dairy farmers feel the Canadian farm milk pricing system is not market oriented. However, a recent study from Canada by, Peter Clark, president of Grey, Clark, Shih and Associates Limited. found U.S. dairy farmers are heavily subsidized. The study, according to a press release found, "U.S. federal, state and local governments continue to subsidize their agriculture industries with a labyrinth of programs that are conservatively estimated at over US$180 billion in 2009 and representing well more than half of total U.S. farm gate revenues of US$290 billion."

The release stated, "In summary, the subsidies to U.S. dairy producers are essentially equivalent to revenue the industry receives from the market place. This generous support enables U.S. producers to sell below their fully absorbed cost of production by insulating them from the need to earn a profit from the market. The support also permits insulation from international price pressures."

The selling price for a product, according to the dictates of capitalism, is costs plus profit equals selling price. The CME trading flies in the face of capitalism.


  1. It's been so long since California dairyman have made a profit on a product that is in almost every shopper's grocery cart and a Starbucks on every corner. I'm baffled and discouraged. No hope in sight.

  2. Back when I was a "pup",(before I grew into a S.O.B) I remember going to a farm meeting when the state of affairs was just about like it is now. Western N.Y. didn't grow a fraction of the hard corn it does now; every dairyman bought his grain corn. Every local dairyman in the room was convinced the price of corn was just too high. Then a young dairyman and guest speaker from Ohio stood up and pointed out the truth of the matter: he grew most of the corn he fed his cows and he felt the price of corn was well deserved!
    Truth of the thing was that the corn price was NOT too high: the price of milk was too LOW!
    Before girding for battle a wise man recognizes his enemy. Any system that depends on one farmer loosing so another can profit is a deeply flawed system. Don't envy the corn farmer's profit; strive for a fair pricing system that will allow you to pay a fair price for corn and still profit yourself! Nate Wilson

  3. According to the CME pricing from Monday the California CWT price for 4b (Cheese) was $11.76 and falling. For two months out of the last twenty the farmers have gotten a near "break even" price here, but when their price comes out on the 24th they will once again see a several dollar drop from last month. I see that CWT is paying out some more farmer money to Darigold and DFA to export cheese. Must be nice to have plenty of farmer money to spend when the farmers have none.

  4. When is this bubble going to burst? That is the question I want answered. Are we dairy farmers really this resillent.

  5. What comes to mind is one of my favorite lines from The Blues Brothers. Artie Gibson says: "So......whadda ya gonna do about it, whitey?"


  6. Two weeks and its adiose (can't spell either) it ain't gonna be my problem no more!!!!

  7. Well put Mr. Wilson