(click on images to enlarge)
The first graph is similar to graphs in the past. The Consumer Price Index (CPI), Producer Price Index (PPI) for processors and the PPI for farm milk. The index is calculated by the Bureau of Labor Statistics (BLS) using 1982 -84 as the base period representing 100 or 100% of the base. Each year is then divided into the base.
As can be seen, prior to the elimination of parity, all three prices moved up roughly together. This is called efficient transmission of price signals.
When parity milk pricing was eliminated, all of the power to price farm milk was put into the hands of the corporations buying farm milk.
So, the second graph I constructed by taking the processor PPI and subtracting the farm PPI. In this graph 1982 represents zero as there was no difference. As anyone can plainly see, this was a massive transmission of wealth to the powerful by means of legislation.
Small wonder that dairy farm milk pricing is seen as complicated.
Here's an interesting paper by the Cato Institute that was written in 1982 regarding the Agriculture and Food Act of 1981 !!!!
ReplyDeleteTake a read:
http://www.cato.org/pubs/pas/pa014.html
Is it any coincidence then that the term, and concept, of "mega dairy farming" began in earnest around this time? Dairy farmers had no choice.
Consider the comment of a dairy farmer in 1981 regarding the legislation: "Oh, we would just increase our output to lower our unit cost and to keep up our money flow. Everything we buy will not go down, so we have to have more revenue if we're going to continue. Your marginal producers may get out, but your professionals, your good operators, will just increase milk output".
Comments???
Bruce