The price of milk

Dittohead not! · Dec 31, 2012

[h=1]Deal reached for stopping spike in milk prices [/h]

WASHINGTON -- The top leaders in both parties on the House and Senate Agriculture committees have agreed to a one-year extension of the 2008 farm bill that expired in October, a move that could head off a possible doubling of milk prices next month.

Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., indicated the House could vote on the bill soon, though House leaders have not yet agreed to put the bill on the floor. In addition to the one-year extension that has the backing of the committees, the House GOP is also considering two other extension bills: a one-month extension and an even smaller bill that would merely extend dairy policy that expires Jan. 1.

A couple of issues here. For one, it appears that maybe perhaps the Congress might be able to actually reach an agreement on something.

Another is more basic: If the cost of a gallon of milk is actually, say, $7, but government subsidies are bringing the cost down to roughly half that, how much are we actually paying, counting tax money and money paid to the grocery store?

Defraying the cost of a commodity by subsidizing it with government money does not actually make it cheaper. More than likely, the cost is higher than it would be if it were sold for the actual price.

Those who choose that new program also would have to participate in a market stabilization program that could dictate production cuts when oversupply drives down prices - an idea that hasn't gone over well with Boehner.In July, he called the current dairy program "Soviet-style" and said the new program would make it even worse.

Government control of commodity prices worked well for the Soviets, didn't it?

Fisher · Dec 31, 2012

It is good news but the government actually drives up the price of milk, not down. Why it would have spiked has to do with supply shortages as we would otherwise defaulted back to a law that all milk had to be sold to the US government who would then re-sell it to the dairy industry, and quite frankly, there is no government system to do that anymore.

sawyerloggingon · Dec 31, 2012

Dittohead not! said:
Deal reached for stopping spike in milk prices

A couple of issues here. For one, it appears that maybe perhaps the Congress might be able to actually reach an agreement on something.

Another is more basic: If the cost of a gallon of milk is actually, say, $7, but government subsidies are bringing the cost down to roughly half that, how much are we actually paying, counting tax money and money paid to the grocery store?

Defraying the cost of a commodity by subsidizing it with government money does not actually make it cheaper. More than likely, the cost is higher than it would be if it were sold for the actual price.

Government control of commodity prices worked well for the Soviets, didn't it?

The way I understand it the milk subsidy was put in place in order to keep small family dairies in business because they could not compete with huge industrial operations. Social engineering and government interference strike again. Without the subsidy small dairy's would go away and big ones could do their thing so the price of milk would end up where it is now without tax payer kick backs.

Diogenes · Dec 31, 2012

Dittohead not! said:
A couple of issues here. For one, it appears that maybe perhaps the Congress might be able to actually reach an agreement on something.

That would indeed be surprising.

Another is more basic: If the cost of a gallon of milk is actually, say, $7, but government subsidies are bringing the cost down to roughly half that, how much are we actually paying, counting tax money and money paid to the grocery store?

I think the problem is that we are about to default to the 1947 law which will grossly distort the retail prices we pay. In effect, the government will be offering to pay the producers twice the current rate.

Defraying the cost of a commodity by subsidizing it with government money does not actually make it cheaper. More than likely, the cost is higher than it would be if it were sold for the actual price.

Government control of commodity prices worked well for the Soviets, didn't it?

Agreed. It's just another case of "We're from the government and we're here to help you."

Dittohead not! · Dec 31, 2012

sawyerloggingon said:
The way I understand it the milk subsidy was put in place in order to keep small family dairies in business because they could not compete with huge industrial operations. Social engineering and government interference strike again. Without the subsidy small dairy's would go away and big ones could do their thing so the price of milk would end up where it is now without tax payer kick backs.

The small farmer always seems to be the rationale for subsidies. I picture that Rockwell painting of the farmer holding a pitchfork standing next to his wife. Reality is quite different, at least around here. Dairies are huge operations and highly mechanized. Some guy with a dozen cows couldn't possibly compete with them.

A local farmer, when I commented on the odor of a nearby dairy, said, "Smells like money to me."

Indeed, it does.

Helix · Dec 31, 2012

sell it for the actual price. there are plenty of alternatives out there. i'll pay more for my yogurt.

sawyerloggingon · Dec 31, 2012

Dittohead not! said:
The small farmer always seems to be the rationale for subsidies. I picture that Rockwell painting of the farmer holding a pitchfork standing next to his wife. Reality is quite different, at least around here. Dairies are huge operations and highly mechanized. Some guy with a dozen cows couldn't possibly compete with them.

A local farmer, when I commented on the odor of a nearby dairy, said, "Smells like money to me."

Indeed, it does.

I am building my retirement home in NE Washington and the valley below my mountain hideaway is all small dairies. Most are pretty ramshackle looking affairs that I'm sure could never stay in business without this dairy man welfare plan.

Dittohead not! · Dec 31, 2012

sawyerloggingon said:
I am building my retirement home in NE Washington and the valley below my mountain hideaway is all small dairies. Most are pretty ramshackle looking affairs that I'm sure could never stay in business without this dairy man welfare plan.

Really? I thought the small operators had gone the way of the dodo bird.

Do you think it's a good idea for the government to pay to keep them in business?

Fisher · Dec 31, 2012

sawyerloggingon said:
The way I understand it the milk subsidy was put in place in order to keep small family dairies in business because they could not compete with huge industrial operations. Social engineering and government interference strike again. Without the subsidy small dairy's would go away and big ones could do their thing so the price of milk would end up where it is now without tax payer kick backs.

You are correct as to the intent. For those who missed my post on the other thread about this a few days ago, here it is in a nutshell: The country is divided into 10 regions. The gov sets a uniform price for milk from farmer to dairy in each region so a person with 50 cows gets the same price per gallon as his neighbor with 500 cows. The government then sets the price it will pay for processed dairy products and no processor is allowed to sell to anybody for less than that price. The government does subsidize exports and buys from the wholesale market, but otherwise it just wholesale price fixes at a rate above what supply-demand would dictate so the purchasers are actually the ones who do the bulk of the subsidizing via the inflated prices.

Lord Tammerlain · Dec 31, 2012

As I understand it

Without the farm deal the government subsidy of milk goes back to the way it was many many decades ago using the calculation set in 1949.

Meaning the government would be buying milk at $7 per gallon, making that the floor price for milk to be sold.

In other words the government support right now is a much better deal the what was occuring in the 40s. Why the old subsidy was not just eliminated in the first place is the question i have

Ray410 · Dec 31, 2012

Small farmers and dairies, like mom and pop stores, are traditional Americana, hence the seething liberal rage and hatred that results in these sorts of threads, ostensibly presented as an intellectual analysis of the economics of milk production.

I'll bet those farmers also cling to their guns, religion and mistrust of immigrants.

Fisher · Dec 31, 2012

Dittohead not! said:
Really? I thought the small operators had gone the way of the dodo bird.

Do you think it's a good idea for the government to pay to keep them in business?

No there are several near me. Most of them have other jobs to pay the bills, but they do make some money off small herds.

Gardener · Dec 31, 2012

As a consumer, my first question is "what part of my income is being spent on milk?" The answer to that is "miniscule". If the price of milk were to triple, my standard of living would hardly be affected.

What really matters to me are those things towards which I do have to allocate much of my income such as housing, energy and insurance, and those bills continue to skyrocket. A small percentage in the cost of these creates much more of a hardship than a huge increase in the cost of milk, so if I were to suggest to congress that they do anything at all in the area of price controls, it would be in those areas that actually cost people the most money rather than those that cost the least or nearly so.

Of course, while they are at it, they might try indexing that which they use to create their official reports for the rate of inflation in such a way as to accurately reflect what it actually costs to live instead of the low figures they keep releasing which have been manipulated to reflect a much lower rate of increase than exists in reality.

Fisher · Dec 31, 2012

Ray410 said:
Small farmers and dairies, like mom and pop stores, are traditional Americana, hence the seething liberal rage and hatred that results in these sorts of threads, ostensibly presented as an intellectual analysis of the economics of milk production.

I'll bet those farmers also cling to their guns, religion and mistrust of immigrants.

In all fairness, the bulk of the existing farm bill is actually food stamp related, so milk is only a fraction of the spending in it and the conservatives do their fair share of gripping about food stamps. Either way, they now have to wait for the next Congress to be sworn in to vote on it as I assume they will not run it through both houses today.

notquiteright · Dec 31, 2012

Ray410 said:
Small farmers and dairies, like mom and pop stores, are traditional Americana, hence the seething liberal rage and hatred that results in these sorts of threads, ostensibly presented as an intellectual analysis of the economics of milk production.

I'll bet those farmers also cling to their guns, religion and mistrust of immigrants.

Said with little to no contact with small scale farmers. :roll:

Most small scale farmers make the bulk of their money off farm, using the farm as a tax write-off. A considerable number are retirees using the farm as supplimental income over other retirement income.

Both sides of the spectrum both worship and vilify 'small scale' farms. depends on the rant of the day.

Subsidies used to help buffer production so dairymen were not filmed dumping milk into a ditch, nor being paid pennies per gallon for the overproduction.

It is interesting how some compare it to the soviet union because the program was at it's best during the cold war, before heavy lobbying warped the plan.

but it is a fun horse to beat, so many have opinions, so few know any dairymen and what the program actually does for (or not) them

sawyerloggingon · Dec 31, 2012

Dittohead not! said:
Really? I thought the small operators had gone the way of the dodo bird.

Do you think it's a good idea for the government to pay to keep them in business?

It is actually called Swiss Valley because in the late 1800s and early 1900s families from Switzerland set up Dairy's here because that was their profession in the old country. The farms are mostly still in the same families with virtually nothing ever subdivided during the real estate boom which I am thankful for so from a purely selfish point of view I am happy they all get government money to stay afloat. In the big picture though it is wrong.

Fisher · Dec 31, 2012

Gardener said:
As a consumer, my first question is "what part of my income is being spent on milk?" The answer to that is "miniscule". If the price of milk were to triple, my standard of living would hardly be affected.

What really matters to me are those things towards which I do have to allocate much of my income such as housing, energy and insurance, and those bills continue to skyrocket. A small percentage in the cost of these creates much more of a hardship than a huge increase in the cost of milk, so if I were to suggest to congress that they do anything at all in the area of price controls, it would be in those areas that actually cost people the most money rather than those that cost the least or nearly so.

Of course, while they are at it, they might try indexing that which they use to create their official reports for the rate of inflation in such a way as to accurately reflect what it actually costs to live instead of the low figures they keep releasing which have been manipulated to reflect a much lower rate of increase than exists in reality.

Of course, it would impact everything that has a dairy product in it, not just the price of milk, but fortunately the crisis is averted and those stores that have raised their prices in anticipation of the shortage now will not lower them because hey, it's free money.

Dittohead not! · Dec 31, 2012

Fisher said:
Of course, it would impact everything that has a dairy product in it, not just the price of milk, but fortunately the crisis is averted and those stores that have raised their prices in anticipation of the shortage now will not lower them because hey, it's free money.

Free money from Uncle Sam! Come and get it while it lasts, it's free, free!

Uzidoesit · Dec 31, 2012

Let's see what deregulation does to the price of milk, cheese and butter and all dairy products.

Dittohead not! · Dec 31, 2012

Uzidoesit said:
Let's see what deregulation does to the price of milk, cheese and butter and all dairy products.

It doesn't look like we'll get to, does it?

Fisher · Dec 31, 2012

Dittohead not! said:
Free money from Uncle Sam! Come and get it while it lasts, it's free, free!

Actually it is free money from consumers with Uncle Sam to blame, but six of one and half a dozen of the other......I'll let you know when a pack of sliced cheese that went up 40 cents in December goes back down 40 cents.

Dittohead not! · Dec 31, 2012

Fisher said:
Actually it is free money from consumers with Uncle Sam to blame, but six of one and half a dozen of the other......I'll let you know when a pack of sliced cheese that went up 40 cents in December goes back down 40 cents.

OK, I'll be waiting. Meanwhile, I'll let you know when Hell freezes, pigs fly, and San Francisco goes Republican.

Xerographica · Dec 31, 2012

There's a term for this problem ...

Diogenes · Dec 31, 2012

Uzidoesit said:
Let's see what deregulation does to the price of milk, cheese and butter and all dairy products.

That would require repealing the default law from the 1940s. Don't bet on it happening any time soon.

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The price of milk

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