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Friday, February 8, 2013

More Milk Controversy – Uncle Dale’s Response

In our previous article we linked to a Washington Times article and provided a synopsis of their claims. Here is Uncle Dale's informative response to their claims. 

Sorry Michael, but I think I should respond to the article below in a very direct way. First of all, for our followers, I will introduce myself as a Farm Management Specialist for the University of Maryland. I spend about 1/3 of my time working with Maryland dairy farmers to help them analyze their finances to improve their management. I have evolved into an advocate of small farms and pastured based systems. 

The Times article was written by someone who knows nothing about the dairy industry. There is no “Big Milk” monopoly and the government does not try to keep milk prices artificially high for the dairy industry. Most milk is processed through farmer owned cooperatives scattered across the United States that are in competition with each other. Profits from these cooperatives are not excessive and are paid back to farmers in dividends. It is true that there are marketing orders and prices are set through complex government pricing formulas based on supply and demand of milk and milk products in various regions of the county. But these pricing formulas do not artificially pump up prices to gouge the consumer. There are no excess monopoly profits.  These pricing mechanisms are in place to stabilize the natural high volatility supply and demand that devastates dairy farmers. If anything, they help small farms who cannot handle price volatility well as large farms can. Dairy farmers do get subsidies when the price of milk falls but the price floor is so low that the subsidies only kick in every few years. These subsidies help save farms that would otherwise go out of business, selling their cows for meat because with low prices other dairy farms cannot afford to buy them. This would reduce the national dairy herd and supply of milk to a point that milk prices would then spike for consumers. So the subsidies and actually keep the price of milk stable for consumers.

Louisiana, like some other states, prohibits selling milk below cost. These are state laws and not federal laws. Many states do not have them. These laws are not meant to keep milk prices artificially high but rather keep them from being artificially low. Grocers use milk, something that everyone buys, as a loss leader. Bring the customers in with milk below cost and then the costumers will buy other things. The problem is, when the grocers put the price back to normal levels, the costumers then blame farmers and “Big Milk” for the spike in milk prices or the consumers think that somehow one grocery store has access to cheap milk that other grocery stores don’t. These state laws basically say “Don’t jerk the consumer around with artificial prices.” So these laws are not all that bad. 

Raw milk is an entirely different issue. The laws on raw milk are administered by the individual state health departments who care about food safety and who know little, and care little about dairy profits. These are not “price-fixing mechanisms… a sop to the milk industry.” All they care about is that there is no outbreak in food poisoning from milk products. From my other articles, you can see that I have mixed emotions about this.  

I have worked with many small farmers that want to get away from the “Big Milk” cooperatives. They process their own milk and sell directly to consumers. I love this model. The only problem is, these farmers have to charge higher prices for their products because they don’t have the economies of scale of large cooperatives.  

I hate articles like the one mentioned because it dramatically misinforms a public that already knows little about agriculture.


1 comment:

David said...

Dale, thanks for the inside scoop on the milk industry. It's difficult to know what to believe in the media these days. It so nice to get information from one that has the real knowledge about what's happening.

Have a great Farm Management Specialist day.