Milk and Free Markets

Milk markets made Morning Shots today, but I realized when I was reading the article that I would like to give it more detailed treatment, particularly the following section:

Larry Tande is with the National Holstein Association. Tande says dairy farmers need to figure out a way to control the supply of milk and reduce it when there’s too much. And he’d like to see more government oversight when it comes to the milk processors and distributors.

“Those that advocate for free market, we’ve been there all our lives and look where we’re at. Whether you like it or not, government’s involved now.  Giive me a break,” Tande said.

I do not know the gentleman quoted here. However, his remarkable lack of knowledge regarding the history of milk production is alarming.

In 1917 (well before “all our lives” for most of us), the State of New York decided to set milk prices. I don’t know if that was the beginning, but suffice it to say that, in many regards, little has changed since that time.

For a recent example of the “free market” which Tande thinks still exists with regard to milk production, one has only to go back 3 years:

A maverick dairyman named Hein Hettinga started bottling his own milk and selling it for as much as 20 cents a gallon less than the competition, exercising his right to work outside the rigid system that has controlled U.S. milk production for almost 70 years. Soon the effects were rippling through the state, helping to hold down retail prices at supermarkets and warehouse stores.

There you go, the free market at work (just ignore the reference to “the rigid system that has controlled U.S. milk production for almost 70 years”). But, wait, there is more.

That was when a coalition of giant milk companies and dairies, along with their congressional allies, decided to crush Hettinga’s initiative. For three years, the milk lobby spent millions of dollars on lobbying and campaign contributions and made deals with lawmakers, including incoming Senate Majority Leader Harry M. Reid (D-Nev.).

Last March, Congress passed a law reshaping the Western milk market and essentially ending Hettinga’s experiment — all without a single congressional hearing.

Maybe the “free market” system was on vacation?

Most U.S. dairy farmers work within a government system set up in the 1930s to give thousands of small dairies a guaranteed market for their milk and to even out prices for consumers.

Maybe not.

Then again, I’m quoting from the Washington Post. Maybe they just got it wrong? Fair enough. From the USDA’s own materials, we have the following:

For some 50 years, price supports have been the backbone of the pricing system for milk and dairy products. The support price underpinned the entire price structure for bulk milk sold by farmers either directly to processors or through cooperatives.

That reference is almost 10 years old. To put it simply, price supports for the last 60 years (by the USDA’s own reckoning) have been ensuring that the milk market in the United States is not a “free market” at all.

3 thoughts on “Milk and Free Markets

  1. The point of the article is that Tande doesn’t think the free market exists! That’s why his organization is proposing a program to fit within the current milk marketing system. His comment was directed towards those who think that it STILL IS a free market, and want the government to pull out overnight.

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