Milking the System

Oh, what a tangled web we weave when first we practice government intervention in the agricultural commodities markets. The following statement should surprise no one: if production of a given product increases, then product costs should decrease within the market (assuming a relatively steady demand from the market). Then we have this:

South Dakota dairy farmers are producing more milk, but they’re getting paid about half of what they earned last year.

The story goes on to say that production is up 8% over last year, but prices have dropped from $18 to $10 per hundredweight. Now, while the drop in prices is due to a number of things, the fact that increased production is resulting in lower prices is presented as a surprising thing. This strange market correlation is only surprising to those who have never not known milk prices to be based on the USDA’s direct and indirect meddling.

2 thoughts on “Milking the System

  1. As one who deals with many in the milk industry..they have no one to blame but themselves. The milk marketing order system the gov’t placed on the milk industry is both obsolete and anti-dairy. The market will right itself, however there will likely be casualties among producers.

  2. OxfordT,

    My concern is that the market will not right itself until the government steps out of the role of indulgent father. If milk needs to be $5 a gallon, so be it. I’ve got to think, however, if that should happen, that we will see the rise of boutique dairies once again.

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