Wednesday, October 3, 2012

Should we prop up dairy farmers?

 Apparently California dairies are going broke.

People who have been dairy farmers there whole life, like 82 year old Mary Cameron, are losing money. In fact, Cameron is losing 40K/month! From the article:

Today, Cameron owes $7.5 million to her banks and creditors, and has run out of cash for feed. To make ends meet, she has sold cows for beef and fed her herd less grain — but that means milk production is down and so is revenue.

Cameron recently saw a bankruptcy lawyer and may have to sell her entire herd and dairy.

"It just makes me sad," Cameron said. "This is a world I love, this is my life."

How did this happen? Whose fault is it? Too much competition? Poor management? People drinking less milk? Mary Cameron thinks she knows:

For her woes, Cameron blames state officials' decision to keep milk prices lower than those in other states.

Wait. What? The problem according to Cameron is that the California government didn't keep the price high enough? So according to Cameron, the government is responsible for keeping the price of milk high enough for her to make money. And if they don't well that is just not fair.

But what about consumers? Why should everyone pay a higher price for milk so that Cameron can keep her farm? As the article states:

CDFA spokesman Steve Lyle said the reason for lower prices is that milk supply exceeds demand in California.

What Steve Lyle meant to say is that the quantity supplied exceeds the quantity demanded, but that aside, no one wants to buy the milk that Cameron is producing for the price that she wants to sell it at. Yet she, and other farmers, think that us consumers should be forced by the government to pay a price that suits them. It never ceases to amaze me that articles about agricultural price floors never mention the effect of high prices on the consumer. 

Not only are price floors bad for consumers in that they artificially reduce consumer surplus, but they also create a deadweight loss, which is bad for some producers and consumers.

California needs some dairy farmers to go out of business and the state government needs to quit fixing prices so that a market equilibrium can be reached in which the quantity demanded equals the quantity supplied. If not, consumers will bear the burden of keeping inefficient farmers like Mary Cameron in business.

"That's where I belong," she said, "...that's where I've been all my life."

No Ms. Cameron, the market says that is not where you belong. And it is not the responsibility of milk consumers to artificially support your lifestyle.

2 comments:

  1. Adam, so what do you propose people like 82 Ms. Cameron should do? Should she go back to school? Heck she could be out in four years...two if she did it online! Or perhaps she should just die in abject poverty comforted by the fact that consumers are paying 75 cents less for milk? I'm not saying we should prop up the milk industry to keep her in business, but we as should feel obligated to help people like this woman transition to a better life.

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  2. Die in poverty? Ms. Cameron is, according to her, losing $40k/month farming. Continuing to farm can only increase her chances of dying in poverty. I feel no obligation to help people because of stubbornness.

    She owns 1900 cows, who knows how many acres of land, and probably a lot of equipment. She needs to swallow her pride, sell all of it, pay off her debt, and live out her remaining years on social security and her savings.

    The government created this problem with their price controls, luring in people who had no business farming. If it does not get rid of them people like Ms. Cameron will continue to be drawn to farming by the artificial profit. In my opinion a lot of government programs create a dependency. Ms. Cameron has relied on these price fixes for so long that taking them away now would hurt her farm. But in the same way that parents shouldn't keep supporting their 40 year old kids, at some point it is necessary to end these benefits and cut off support. Many will benefit and a few will lose.

    Like I said earlier, Ms. Cameron does not need a jobs program because she is 82 years old and she can do what every other 82 year old does when their business fails. I don't see why her situation is any more unique than the 82 year old doctor whose practice fails or the 82 year old store owner whose store goes out of business. The same is true for younger people. Do you feel obligated to help every entrepreneur who fails transition to a "better life"? What is unique about helping dairy farmers? Do we need jobs programs for auto mechanics, restaurant owners, doctors, lawyers, boutique owners, independent consultants etc.? Why should all of the people who fail in those professions be forced to subsidize the transition of dairy farmers? Where are their job programs?

    Or do you feel obligated to help dairy farmers because you feel guilty that some politicians who you have never met and who probably died 20 years ago made some bad policies in the 1930's and 40's that future generations have to clean up? If so, that is probably similar to how some people will feel in 60 years when they have to clean up this health care mess you seem to like so much.

    Like the millions of other people who fail at various occupations and then transition without government programs, I think that dairy farmers will be just fine. The old ones will retire, the young ones will try something new, and the world will keep spinning.

    My uncle was a dairy farmer in upstate New York and he quit doing it about 15 years ago. He would complain about milk prices now and then too. Now he runs a small motor repair shop and sells some land once in a while. What he didn't do was call up the government and say "what now?". I think that most dairy farmer would do the same thing. They would figure it out. I have a lot more faith in individuals to figure things out than I do the government to "fix it". To think that someone like Barbara Boxer, Nancy Pelosi, or Jerry Brown knows how to help farmers transition to a "better life" is comical.

    That being said, I am sure that if you wanted to donate some money to the "Ms. Cameron better life fund" she would gladly take it. We can start a Facebook donation page for dairy farmers in general and see how obligated others feel when the money isn't being taken from them by force through taxation.

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