Paula Tracy covers Agriculture Secretary Tom Vilsack's visit to New Hampshire in the Union Leader. The former Iowa Governor said he is planning to form a commission to examine the current milk pricing system:
The price per hundred weight of milk in New England dropped from a high of about $20 in December, to about $12 now in New Hampshire. The price to produce it is about $18 per hundred weight.
"It's not sustainable," Gov. John Lynch told the audience.
The federal milk pricing system is one of the most bysantine and inefficient structures in the U.S. It seems designed to not only make milk more expensive, but to keep as many dairy farmers making as little profit as possible. Market forces have been pushing towards fewer, larger dairy farms producing large amounts of milk at lower prices. Smaller dairy farmers have exerted political pressure to have government design a system to guarantee them above-market prices to stay in business.
Family farmers are a very sympathetic group. Milk is the most wholesome of foods, and the image of the New England dairy farmer waking before dawn to milk the cows is both romantic and nostaglic. These leads to tremendous pressure for politicians to intercede on their behalf, at the expense of consumers. We all pay a little more for every gallon of milk.
The milk pricing system has not prevented consolidation of the industry. Price supports along can't overcome the economies of scale that larger farms provide, and the government hasn't been willing to articificially raise milk prices high enough for smaller farms to turn a profit. In the end, we end up with a system that lets small dairy farms hang on to the edge of solvency with the promise of government assistance, but little hope to compete.
Family farmers are a very sympathetic group. Milk is the most wholesome of foods, and the image of the New England dairy farmer waking before dawn to milk the cows is both romantic and nostaglic. These leads to tremendous pressure for politicians to intercede on their behalf, at the expense of consumers. We all pay a little more for every gallon of milk.
The milk pricing system has not prevented consolidation of the industry. Price supports along can't overcome the economies of scale that larger farms provide, and the government hasn't been willing to articificially raise milk prices high enough for smaller farms to turn a profit. In the end, we end up with a system that lets small dairy farms hang on to the edge of solvency with the promise of government assistance, but little hope to compete.
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