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"A gallon of milk costs a farmer approximately $1.90 to produce, but in the last year, farmers have been receiving as little as $1.35 per gallon." If it cost m
by ewams 8y ago
"A gallon of milk costs a farmer approximately $1.90 to produce, but in the last year, farmers have been receiving as little as $1.35 per gallon."
If it cost more to make it than they are getting, why are milk prices not higher?
- jryan49 8y agoOnly thing I can think of is if the government sets price ceilings
- GW150914 8y agoMilk is heavily subsidized in the US, to the tune of 73% of returns. https://www.realagriculture.com/2018/02/u-s-dairy-subsidies-equal-73-percent-of-producer-returns-says-new-report/ https://www.realagriculture.com/2018/02/u-s-dairy-subsidies-...
- meritt 8y agoAgriculture subsidies. Farming in the US hasn't been a fundamentally profitable business for decades but the government provides a massive welfare program to ensure the survival of farmers, maintain a stable food supply, and keeping prices low for consumers.
- dbcurtis 8y agoYes and no. Some some farming is naturally profitable. But much is subsidized.
- jetrink 8y ago> ensure the survival of farmers, maintain a stable food supply, and keeping prices low for consumers Also, farmers are a powerful special interest group. I know a dairy farmer who was invited to meet with a state governor one on one. The farmer flew to the meeting on his family's private jet.
- chiefalchemist 8y agoAs a side note, a few years ago (~10 to 15 yrs) there was an article / op-ed in the NYT Sunday Magazine. In it the author's "theory" was the growing obesity crisis was due to farm subsidies. In short, cheap corn means cheap high fructose corn syrup. Hard to argue against that logic. Cheap food is great for votes. Unfortunately, it also seem to often have ill health consequences.
- travisoneill1 8y agoI'll take it over the health consequences of a food shortage any day.
- chiefalchemist 8y agoEasy to say until the health consequences become so massive they suck up so much money you're going to bed hungry. And that __is__ in fact happening. I hear ya. But that does not diminish the consequences and real cost of subsidized foods. Fact: Worldwide, more people die from the effects of too much food than not enough.
- village-idiot 8y agoSubsidies distorting the market largely. Farmers continue to use rBST to over produce milk, and the fed pays to destroy some of it to avoid collapsing the market. The situation would sort itself out better if we’d left it the hell alone, but now the pain that correcting this situation will cause is significant
- knome 8y agoIs this one of those purposeful sorts of policies where the government decided artificially ensuring too much food being produced is better than letting the amount of food produced naturally bounce between too much and too little, preferring the comfort of waste to the possibility of occasional famine?
- village-idiot 8y agoPossible, but one could accomplish that without adding rBST into the equation. Letting farmers purposefully jack up production and then paying them to destroy the excess product is just incoherent policy.
- TuGuQuKu 8y ago"Capitalism is the most efficient method of allocating resources" lol
- deleted 8y ago[deleted]
- dade_ 8y agoReally makes you wonder why a country would implement supply management. Oh America...
- simonsarris 8y agoJust FYI the situation is the same in Austria, and possibly other EU countries, w.r.t milk prices.
- downrightmike 8y agoA gallon in the stores costs $4-5
- ams6110 8y agoYes if you buy "organic" milk in a glass bottle. Around here a gallon in a plastic jug at Kroger is about $2.00. Keep in mind milk is often priced as a "loss leader" to get people into the store..
- GlenTheMachine 8y agoI don't know where you're shopping. A gallon of milk this afternoon cost me $2.59.
- markkanof 8y agoA 1/2 gallon of organic whole milk at a grocery store in Portland, OR is 3.99 or 4.59 depending on if the store brand is available or not. Not disputing any of your knowledge of the industry, just adding another data point.
- khuey 8y agoEven in San Francisco a gallon of milk at Trader Joe's is under $3/gallon.
- shagie 8y agoThere's some interesting mechanics in the milk subsidies. The original subsidy was based on the distance from Eau Claire, Wisconsin ( http://icetronauts.tripod.com/milk.htm http://icetronauts.tripod.com/milk.htm ). > Under the system established in the 1930s, the farther a state was from Eau Claire, the higher were the federal price subsidies paid to its dairy farmers on milk sold for bottling. > For example, the maximum subsidy, or differential, paid to Wisconsin dairy farmers is $1.20 per 100 pounds of milk, while farmers in southern Florida are paid $4.18 per 100 pounds. California is even further away. The particulars of it are at https://www.gpo.gov/fdsys/pkg/GAOREPORTS-RCED-95-97BR/html/GAOREPORTS-RCED-95-97BR.htm https://www.gpo.gov/fdsys/pkg/GAOREPORTS-RCED-95-97BR/html/G... It is still based in part on Eau Claire. https://www.bostonglobe.com/business/2013/06/08/what-does-boston-have-with-milk-prices-wisconsin-turns-out-lot/AUfXl8MXtCffhdw3PD79bJ/story.html https://www.bostonglobe.com/business/2013/06/08/what-does-bo... Between water policy, oversupply during the Eau Claire Base Point and existing subsidies... California is a very odd place to produce milk and the cheap milk is a legacy of those policies. And the last spring and hot summer in Eau Claire ( http://www.aos.wisc.edu/%7Esco/clim-history/stations/eau/eau-gddu-2018.gif http://www.aos.wisc.edu/%7Esco/clim-history/stations/eau/eau... & https://madison.com/wsj/business/usda-wisconsin-milk-production-slows/article_51ca73f4-b466-5f2d-ab1b-8b08874643c0.html https://madison.com/wsj/business/usda-wisconsin-milk-product... ) will impact the price of milk there, along with the tariff spat with Canada... which in turn changes the amount of the subsidy across the country.
- celias 8y agoPlanet money did a piece the "government cheese" program during the Carter and Reagan administrations that was supposed to help dairy farmers https://www.npr.org/sections/money/2018/08/31/643486297/episode-862-big-government-cheese https://www.npr.org/sections/money/2018/08/31/643486297/epis...
- abtinf 8y agoSetting aside the specifics of milk, there are situations where it is more economical to run a business at a loss than not at all. Let's say producing a product costs $5 in fixed costs (interest, depreciation, etc) and $1 in variable costs (labor, raw material, etc), for total of $6 per unit. If you can sell the product for more than $6, you make a profit. If you sell the product for $1-$6, you lose less money than you would if you didn't sell it, because you have to pay those fixed costs even if you don't produce any units. You should only stop production if the price falls below $1.