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I feel that we didn't read the same article. This article is absolutely about modernisation and optimization. The dairy business has been guided, partially by

I feel that we didn't read the same article. This article is absolutely about modernisation and optimization. The dairy business has been guided, partially by government policy, to maximize milk production while minimizing human labor. This drove the price of milk down, and led to a 'go big or go home' drive for dairy farmers. Smaller operations can't compete with this and they're closing. > It's about large corporations getting paid money by the government to support an unprofitable business While I don't doubt that this happens, It was not a theme of the article. > Those not "playing the game" lose their business - it's that simple. No, business was lost because the small farms are being outcompeted by large farms. This was a consequence of the market, not government subsidies. I think it would be fair to say that government policy shaped the market, but that's not the same thing as a subsidy.

pdonis 8y ago
> small farms are being outcompeted by large farms. This was a consequence of the market, not government subsidies How so? Government subsidies are what enabled the huge agribusinesses to take over the market. The article discusses exactly this point.
- bradford 8y ago
  > Government subsidies are what enabled the huge agribusinesses to take over the market. That might be so, but that's not what the article discusses. The word 'subsidies' is only mentioned once, and it's not in a context that supports your assertion. I'm not an expert on farming and I'm not sure if you are either, so I hope I can be forgiven for trusting what's in the article instead of commentors on this thread. If I were to paraphrase what went wrong with american agriculture, based on what's in the article, I'd say that the root cause was a policy change enacted during the Nixon administration: > the farming landscape changed dramatically in the 1970s when President Nixon promoted agribusiness lobbyist Earl “Rusty” Butz to USDA secretary. Butz had a reputation going back to at least the 1950s for lobbying for dramatic modernizations to farming at the expense of small farms. “Adapt or die; resist and perish… The change removed regulations from the FDR era, regulations that were explicitly in place for environmental purposes: > Before Butz, farming practices were ruled by FDR New Deal-era controls on production, when memories of the Dust Bowl and destruction of the land through overproduction were still vivid. > Butz became a pariah to everyone but the big farmers as small farmers went bust under the continual tightening of the efficiency noose > only farms with thousands of cows, that can use their size to cut costs, are able to operate in the black: So, either you go big, and sell your dairy for the lowest possible cost, or no one buys your dairy and you go out of business. when I said "small farms are being outcompeted by large farms", that's what I meant.
  - supermatt 8y ago
    Ive tried to explain this to you, but you clearly aren't interested in the reality. What mechanism allowed these unprofitable farms to grow in order to purchase the smaller farms - where did the money to do this come from? Please consider that they are (without exception) unprofitable and have become proportionally less profitable as time has gone by. You clearly have no understanding of the economics of dairy farming if you think the farmers - large or small - are setting their price, or if their profitability is in some way dictated by how they operate on an agricultural level. Its subsidies, plain and simple. I don't understand your agenda in trying to make this out to be something else. I get that this is an entrepreneurship forum, but this is the exact kind of example we should recognise as destructive - not framing it as good business in any way. EDIT: I should clarify, I'm not suggesting that the owners of large dairy farms are evil. It is the system that is forcing this upon them too. If they didn't do it, they too would go bankrupt. If thats the ideal of "go big or go home", well, there can be only one...
    - sonnyblarney 8y ago
      No matt, you have not explained it at all from an economics perspective - in fact, your own stated facts don't support the notion that bigger farms have some kind of leverage from the subsidies over smaller farms. A 'unit subsidy' doesn't at all help larger entities more than smaller ones - there must be some other dynamic at play. A unit subsidy should be the economic equivalent of broadly elevated demand. Either 1) larger farms simply do have some economies of scale, thus flushing out smaller ones - in which case subsidies are not super relevant and this would be happening anyhow or 2) there's some kind of direct advantage the larger producers have in yielding a per-unit subsidy, I can't imagine what that would be, but you seem to have a lot of expertise so perhaps you can elucidate.
      - supermatt 8y ago
        I replied to you regarding this in another thread. In short, its #2. It's to do with volume. By producing a large volume of an unprofitable product you would usually lose more money than someone producing a small volume of an unprofitable product. However, because of the subsidies, this has been reversed, and you now make more money than someone creating a smaller volume. This is exactly how these large farms have been established (they were incorporated to take advantage of these very subsidies), and they have used the large "profits" to further grow. The margins have further reduced, but they are still "profitable" because of the volume.
supermatt 8y ago
Its most definitely NOT about modernization and optimization. Its literally exactly as I describe it. Here is how it works: If you have a small number of cows, you receive a small subsidy. If you have more cows you have greater subsidy. Therefore you increase number of cows to give yourself larger subsidy to support yourself through declining profit margins. You can only increase animal density so far. After that you need more land, i.e. you need to expand. If you expand (i.e. buy up all the smaller farms - please go back and reread the article), then you have more cows, and therefore get greater subsidies. You invest that "profit" into buying more farms (that are desperate to sell as their profits are too small for them to survive, but capped as they cant increase their density/estate), get greater subsidies, etc. That is not "out-competing" smaller farms. UNPROFITABLE large farms are literally being paid by the government to put the smaller farms out of business. This is exactly what the article is about, although the author does a poor job of explaining this - in fact, he doesn't even mention the subsidies, but I assure you that this is the case. Like I said - it's disgusting.
- sonnyblarney 8y ago
  That's a good point - but I don't see how there's any 'economy of scale' to the racket. An individual cow has a certain cost, produces a certain amount of milk, and as you say, yields a certain subsidy. The unit costs of that scale up and down fairly linearly - i.e. it doesn't explain why it's better or worse for smaller or bigger farmers. Now - if there was some sort of 'economy of scale' in this kind of farming, i.e. if you can reduce the overhead of each cow by scaling up, well, then it's possible that the profitability threshold is somewhere near a large amount of cows, in which case, smaller producers go out of business. That said, in the later case ... well it is all about efficiencies and optimization - not subsidies. In short - unless the 'big farms' get some kind of special subsidy due to their size, then this actually is about optimization, not about subsidies. If the subsidies are 'per cow' then it doesn't seem that smaller farms are worse for wear than bigger farms. Instead of subsidies, imagine if there were simply higher demand for milk, and the gov. stopped the subsidies. Imagine that the revenue per cow increased to the exact amount of subsidy. Well, in this case, the economics would be net neutral, totally the same situation, financially. Well, the smaller farmers are going out of business in this situation, and not the bigger ones. Ergo - this is about scale and optimization - not about subsidies.
jelliclesfarm 8y ago
Disagree. Govt subsidies cause prices to sink so low that it costs more to grow than to sell. It’s an old one, but King Corn is still one of my favourite Farm/food documentary. I recommend it highly.

pdonis 8y ago

> small farms are being outcompeted by large farms. This was a consequence of the market, not government subsidies How so? Government subsidies are what enabled the huge agribusinesses to take over the market. The article discusses exactly this point.

bradford 8y ago
> Government subsidies are what enabled the huge agribusinesses to take over the market. That might be so, but that's not what the article discusses. The word 'subsidies' is only mentioned once, and it's not in a context that supports your assertion. I'm not an expert on farming and I'm not sure if you are either, so I hope I can be forgiven for trusting what's in the article instead of commentors on this thread. If I were to paraphrase what went wrong with american agriculture, based on what's in the article, I'd say that the root cause was a policy change enacted during the Nixon administration: > the farming landscape changed dramatically in the 1970s when President Nixon promoted agribusiness lobbyist Earl “Rusty” Butz to USDA secretary. Butz had a reputation going back to at least the 1950s for lobbying for dramatic modernizations to farming at the expense of small farms. “Adapt or die; resist and perish… The change removed regulations from the FDR era, regulations that were explicitly in place for environmental purposes: > Before Butz, farming practices were ruled by FDR New Deal-era controls on production, when memories of the Dust Bowl and destruction of the land through overproduction were still vivid. > Butz became a pariah to everyone but the big farmers as small farmers went bust under the continual tightening of the efficiency noose > only farms with thousands of cows, that can use their size to cut costs, are able to operate in the black: So, either you go big, and sell your dairy for the lowest possible cost, or no one buys your dairy and you go out of business. when I said "small farms are being outcompeted by large farms", that's what I meant.
- supermatt 8y ago
  Ive tried to explain this to you, but you clearly aren't interested in the reality. What mechanism allowed these unprofitable farms to grow in order to purchase the smaller farms - where did the money to do this come from? Please consider that they are (without exception) unprofitable and have become proportionally less profitable as time has gone by. You clearly have no understanding of the economics of dairy farming if you think the farmers - large or small - are setting their price, or if their profitability is in some way dictated by how they operate on an agricultural level. Its subsidies, plain and simple. I don't understand your agenda in trying to make this out to be something else. I get that this is an entrepreneurship forum, but this is the exact kind of example we should recognise as destructive - not framing it as good business in any way. EDIT: I should clarify, I'm not suggesting that the owners of large dairy farms are evil. It is the system that is forcing this upon them too. If they didn't do it, they too would go bankrupt. If thats the ideal of "go big or go home", well, there can be only one...
  - sonnyblarney 8y ago
    No matt, you have not explained it at all from an economics perspective - in fact, your own stated facts don't support the notion that bigger farms have some kind of leverage from the subsidies over smaller farms. A 'unit subsidy' doesn't at all help larger entities more than smaller ones - there must be some other dynamic at play. A unit subsidy should be the economic equivalent of broadly elevated demand. Either 1) larger farms simply do have some economies of scale, thus flushing out smaller ones - in which case subsidies are not super relevant and this would be happening anyhow or 2) there's some kind of direct advantage the larger producers have in yielding a per-unit subsidy, I can't imagine what that would be, but you seem to have a lot of expertise so perhaps you can elucidate.
    - supermatt 8y ago
      I replied to you regarding this in another thread. In short, its #2. It's to do with volume. By producing a large volume of an unprofitable product you would usually lose more money than someone producing a small volume of an unprofitable product. However, because of the subsidies, this has been reversed, and you now make more money than someone creating a smaller volume. This is exactly how these large farms have been established (they were incorporated to take advantage of these very subsidies), and they have used the large "profits" to further grow. The margins have further reduced, but they are still "profitable" because of the volume.

supermatt 8y ago

Its most definitely NOT about modernization and optimization. Its literally exactly as I describe it. Here is how it works: If you have a small number of cows, you receive a small subsidy. If you have more cows you have greater subsidy. Therefore you increase number of cows to give yourself larger subsidy to support yourself through declining profit margins. You can only increase animal density so far. After that you need more land, i.e. you need to expand. If you expand (i.e. buy up all the smaller farms - please go back and reread the article), then you have more cows, and therefore get greater subsidies. You invest that "profit" into buying more farms (that are desperate to sell as their profits are too small for them to survive, but capped as they cant increase their density/estate), get greater subsidies, etc. That is not "out-competing" smaller farms. UNPROFITABLE large farms are literally being paid by the government to put the smaller farms out of business. This is exactly what the article is about, although the author does a poor job of explaining this - in fact, he doesn't even mention the subsidies, but I assure you that this is the case. Like I said - it's disgusting.

sonnyblarney 8y ago
That's a good point - but I don't see how there's any 'economy of scale' to the racket. An individual cow has a certain cost, produces a certain amount of milk, and as you say, yields a certain subsidy. The unit costs of that scale up and down fairly linearly - i.e. it doesn't explain why it's better or worse for smaller or bigger farmers. Now - if there was some sort of 'economy of scale' in this kind of farming, i.e. if you can reduce the overhead of each cow by scaling up, well, then it's possible that the profitability threshold is somewhere near a large amount of cows, in which case, smaller producers go out of business. That said, in the later case ... well it is all about efficiencies and optimization - not subsidies. In short - unless the 'big farms' get some kind of special subsidy due to their size, then this actually is about optimization, not about subsidies. If the subsidies are 'per cow' then it doesn't seem that smaller farms are worse for wear than bigger farms. Instead of subsidies, imagine if there were simply higher demand for milk, and the gov. stopped the subsidies. Imagine that the revenue per cow increased to the exact amount of subsidy. Well, in this case, the economics would be net neutral, totally the same situation, financially. Well, the smaller farmers are going out of business in this situation, and not the bigger ones. Ergo - this is about scale and optimization - not about subsidies.

jelliclesfarm 8y ago

Disagree. Govt subsidies cause prices to sink so low that it costs more to grow than to sell. It’s an old one, but King Corn is still one of my favourite Farm/food documentary. I recommend it highly.