There is a lot of protesting going on IRT milk prices in Europe right now:
http://www.nytimes.com/2009/10/06/business/global/06milk.html?_r=2&adxnnl=1&adxnnlx=1254945674-fdvWBy20Q/AecZVA5EWOhQ
How does this happen? Did the average Euro-Cow suddenly develop mega-udders, or has the EU dinked with pricing and quotas so much that the system has become uncontrolable, or what?
It’s gov’t controlled pricing because its a necessity.
Why? What makes the pricing controls necessary? How are controled prices set to levels that guarantee a meltdown of the dairy industry in the interests of the EU?
Price move up and down as with all other prices in a capitalism system. Now they are down, on account of a general economic crisis and with overproduction.
I don’t think there is price control per se. There are quotas (which are being phased out) which of course are meant to control prices. Some farmers want state subsidies now prices have gone down. Danish farmers are strongly against any such system.
The farm subsidy system is a left over from the early days of the EU, where the memory of war and post-war food shortages were very strong. So they wanted a system to build a strong food production system so Europe could become self supplying and never again would come to a situation were people would starve. They succeeded greatly. To such an extend that we for more than two decades have become almost buried in food.
Ah - So let me see if I understand: It’s an intersection of economic crisis, normal price fluctuation, changing regulatory environment, and past agricultural policy - IOW, an unforseen and (hopefully) unique event?
Have I got that correct?
I’m no expert, but your summary seems to catch the main points. Also keep in mind that the claim of “75% of production costs” is unverified and serves the interests of the protesting group. Does “production costs” in this case mean the short-run marginal cost of production (in which case farmers would stop producing immediately) or the long-term costs including the cost of land ownership (in which case it may still be profitable to continue production in the short term).
I wouldn’t say it’s necessarily a unique event; normal variation in the price of any commodity may result in the price paid to suppliers being temporarily less than the cost of production.
Past policy is definitely a big part of the general mess in dairy farming, over here in the Netherlands in any case. IIRC, what happened during the late 80s was that there were basically government guarantees on milk prices, coupled with import restrictions, which drove milk production so high that there was no way to sell all of it. That in turn resulted in a quota mechanism - a farm would get a max number of kilos of milk that could be produced/sold each year, based on the number of cows the farm had at the time the quota was introduced. That resulted in a very lively market of quotas. Quotas could (and still are) sold and rented by farmes that shrink to farms that are growing. If you couldn’t buy or rent more quota, you just can’t grow the farm.
All of that is basically a big mess, and the few dairy farmers I know are quite happy that that system is being phased out - though I’m sure there are many that regret it.
But at the same time, intra-european borders are pretty much open for milk and government subsidies are non-existant or at least reduced a lot, so what’s happening now is that large supermarket conglomerates can buy milk very cheaply from eastern europe, and are a) using milk & fruit prices to drive sales to their shops and b) putting the pressure on the farmers to get their products as cheap as possible. And since large supermarket chains are basically the only customers the farmers have, they’re in a position where they either take the offer or have no turnover at all. Fruit & vegetable farmers are pretty much in the same boat in that regard - they’re just not as big or as organized as their customers.
Anyway, as far as I can find out, current price a farmer receives for a kilo (pretty much a liter) of milk is going up to about 25 eurocent (from 20 cents only a few weeks ago), while they say they need about 35 - 40 cents to make any profit on it.
Just for context, US milk pricing is extremely complex and subject to a great deal of government intervention. In the US, imbalances have tended to involve the Government buying surplus milk, I think.
On a different topic, whatever the merits of their cause may be, for the farmers to drag a real cow into the middle of their protest as a prop strikes me as animal cruelty.
OK, I think I see the scope of it. Thanks!
On a related question - How much of the surplus can/could be converted to alternate use (cheese, yogurt, and such)?