From Volume 8, Issue 29 of EIR Online, Published July 21, 2009

Global Economic News

Low Milk Prices, Economic Collapse Forces World Farmers Into Ruin

July 15 (EIRNS)—At the current rate of economic breakdown, 10% to 20% of the U.S. dairy herd will be wiped out by the end of this year. This projection comes from many state and national dairy leaders, referring to the fact, as one farmer put it, we're getting 1973 prices while paying 2009 costs. "I'm almost 50 years old, and in my lifetime it's never been this bad. Everyone's in the red," said Mike Van Amburgh, professor of Animal Science at Cornell University in New York, one of the traditional U.S. milk states.

The crisis is worldwide, and serves to eliminate the main source of animal protein in the daily diet for millions of people. As such, you could say that the current economic policy of the Obama Administration, which is contributing to this disaster, is part of his Nazi health-care policy.

Consumers are faced with impossibly high prices charged for dairy products by the mega-processors—Nestle, Kraft, Suiza/Dean, Unilever, and others, all the while, farmers, almost without exception, are hit with below-cost-of-production payment for their milk output. There is outstanding inaction by governments.

In the U.S. for example, over the last 18 months, the price the farmer receives for 100 pounds of milk fell from $20.50 down to about $11.50-12.50 in June. This is $3 short of breakeven, as well as $6-8 short of what the farmer received in 2007 and early 2008. A typical farmer milking 375 cows is losing $26,000 a month.

Internationally, a similar situation prevails. The world's largest milk exporting company, Fonterra Cooperative Group, Ltd., is paying New Zealand farmers 12% less for their milk as of May 31, than a year before.

In Argentina, the head of the National Dairy Farmers Association warned that by the end of 2009, the nation may have to import milk. In 2006, the Argentine dairy herd was in the range of 55.4 million head, but by 2010, it could be below 47.9 million.

In Europe, on July 13, dairy farmers blocked the roads to Brussels, a continuation of many protest actions over recent months, staged to demand action to save the European dairy sector, the biggest cheese production center in the world.

This Spring, dairy farmers from California—since 1993, the biggest milk state—conducted a "fly-in" to Washington, D.C. to lobby for action.

But no effective national, nor internationally concerted action is underway to save the food supply and production capacity. Instead, there are "for show" responses. On July 22, the EU is to announce some measures, and it recently extended for six months, its program to buy and store surplus butter and milk powder, in order to give farmers a slightly better "marketing option." In the U.S., Obama's Agriculture Secretary is stonewalling. Sen. Bob Casey (D) from Pennsylvania—an important dairy state—has introduced a bill to also improve "marketing."

But the policy required—to take emergency action on the crash, as LaRouche proposes, and within that, to implement cost-of-production and parity pricing for farmers and producers of other public-good commodities—is the only direction that can work.

Meantime, crazed plans based on mythical "supply and demand" have led U.S. farmers to join the National Milk Producers Federation's cow kill-off plan, promoted to "drive up prices." So far, 101,040 cows have been culled. In 2008, 1.6 billion pounds of U.S. milk production capacity were eliminated.

Germany: Skyrocketting Social Costs, as Tax Revenues Collapse

July 15 (EIRNS)—Reports show how the social fabric is threatened in a country, that is, Germany, which was once proud of its industry and its social system:

The DGB trade union confederation is demanding an increase of payments for people who are on Hartz IV (reduced unemployment and welfare benefits). It points to the higher poverty risk of those, living in the Eastern German states. There, 16.4% of the potential working population are on Hartz IV (in West Germany 7.4%). East German children below the age of 15, who are living in families with HARTZ IV are double the number of those in the Western German states (28%, as compared to 13,1%).

The managing director the German Association of Cities and Municipalities rejected the higher payment demands. He pointed to the dramatic budget situation, with an increase of debts for the federal state, the states, and communes to a total of 1.7 billion at the end of this year. This also implies, according to the municipal association, that the communes, just to pay the rent for those on Hartz IV through 2013, will have to spend EU12-18 billion.

The German Labor Office (BA), meanwhile, sees a dramatic increase of costs due to the coming explosion in short work and unemployment, with the BA facing a budget hole of EU20 billion in 2010. This would have to be filled either by a tax increase, or by a loan from the federal government. A federal loan is already under discussion for the health insurance fund.

All in all, social costs in Germany, according to the new government report on social matters, will increase this year by almost 5% to 31.9% of GDP. This is an addition of EU32.6 billion, to a total of EU754 billion.

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