U.S. Farm Prices for Beef and Milk at Crisis Lows; Farmers Seek Emergency Measures, But Within a Defunct System
July 22, 2016 (EIRNS)—Last week, the U.S. National Farmers Union (NFU) established an emergency committee for a policy response to the low prices received by farmers for their milk, which is the latest in a number of such initiatives. The National Farm Organization (National Farmers, nfo.org) has a three-page emergency statement out, " Dairy Policy That Protects Family Farmers." This Spring, the Senate Judiciary Committee called for a Federal investigation of why beef prices have plunged to the cattlemen.
Farm milk prices are now about 40 percent lower than two years ago, and below the dairymen’s cost of production. Beef cattle prices are down about 50 percent from 2014.
Beef and milk are among the most demanding links in the chain of food production, since herds of large animals require high capitalization, a long lead time to develop, and high husbandry skills. Animals can’t just "go fallow" for a season or two. Plus, the commodities involved are perishable.
While the prices farmers receive for their output have sunk, their input costs have remained the same or risen—electricity, water, veterinary, housing, feed, transportation, and so on. And though feed corn prices fell (and some other rations), this has not off-set the rest of herd expenses. Under the pretense of addressing this, a Federal "Dairy Margin Protection Program" (MPP) was enacted in recent times, which, when there is an imbalance between revenue vs. expenses for milk farmers, they are supposed to get compensation. However, the Obama Administration has cooked the calculations to prevent this. Congress has dropped and frozen what is to have been a support price. "Does Anyone Care What Is Happening to the Dairy Farmer," was issued last month by Arden Tewksbury, a dairy leader in Pennsylvania. NFU President Roger Johnson said July 14, "If adequate support for dairy farmers is not provided, it will force thousands of family farms out of business." Large operations can reduce their costs by some 25 percent compared to smaller farms (under 1000 cows), but even so, they are threatened with shutdown eventually.
The same situation exists in Europe, with differing particulars. Last year protesting farmers took to the streets in big European cities, letting loose cows, dumping milk, and driving farm machinery through town. In Britain, for example, the number of dairy farms has dropped by 10 percent in one year, down to barely 9,000. The U.S. has lost 18,000 dairy farms in the last 10 years.
The ’human’ response is to intervene, to protect the food supply. This can involve setting floor prices for what the farmer gets, allowing for fair pricing along the line for processing and distribution, and making sure costs are not dumped on the consumer. The precedent in milk, is the mid-20th century system of Federal "Milk Marketing Orders," worked out for differing regions in the country, before they were abandoned.
The principle involved is parity pricing—assuring that costs of production are covered, to protect the public interest in a secure food supply for now and the future. For example, parity prices as such were set for beef under the Administration of Franklin Delano Roosevelt, and continued through the 1960s, until the "free market" era of deregulation eliminated the principle of public interest.
Taking the necessary measures for food presumes a complete shift in the financial-economic system itself, with Glass-Steagall emergency action, and credits for production, as is shown by the need to restore Deutsche Bank, and productive banking, through the ’Alfred Herrhausen’ precedent for worthy investments.