Milk Spilled
in War on Low Prices
by J. H. Huebert
The Collegian
February 18, 2000
My jaw dropped and I laughed out loud when I noticed the headline on the front page Saturday’s Sharon Herald newspaper: "Dairyman dumps 1500 pounds of milk." Pictured below was the jumpsuited farmer in huge rubber boots dumping out gallons of perfectly good milk.
Why was he doing this? To protest low milk prices.
Now I know what you’re thinking: "Yeah, right on! Milk prices are too low and we’re not going to take it any more! I want higher prices, and I want them now! Also, computers... they’re too cheap now! Too many people can afford them! Up with prices!"
What, you weren’t thinking that?
Well, neither was I, but the New Wilmington farmer, Sean Nolan, sees low prices as a scourge that must be eliminated. Mr. Nolan—a self-identified "grassroots farmer, family farmer and endangered species"—claims that current prices don’t allow him to meet his cost of production. What’s caused this situation? "Megafarms" 100 times larger than his and "over-importation" of foreign milk. In other words, Mr. Nolan is upset because he has been out-competed. He is annoyed because other dairy producers are more efficient than he is.
And he’s not just crying and spilling milk. He demands that the government institute a "cost-of-production emergency floor price" of $15.50 per hundred weight—about 36% higher than the current price.
On its face, that might seem reasonable, and we might sympathize. Prices should cover costs, and we should do what we can for the family farmer, right? But further thought leads us to the conclusion that such a price floor makes no sense.
What if I were to go into business as a dairy farmer? What if I invested large sums of money into expensive equipment, and then only chose to milk one cow? And then, because I don’t know anything about dairy farming, I wouldn’t be able to produce much of anything from my one cow. My costs per gallon would be outrageous. I wouldn’t make a profit, and I wouldn’t deserve to. Would it be appropriate for the government made my costs of production the "price floor"? Of course not.
Why should it be different for anyone else? Nolan milks thirty instead of just one, but the market has shown that to be an inefficient number, too, and that’s probably why he can’t cover his costs.
Mr. Nolan was heard to say, as he dumped the milk, "We’ve got a so-called surplus for you!" The funny thing is, if a price floor were instituted, there really would be a surplus, because producers would want to sell more at the higher price than consumers would be willing to buy. Apparently he’s never taken Econ 101.
Still, the laws of economics are often insufficient to prevent the government from instituting foolish and destructive policies. There are price controls on milk—the floor just happens to be lower than Nolan and others (more than 50 demonstrators recently gathered outside a nearby Dean dairy plant to protest low prices) want it. So it’s conceivable that the regulators could pay attention to this plight. Fortunately for consumers, their more efficient competitors seem to have a greater influence on policy these days.
We may have warm and nostalgic feelings for the idea of the "family farmer." People often have difficulty adjusting to change. But material progress necessitates that obsolete institutions go by the wayside. Unless we irrationally believe that some jobs are inherently sacred, there’s no reason to artificially prop up any failing business.
If Mr. Nolan can’t find a way to compete with better dairy farms, perhaps he should stop wasting milk and effort and do what most businessmen do when they can’t make a profit—find a different business.
Meanwhile, the rest of us should celebrate the increasingly low prices—for milk, and for everything else—that the market blesses us with. There should never be a law against low prices.
© 2000 J. H. Huebert