Why Is Government Fixing the Price of Milk?

Prices should be decided by buyers and sellers.

The Denver Post warns, "Milk, food prices could rise if Congress fails to act."

Congress is working on a farm bill, which, among other things, will set limits on how high or low milk prices can be in different regions of the country.

Politicians from both parties like to meddle in agriculture. When the Heritage Foundation told Republicans not to pass any farm bill, "conservative" politicians banned Heritage from their weekly meetings.

But why should politicians be involved in agriculture? Why should they set food prices, any more than they set the price of books or staplers? The market decides most prices, so we don't have to wait with bated breath for politicians to make up their minds.

In a normal market, sellers charge the highest price their customers will pay -- and then lower the price when they lose customers to sellers who charge less. Competition keeps prices low, not generosity or warm-heartedness. Or government.

The price of milk, on the other hand, is decided by regulators, using complicated formulas. They set one price for wholesale milk used to produce "fluid" products and another for milk used in making cheese. It's a ridiculous game of catch-up, in which the regulated prices never change as fast and efficiently as they would in a market, one buyer and seller at a time.

Next week, California will hold public hearings about milk price negotiations, as if more arguing will reveal the "correct" price. The agricultural news site Agri-View reports that dairy farmers filed a petition with the California Department of Food and Agriculture (CDFA), demanding it implement an earlier, massive milk-price compact agreed to by cheesemakers and legislators.

Under the agreement, cheese processors must kick in an additional $110 million to a statewide pool of money used to pay dairy farmers, who are upset that they've been paid less than what farmers get in surrounding states.

Rob Vandenheuvel of the state's Milk Producers Council says, "Government has the responsibility to keep us in line with what the rest of the country is making, and they're not doing it. It gives us no choice but to spend money on lawyers."

Great. How many lawyers does it take to produce a gallon of milk?

The dairy farmers say some dairy farms lose money, which proves milk prices are too low. But cheesemakers say they can barely stay in business, proving milk prices are too high.

Why is any of this the legislature's business? It shouldn't be. Prices should be decided by buyers and sellers.

Prices are not just money. They're information. Rising prices tell farmers to produce more; that increases supply and prices go back down. Falling prices tell producers to invest in other products. This system works well for plums, peaches, cars and most everything we buy.

But bureaucrats and lobbyists say milk is "special."

Vandenheuvel says cows can't be subject to market demand because "there are several years of lead time between when you decide to buy a cow and when that cow produces milk."

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  • ||

    Oh oh I know: Because Fuck You, That's Why!

    Do I win a prize?

  • UnCivilServant||

    No. And I think you already know why you don't.

  • Surly Chef||

    Man, I came in here just to say that.

    *slumps shoulders and backs out of room.

  • Brandon||

    FYTW, Stossel. It's always FYTW.

  • Archduke Trousersenthusiast||

    Why do you hate poor people?

  • Anomalous||

    Beccause they're tough and take too long to cook?

  • gaoxiaen||

    Not enough marlbing. That's why we have SNAP.

  • gaoxiaen||

    *marbling Dammit, I always see the misspelling a fraction of a second after I hit Submit.

  • Alan Vanneman||

    In 1976 Ronald Reagan stood before the farmers of Iowa and told them that he wanted to bring the free market to American agriculture. The farmers told Ronnie "We don't give a damn about the free market! Tell us where you stand on parity." Ronnie, knowing when he was licked, pleaded ignorance: "I don't know what parity is."

    In 1986, Ronnie urged farmers to vote Republican, telling them proudly that his administration had provided more money to farmers than all previous administrations combined! (True if you don't adjust for inflation, and Ronnie never understood that anyway.)

    The moral? Farmers hate the free market!

  • WTF||

    You mis-spelled your first name.

  • Paul.||

    The moral? Farmers hate the free market!

    Yes, we know.

  • Paul.||

    Oh yeah, you take me back to the halcyon days of 1985!

    You know who else hated the free market?

  • Anomalous||

    Karl Marx?

  • Loki||

    Every politician ever.

  • Paul.||

    Actually, I was thinking the pack of libruhls who organized Farm Aid to whom Reagan was responding.

  • gaoxiaen||

    Al Capone.

  • Marshall Gill||

    Thank Science! I am constantly kept up at night over the fluctuations in milk prices. It may even cause me to declare bankruptcy due to my credit over-extensions. Everything will be better when milk is simply $10 a gallon all the time!

  • ||

    milk is "special."

    Stossel could at least argue that point head on. He ducks it. I'm disappointed.

    The "special" nature of milk dates back probably 100 years. There's some good Cato background on this topic.

  • Nazdrakke||

    Stossel is not exactly the go-to guy for deep thoughts. I think of him as a libertarian billboard; hopefully catching someone's attention long enough to give the product a look.

  • ||

    Stossel is Libertarianism 101.

  • ||

    I think Stossel actually possess a clear understanding of libertarian philosophy much deeper than he projects publicly. He's appealing to a particular audience (these articles don't just get published at Reason).

  • Paul.||

    And then they look inside the box and see nothing but Kochs!

  • Knarf Yenrab (prev. An0nB0t)||

    What's wrong with a box filled with Cokes?

  • ||

    What happens to dairy farmers that don't sell milk at the regulated price?

    The wierd thing is, most Americans probably don't even know that milk prices are regulated. They probably think we have a "free market".

  • Paul.||

    Yep, like how our free-market healthcare system is literally killing people! Literally!

  • sarcasmic||

    Those who force Peter to pay more for Paul's milk will always have the support of Paul.

  • ||

    I feel the most sorry for the lactose-intolerant Peters. And I mean that in every possible way.

  • Loki||

    The Denver Post warns, "Milk, food prices could rise if Congress fails to act."

    And that, in a nutshell, is why I don't read the Denver Post.

  • Gilbert Martin||

    "The dairy farmers say some dairy farms lose money, which proves milk prices are too low"

    Wow - what brilliant economic logic.

    So when a car dealership goes under, the problme was they just weren't charging enough for cars.

    When a restaurant goes belly up, the real problem is that the food wasn't expensive enough.

    I think I'll run right out and set up a hot dog stand on the street corner and sell hot dogs for $1,000 apiece. There's just no way that couldn't be a smashing success!

  • gaoxiaen||

    That might work if you set up directly abeam of the ISS.

  • Knarf Yenrab (prev. An0nB0t)||

    Vandenheuvel says cows can't be subject to market demand because "there are several years of lead time between when you decide to buy a cow and when that cow produces milk."

    As I sit here drinking my post-lunch Maker's Mark, I marvel at this insight courtesy of Mr. Vandenheuvel.

    And if the gods see fit to saddle you with a monicker like Robert Vandenheuvel, don't settle on the nickname of Rob.

  • gaoxiaen||

    Seems appropriate in this case.

  • Death Rock and Skull||

    "Congress is working on a farm bill"

    Why?

  • Super Hans||

    Because FUCK YOU, that's why.

  • Heenan73||

    Strange, that if just one state opted out of price fixing, the whole shebang would collapse.

    Strange that both political parties, that claim to be so different, support milk price fixing. Maybe they aren't so different after all.

  • bassjoe||

    Um... you just realized this?

    The political consensus in this country for most things is kind of scary.

  • Mark22||

    The biggest waste here isn't even the inefficiencies in the dairy market or the inflated prices consumers end up paying, it's the fact that our government officials, politicians, and public sector employees are wasting time and resources on such b.s.

  • Will Nonya||

    "Milk isn't "special." Almost no product is. Let competition set the price."

    Almost no product? SO what is an example of a special product?

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