Economics

Why Buy the Cow?

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cow

From today's Wall Street Journal front pager on the stimulus bill:

Dairy and beef cattle producers butted heads over talk that the government might buy up dairy cattle for slaughter to drive up depressed milk prices.

Correct me if I'm wrong, but isn't the image of families scrimping and saving to buy milk for the children a classic Depression tale of woe? Here we are, with the 1930s foremost in everyone's minds, and we're going to legislatively order the deaths of a bunch of cows in order to keep prices high as a favor to a small but powerful group of dairy farmers?

Who will think of the children

(UPDATE: The same ass-backwards logic was at work in the 1930s, of course, in the Agricultural Adjustment Act. Plus ca change…)

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  1. If milk prices are depressed why are cheese prices so high?

    Cheese costs a fortune. A few years sgo it was cheap.

  2. Am I an idiot? Its completely unfathomable to me why we would want higher dairy prices in a time of economic hardship when people are losing their jobs or getting lower salaries. Am I missing something?

  3. Dairy Mafia: Yep, that’s about it. You gotta problem with that?

  4. Seems to me like they just lost the vegetarian vote

  5. Dairy and beef cattle producers butted heads over talk that the government might buy up dairy cattle for slaughter to drive up depressed milk prices.

    This kind of economic lunacy was tried by FDR through his Agricultural Adjustment Administration, keeping food prices above normal market value and making it inaccessible for the poor, by paying farmers not to farm, and purchasing agricultural goods with taxpayers’ money to destroy them, like crops and pigs. Il Duce’s “economic” advisers seem to keep this “low prices are bad” fallacy alive.

    Ben,
    Am I an idiot? Its completely unfathomable to me why we would want higher dairy prices in a time of economic hardship when people are losing their jobs or getting lower salaries. Am I missing something?

    Ben, not you. Il Duce’s “economic” team is the one missing something – brains!

  6. When did low milk prices become a bad thing? Even for milk farmers, isn’t it possible that low prices would allow people to buy more milk or for producers of milk based products to lower their prices making it possible for more people to buy cheese, chocolate, etc., so that when prices naturally rise again, there will be more people wanting those products that maybe would have avoided them otherwise because the price was originally too high? I mean, why are these farmers the only one in this meeting arguing at each other? We need a common sense rep to sit there and wait for someone to say something stupid, so the rep can point out the obvious benefit to not doing a damn thing regarding price controls and the methods used to implement them.

  7. The prices are lowering because Americans are slowing down their consumption and spending less.

    We know that Americans have been under-consuming and under-spending for far too long! This kind of economy is unsustainable!

    That’s what they’ve been saying all along, right?

  8. stupid is as stupid does

  9. I was thinking maybe while they’re at it, they could drive up depressed home prices by burning a bunch of houses to the ground.

  10. Not to sidetrack, but from the article:

    the president of the Center for Environmental Innovation in Roofing

    WTF? “Center for Environmental Innovation in Roofing”, is this like something necessary?

  11. Salvius,

    You keep a lid on that right now! If some in government learn of it . . .

  12. I’m confused. Why do we need to kill cows to “support dairy prices”. Am I wrong, or aren’t dairy and milk prices already supported by legislative fiat?

  13. And if you sell raw milk, you’ll get a SWAT team sent to the farm. Dairy Mafia indeed!

    I’ve got an idea, let’s scrap all subsidies, cartels and bureaucracy, and let people figure it out for themselves.

  14. You keep a lid on that right now! If some in government learn of it . . .

    Actually….

    No, it would just move the problem to the property insurance market.

  15. Paul,

    We can’t afford that shit anymore! Easier to just kill cows and starve poor people. It’s economics, my friend.

  16. Am I an idiot? Its completely unfathomable to me why we would want higher dairy prices in a time of economic hardship when people are losing their jobs or getting lower salaries. Am I missing something?

    The corporations run the government, not you.

  17. “I was thinking maybe while they’re at it, they could drive up depressed home prices by burning a bunch of houses to the ground.”

    Hey, that would work for the auto industry too!

    We could import some French rioters to burn the cars for us. They have a lot of expertise in that area.

  18. National Milk Producers Federation, sell your own damned cows!

  19. Just think of the drastic measures that are required to support ramen prices.

  20. We could import some French rioters to burn the cars for us.

    You’re joking, right? What, ship in a bunch of H1B visa workers? Overseas outsourcing?

    No, no, no! We have to hire Americans to burn the cars. Or aren’t you patriotic?

  21. I may just be thinking out loud here but . . . maybe the government should hire on cattle rustlers. It worked in Blazing Saddles.

  22. Hey, that would work for the auto industry too!

    Yeah, they could just deliver each person in America a Buick Regal…

    No wait. Let’s burn them to the ground instead.

  23. No, no, no! We have to hire Americans to burn the cars. Or aren’t you patriotic?

    There are too many Americans who would be willing to burn the cars, though, so it would be too cheap to hire them. Now wait a minute, what have I learned about how to fix this problem…?

  24. Paul,

    You fool! Then no one will buy another car. Here’s an idea. Lets just bailout the contributors and lobbiest interests and tell everyone else to fuck off cuz we don’t know what we’re doing.

  25. I was thinking maybe while they’re at it, they could drive up depressed home prices by burning a bunch of houses to the ground.

    The destruction of existing housing stock has been proposed often by many people in “authority”.I think Bill Gross at PIMCO among them.

  26. Am I an idiot? Its completely unfathomable to me why we would want higher dairy prices in a time of economic hardship when people are losing their jobs or getting lower salaries. Am I missing something?

    You’re making the fundamental error of believing that the Obama economic program is being put in place to help the economy.

    Its not. Its a vehicle for political payoffs. Nothing more, nothing less. Those people struggling to support their families aren’t writing checks to the DNC, now, are they? So fuck ’em.

    Its the Chicago Way, baby!

  27. See now, in addition to having workers dig holes and employ others to fill them, now we have an expansion of this concept.

    1. Dig hole
    2. Kill Dairy Cow
    3. Place Dairy Cow into hole
    4. Fill hole
    5. Dig hole
    6. Place people that starved to death due to inflated food prices into hole
    7. Fill hole

    The way I see it, we just doubled or tripled demand for hole diggers and fillers and added a cow killer and carcass handler into the mix. We’ll all be rich in no time.

  28. It seems to me that this whole thing is going to drive down the cost of beef; you eat a dairy cow after you kill it right? Next thing you know we will have to forbid the killing in order to artificially limit the supply of filte mignon and hamburger. Lather, rinse, repeat.

  29. Regardless of anyone’s opinions on the possible benefits of a stimmulus package, I just don’t understand how anyone can support blatantly corporatist policies such as this.

    It’s one thing for the average American to believe that government spending is necessary to get us out of this mess. But believing that we need to make the poorest among us suffer for the benefit of a few politically connected scoundrels is totally mind-boggling to me. To those who would say that public schooling is a failure, I would point out that I think they’ve been successful beyond their wildest dreams.

    Well, I guess I’ll just add powdered milk to the list of storable goods I need to buy before the hyper-inflation begins in earnest.

  30. we’re going to legislatively order the deaths of a bunch of cows

    “Bunch of cows”? As a formerly lactating mother and grandmother, the correct terminology is “herd of cattle.” Please make a note of it. Our Nation’s Farmers?? and their Children? are dependent on Good Legislation?. Thank you. I’d wink if I could.

  31. “I was thinking maybe while they’re at it, they could drive up depressed home prices by burning a bunch of houses to the ground.”

    In my ghetto neighborhood, folks have adopted a more Libertarian approach and are torching houses themselves.

  32. The destruction of existing housing stock has been proposed often by many people in “authority”.I think Bill Gross at PIMCO among them.

    I know for a fact that it’s happening in places like Las Vegas. They’re razing homes by the dozens to make room for…commercial real estate developments. Because that’s just what people who can’t afford to make their mortgage payments and can’t afford to pay down their credit card debt really need, a new place to buy trinkets!

    “So sorry, influential developer who owns half the city council, but there’s nothing we can do about the erosion of home values. But on the bright side, you didn’t pay shit for the land, and as an added bonus we’ll pay you to destroy all the houses and put up a strip mall. Yay!”

  33. “We can’t afford that shit anymore! Easier to just kill cows and starve poor people. It’s economics, my friend.”

    It will work. Really. It will. Because it’s change we can believe in.

  34. “The corporations run the government, not you.”

    That’s a myth. The government EXTORTS corporations, which do everything they can to mitigate. I speak from experience.

  35. “I was thinking maybe while they’re at it, they could drive up depressed home prices by burning a bunch of houses to the ground.”

    In my ghetto neighborhood, folks have adopted a more Libertarian approach and are torching houses themselves.

    What part of Detroit?

  36. “We could import some French rioters to burn the cars for us. They have a lot of expertise in that area.”

    If we can just patient a little longer, we won’t need to import foreigners to do the rioting.

  37. North Minneapolis, actually.

  38. I’d wink if I could.

    FTW!

  39. i stopped buying milk when it went over three bucks a gallon and switched to oatmeal instead

    unfortunately, as someone so poor that i dont own a car, i was never able to exercise this choice with gas

  40. That’s a myth. The government EXTORTS corporations, which do everything they can to mitigate. I speak from experience.

    Which side?

    If we can just patient a little longer, we won’t need to import foreigners to do the rioting.

    And if we need to go faster, take that BART cop and put him on public service duty.

  41. unfortunately, as someone so poor that i dont own a car, i was never able to exercise this choice with gas

    Besides, it’s damn hard to find an oatmeal filling station these days. You have to bring a stove to the grocery store to get a full tank.

  42. “Which side?”

    Both.

  43. Didn’t we learn yesterday that burning cows and burrying them is good for the environment or something?

  44. On the upside, beef, will get cheaper for about a month. It’s time for me stock up on pemmican!

  45. “We can’t afford that shit anymore! Easier to just kill cows and starve poor people. It’s economics, my friend.”

    You really need to leave this stuff to the professionals.

    It’s easier just to kill the people directly.

  46. “That’s a myth. The government EXTORTS corporations, which do everything they can to mitigate. I speak from experience.”

    I lol’d.

  47. “I lol’d.”

    Ignorance is bliss.

  48. There is a way to make money off stupid govt. policy, instead of complaining about it.

    *if* you believe the price of milk will go up, buy milk futures.

    http://futures.tradingcharts.com/chart/DL/19

    there’s a daily chart of milk futures.

    and monthly

    http://futures.tradingcharts.com/chart/DL/M

    i will admit i have never traded milk futures, but they look interesting.

    i frequently trade corn, oil, index futures, natural gas, and the EURUSD currency pair.

    just sayin’ that complainin’ is all well and good, but we are supposed to be good capitalists here.

    the solution to dumb govt. policy is to make money off other people’s idiocy.

    i have NO idea what milk futures will do. i will say on a pure chart basis, they are historically cheap (so is oil fwiw. almost all geopolitical risk is priced out).

    i’d want to look at COT reports and a few other metrics before i decided to trade them, but just saying, that’s what futures markets are there for – hedging and speculating.

  49. The destruction of existing housing stock has been proposed often by many people in “authority”.I think Bill Gross at PIMCO among them.

    Bill Gross is one evil motherfucker, a kind of Orren Boyle Incarnate. His “shake hands with the government” strategy is naked theft, openly practiced.

  50. I’m guessing the liquidity in the milk futures market leaves something to be desired. $1500 bid/ask spread, anyone?

  51. “we’re going to legislatively order the deaths of a bunch of cows”

    We’re fucking Sparta now!

    Let us have the finest timber,
    and line the cattle up four by two,
    and place fire into the trees,
    and watch how it engulfs the skinned cattle,
    while we pray to the father of the gods,
    the son of devious devising Kronos,
    by pouring libations to Zeus.

  52. Isn’t the issue one of conflicting interests? Dairy farmers would certainly like to, um, “retire” their cows to keep prices high, but that would drive prices down for beef producers. This all ends up as part of the stimulus bill because the government has implicated itself into this inter-industry argument via the agricultural subsidy regime. There’s nothing inherent in the stimulus bill that has brought this issue to pass. (In fact, if this issue hadn’t shown up in the stimulus bill it would have shown up in another bill.)

    It is too bad that the administration isn’t taking this opportunity to simply reduce agricultural subsidies and to tell the dairy and beef industries to work out their problems amongst themselves. But it should be noted that the issue is not that the government is forcing higher milk prices; the issue is that the choice to raise milk prices should belong to the dairy farmers themselves. Moreover, as I noted above, in this case the desire to retire cows comes from the dairy industry itself, and it is being blocked by the beef industry via government intermediaries. The government is not dictating prices — it is being used in a proxy war by corporate interests.

  53. Ah, but the cows wantonly spurt greenhouse gases. When “it’s for the children” bumps heads with “it’s for the environment”, which one wins? They’d have to tie, wouldn’t they, since the biggest reason to save the environment is for the children.

  54. “Moreover, as I noted above, in this case the desire to retire cows comes from the dairy industry itself, and it is being blocked by the beef industry via government intermediaries.”

    All well and good timk, and in a true free market it wouldn’t be an issue. But because the dairy folk are getting federal dollars to retire their herds, it gets complicated.

    This all ends up as part of the stimulus bill because the government has implicated itself into this inter-industry argument via the agricultural subsidy regime

    Could not have said it better.

  55. The strange and painful thing about milk prices from a farmer’s perspective is that while retail prices of milk, cheese, yogurt, and ice cream have increased over the years with inflation, the price of milk paid to the farmers themselves has not.
    Retail prices: http://future.aae.wisc.edu/data/annual_values/by_area/304?tab=prices
    Price to farmer: http://future.aae.wisc.edu/data/annual_values/by_area/10?tab=prices
    The strange little jump in 2007 has faded and prices are now falling again and back down to $16/cwt: http://future.aae.wisc.edu/data/monthly_values/by_area/10?tab=prices

  56. Hmmmmmm . . . Lycurgus(the Lawgiver)’s post has given me an idea. We should dig a big pit. Then scream at the cows “THIS. IS. AMERICA!!!” followed by kicking said cows into the pit. 300-tastic!

  57. Buyout programs have been tried before and they did not cut milk production but were very effective at visiting economic devastation on the non subsidized beef industry.

    Our Next Criminal Class: Milk Bootleggers

    Congress attempted to solve the dairy surplus problem in 1986-87 by paying dairymen over $l.3 billion to slaughter their cows.

    Under the Dairy Termination Program, 144 dairy owners got over a million dollars apiece to take a five-year vacation from dairying, and one California producer received $20 million.

    Yet, as the General Accounting Office noted, “Total milk production did not decrease because nonparticipating farmers increased their production during the program period.”[18]

    Mn March 29, 1986, the USDA announced that it would soon be sending 1.6 million dairy cows to slaughter–far more cows than anyone expected to be slaughtered under the dairy buyout program.

    That severely disrupted beef markets, costing ranchers scores of millions of dollars in losses and bankrupting some cattlemen.

  58. “Hmmmmmm . . . Lycurgus(the Lawgiver)’s post has given me an idea. We should dig a big pit. Then scream at the cows “THIS. IS. AMERICA!!!” followed by kicking said cows into the pit. 300-tastic!”

    Blasphemy! Madness!

  59. Lefiti:
    “This is blasphemy! This is Madness!

    Me:
    “Madness…No. This is REASON!”

    -kicks Lefiti into pit of death in slow mo’ with Lefiti’s cronies getting their asses kicked by my badass Spartan Guards.

  60. Correct me if I’m wrong, but isn’t the image of families scrimping and saving to buy milk for the children a classic Depression tale of woe? Here we are, with the 1930s foremost in everyone’s minds, and we’re going to legislatively order the deaths of a bunch of cows in order to keep prices high as a favor to a small but powerful group of dairy farmers?

    Obviously, the solution is to impose price controls so that the retail price of milk is low, but limit production to make sure that the price the farmer gets paid is high. That way kids get cheap milk and farmers never go out of business.

    It’s so simple. Why can’t you libertards understand it?

  61. Hazel Meade,
    Just throw in an income tax hike and I think you’ve got it.

  62. I agree strongly with Hazel Meade. I hope she was not being sarcastic.

  63. Ah! The infamous . . . EDWEIRDO! Or is it . . . Lefiti?

  64. Cows and government…

    Feudalism: You have two cows. Your lord takes some of the milk.

    Marxism: You have two cows. Your community takes them both and provides everyone with milk.

    Socialism: You have two cows. The government takes both, hires you to take care of them, and sells you the milk.

    Communism: You have two cows. The government takes them and puts them in a barn with everyone else’s cows. You have to take care of all the cows. The government gives you as much milk as you need.

    Soviet Communism: You have two cows. The government takes them and puts them in a barn with everyone else’s cows. You have to take care of the chickens the government took from the chicken farmers. The government gives you as much milk and as many eggs as the regulations say you should need.

    Fascism: You have two cows. You have to take care of them, but the government takes all the milk.

    Militarism: You have two cows. The government takes them both and drafts you.

    Dictatorship: You have two cows. The government takes them both and shoots you.

    Totalitarianism: You have two cows. The government takes them and denies they ever existed. Milk is banned.

    Pure Democracy: You have two cows. Your neighbors decide who gets the milk.

    Representative Democracy: You have two cows. Your neighbors pick someone to tell you who gets the milk.

    American Democracy: You have two cows. The government promises to impose price supporting milk quotas in exchange for campaign contributions funneled through the 527 group MooOn.org. After the election, the president is impeached for speculating in cattle futures. The press dubs the affair “Cowgate.” Six weeks later, everyone forgets about it.

    British Democracy: You have two cows. You feed them sheep’s brains and they go mad. The House of Lords debates for months but doesn’t do anything.

    Canadian Democracy: You have two cows. You have no choice but to sell them in order to pay your taxes, which support a man in another province who has only one cow. He can apply for an agricultural subsidy provided the cow speaks French.

    French Democracy: You have two cows. The government dictates a maximum number of milking hours per week and forbids you from milking on national holidays. Cows across the country go on strike and demonstrate by blocking the roadways.

    Indian Democracy: You have two cows. You and your village set aside time to worship them daily.

    Singaporean Democracy: You have two cows. The government sentences you to twenty lashes for keeping farm animals in your apartment.

    Bureaucracy: You have two cows. At first the government regulates what you can feed them and when you can milk them, then it pays you not to milk them. After that it takes both, shoots one, milks the other and pours the milk down the drain. Then it requires you to fill out forms accounting for the missing cows.

    Anarchy: You have two cows. You hand over the milk before your neighbors kill you and take the cows.

    Capitalism: You have two cows. You sell one and buy a bull.

    Hong Kong Capitalism: You have two cows. You sell three of them to your publicly-listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with associated general offer so that you get all four cows back, with a tax deduction for keeping five cows. The milk rights of six cows are transferred via a Panamanian intermediary to a Cayman Island company secretly owned by the majority shareholder, who sells the rights to all seven cows’ milk back to the listed company. The annual report says that the company owns eight cows, with an option on one more. Meanwhile, you kill the two cows because the feng shui is bad.

    Japanese Capitalism: You have two cows. You re-engineer them to be half the size of ordinary cows and produce 5 times the milk. You create an animated cow cartoon called Cowkimon and market the image rights worldwide.

    Environmentalism: You have two cows. The government bans you from milking or killing them. You abandon your cows and grow hemp instead.

    Feminism: You have two cows. They get married and adopt a calf.

    Libertarianism: Whoa, dude, there’s like-these two cows, man. You gotta have some of this milk.

  65. This has all happened before and it will happen again.

  66. Dairy cow does not equal beef steer.

    While it is possible to make dairy cattle into beef, it will be on the low grade market.

  67. Can’t the dairy farmers just sell the whole living excess cows to PETA to frolic in a field somewhere. It wouldn’t affect beef markets because they wouldn’t be slaughtered for food. PETA really sucks at what they aim to do. They seem to not understand the concept that they can buy animals away from people who sell animals in order to save the animals’ lives. Dumbasses.

  68. Japan, 2006: same fucking scenario. They killed the cows and poured the milk down the drain.

    Japan, April 2008: Domino effects of previous cow slaughter hit grain shortage in Australia and no butter can be found for sale anywhere in the entire country. Yay!

    @Nick: clever, but the LAST thing our range and basin ecosystems need is cows getting a cushy retirement and not having those dwindling grass supplies knocked out of their relentless mouths every so often by a hot bolt of steel. I say we kill every motherfucking last one of them, have one EPIC, sea to shining sea barbeque (SSSBBQ) and THEN be vegetarians.

  69. Am I an idiot? Its completely unfathomable to me why we would want higher dairy prices in a time of economic hardship when people are losing their jobs or getting lower salaries. Am I missing something?

    A couple of dairy farmers would starve to death on the streets without subsidies.

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