Should the price of milk be set by the market or the state?

[anandus]

As you probably know (or not) there's a two-day mass protest going on in Brussels by dairy farmers.

They are unhappy because milk is often sold at below production costs due to a drop in international demand and increased competition.
The dairy farmers want an increase of up to 25% in their prices to cover costs.

Dairy farmers in Shropshire, England, recently won a price increase to £0.29 (0.36 euros) per litre from a leading processor.

The EU is the world's largest milk producer and in 2010 nearly 47% of its 123bn euro budget went on subsidies and other forms of financial aid for farmers, including dairy producers.

Personally I think a farm should be treated as any other company and thus submit to the ups and downs of the market. A healthy company tries to be efficient and flexible, is ready for multiple different future scenarios. Also healthy companies aren't (or shouldn't be) dependent on subsidies.

Of course, any form of monopoly or cartels in the sector of processors should be countered, so the free market can do it's invisible hand-thing, instead of extortion of dairy farmers.
But as long as there's no monopoly or cartel I think the dairy farmers must innovate and stop complaining.
(or choose a different job altogether, outsource the cows if the cost of living is too high for such a sector)

By the way, the farmers are rioting in a typical fashion


So what do you think? Should the price of milk and agricultural products be regulated (either directly of through subsidies) or not?
Are the farmers right to protest because of the fact they are losing money with their line of work?

What's your take on it?

Edit:
This is of course not just a topic only about (dairy) farmers, but also about the whole fundamental principle of the (artificial) agricultural sector in Europe (which is immensly subsidised) and the policies of EU towards the agricultural sector.
I'm aware of the origins of these subsidies (the hardships after both World Wars) and the obsessive need for selfsufficiency, but I wonder if it's still neccessary.

 

[Borachio]

Depends. If all subsidies on milk were abolished, I would have to stop consuming it. At the moment, it's cheap food. But it might be a good thing to consume less, as it's not a very good food for adults, being rather indigestible.

Small dairy farmers are being threatened most, I believe, by the mega-dairies currently being started everywhere. It is a shame, as it means an end of a life style. And possibly a big change in the quality of the countryside.

 

[kronic]

What makes you think the EU agricultural markets are not de facto dominated by cartels? Sure enough, large companies (who suck up most of the subsidies) are running the show. By contrast, the number of farmers in Germany is down 50 % when compared to 20 years ago. Since most farmers are rather old, the figure is going to decline even further. Don't think it's much different in other EU countries.

 

[GoodSarmatian]

Let them eat cheese.
If it's not economical to produce so much milk domestically, the EU shouldn't produce so much milk.

 

[Mise]

The market, obviously. They can protest all they want but they're a business like any other business.

 

[Camikaze]

I can understand some sort of government oversight of staple prices, but so as to protect consumers, not producers. Which means that although 'prices are too high' might be a valid reason to intervene to prevent endemic calcium deficiency or something, 'prices are too low' is a very bad reason to do so. Unless prices are artificially low due to dumping, perhaps, though clearly this is not something European dairy farmers would really have much of a right to complain about.

France is no longer on the brink of civil war, so I'm fairly sure it's time for the CAP to go.

 

[Kozmos]

Milk is overused anyway.

 

[Leoreth]

Are the protesters in your picture sprayed with water or milk?

Anyway, do we have any predictions on how much the price of milk would rise should we cut the subsidies?

 

[Borachio]

I haven't found any figures yet. There's this on Croatian farms:

"Hundreds of farms lock their doors because of the miserable milk price. Buyers have announced that they will increase the purchase price to 15 cents, a 1-cent increase. Can the picture be clearer than that?" Igor Resetar, president of the Croatian Association of Milk Producers, told SETimes.

About 2,220 farms closed in Croatia last year, and 963 have closed in the first eight months of this year.

source

In contrast it may be true that US policies actually mean the price of milk is artificially high.

Price Support Program. The Milk Price Support
Program keeps market prices artificially high by
guaranteeing that the government will purchase any
amount of cheese, butter, and nonfat dry milk from
processors at a set minimum price. Those guaranteed
purchases of storable products create steady demand and
higher prices for the products of all dairy farmers. Note
that the price support program props up dairy prices at the
same time that the income support program encourages
overproduction, which puts downward pressure on prices.

I'm confusing myself now.

 

[duckstab]

There is no surer way to guarantee social and political unrest, than to allow staple food prices to rise beyond the level where the general population can afford to remain well-fed.

 

[luiz]

Let the market set the price, so if milk prices are below production costs less milk will be supplied and eventually the price should be above cost. If that doesn't happen, then it's simply better to import all the milk.

 

[ParkCungHee]

I can understand some sort of government oversight of staple prices, but so as to protect consumers, not producers. Which means that although 'prices are too high' might be a valid reason to intervene to prevent endemic calcium deficiency or something, 'prices are too low' is a very bad reason to do so.

But the problem is that the two go hand in hand. While obviously it's possible to over-subsidize food production, prices being too low is a threat to stable food prices.

Because if you tell farmers to simply shut down production if prices get too low, they'll do just that, until food prices get high enough to encourage reinvestment in production, at which point people will have to reinvest capital to return to the previous food production level.

The problem is, food is not a product that people can tolerate being subject to major price fluctuations. No matter what, we have to eat food, whether it costs two dollars a pound or twenty.

Subsidizing the industry when prices are too low and fixing the cost when they are too high is the price we pay not just for cheap but stable food prices.

 

[GoodSarmatian]

I haven't found any figures yet. There's this on Croatian farms:

Croatian farmers have the misfortune of being in a small European country that is not a member of the EU.
It's only logical that they're really screwed.

 

[EnglishEdward]

There is an imbalance of power in the so called UK market.

There are a comparatively small number of large wholesalers
and supermarkets and many many more farmers; the farmers have to
be competent providers while the few professional purchasers merely
have to be aggressively greedy so the purchasers dictate the terms.

 

[dutchfire]

I don't think 47% of the EU budget should go to agriculture. I can tolerate some subsidies and can, in some cases, see the point, but this is rather ridiculous. (Note: according to wiki, it will go down to 32% in 2013. Still much). In another perspective, it is €100 per EU citizen per year. That doesn't seem like that much.

I think we shouldn't give subsidies to the point that we are a large net-exporter of milk. I think we should just make enough milk for internal consumption, with a little to spare for "a bad year".

 

[Mise]

I definitely would prefer the extra €100 tbh...

 

[dutchfire]

I might spend more than €100 on milk annually.

 

[Mise]

You may well do, but I don't see how that's relevant?

 

[Murky]

The market should determine price, but the state should provide enough of a safety net so that people can buy as much as they need.

 

[Truronian]

Don't know much about this, but I do think it's environmentally unsound to subsidise industries that require vast amount of cattle given the huge quantities of methane they give off.