Dairy Supply Management for US?

Tamar Haspel, a food writer I follow on twitter, praised this article in Civil Eats about dairy supply management.  The article describes rising grass roots interest in supply management among Wisconsin dairy farmers and some other areas.  The Farm Bureau opposes it, of course. 

Canada has used supply management for dairy, poultry and eggs since at least 1972 according to this wikipedia article.  (I write "at least" because supply management was a feature of depression-era ag policies but I'm not sure Canada used it for dairy.)

Essentially supply management means assigning production quotas to farms, with penalties for over-production.  The US used to have supply management in place for wheat, cotton, rice, peanuts, and tobacco, rules which dated back to the 1930's.  Over time they've all been dismantled.   Judging by the impace of the change on tobacco farmers, the effect of supply management was to slow the decline of farm units.  In other words, it was harder to get bigger and easier to stay small, but the trends were the same.  The advance of technology and the power of markets still work, just slower.

Slow is what, IMO, the proponents want.  If you're a farmer in your 50's, you'd like to keep going until you can retire. Supply management might make that possible.  But if you're a young go-getter in your 30's looking to expand and adopt new technologies, you don't like the concept.  Politically there's always been more old farmers than young farmers.

Wendell Berry Meet Westby Cooperative Creamery

Washington Monthly had a piece on the Westby:

Westby is the exception, not the rule. It’s a holdout from an earlier era when co-ops helped farmers and rural communities keep a much larger share of the nation’s wealth than they do today. Most everywhere else across rural America, the powerful cooperative movement has either faded or, worse, become co-opted by giant monopolies that prey off the very small-scale producers they’re supposed to protect. In that way, they reflect a broader change in the economy. While pretending to represent farmers’ interests, these co-ops in fact dictate prices to farmers just as Amazon dictates prices to book publishers and Walmart to its suppliers. Cooperative Creamery in WI

Wendell Berry writes for the Henry County Local on the recent spate of creameries and distribution channels dropping dairy farmers and includes this:

The person interviewed in these several articles who makes clear and admirable sense is Gary Rock, a dairyman, one of Dean’s terminated, in LaRue County: “He would like to see a base program across the nation that sets production quotas in line with market demands.” He thus sees through the problem to its solution. He is advocating the only solution to the problem of overproduction. Kentuckians don’t have to look far for an example of the necessary solution, for we had it in the Burley Tobacco Growers Co-operative Association. That organization effectively controlled production, maintained fair prices, and gave the same protections to small producers as to large ones. The history of the Burley Association disproves, as its membership conscientiously rejected, the “inevitability” of the destruction of family farms by agribusiness corporations.

Of course Berry is wrong.  Production wasn't controlled by the co-op, but by your faithful USDA/ASCS bureaucracy (operating in conjunction with the co-op).  "Supply management", one term for the sort of program involved, is something Canada still uses for dairy and eggs and maple syrup. We dropped the tobacco and peanut supply management programs after I left, not that there's any relationship. :-)

Blast From Past: Tractor [Cades]

Interesting piece here from FiveThirtyEight, comparing the upcoming science march with other collective action protests, especially the "tractors on the mall" protests.  I remember them well.  This was the time period when I moved from directives to programs, specifically the "normal crop acreage" concept (i.e., a base for the whole farm rather than crop specific, intended to give more flexibility to farmers) and a disaster payments program which was, in effect, competing with crop insurance to see which approach would become the one for the future (crop insurance won over the next 15 years).

It's significant, I think, that the 538 post links to the American Agriculture Movement website; the AAM was the organization behind the tractor cades, but in fact the website is defunct, with nothing updated since 2015. While commodity prices are down and have been down for the last few years, the farmers who are left aren't in as bad shape as they were at the end of the 70's.

[Tweaked the title and fixed the link]

Dairy: Supply Management Versus Organic

NYTimes has a story on Canadian dairy farmers and their relationship to the EU (remember the Canada/EU treaty which was delayed for a bit by Walloon dairy farmers (i.e., Belgium).  Their concern is that more cheese may be imported from the EU into Canada. Two paragraphs:

The way the country’s “supply management” system works now, Canadian dairy farms are almost guaranteed to prosper. Milk production is controlled by quotas, marketing boards keep prices high and stable, and import duties of up to 300 percent largely shut out competition from abroad.

But after the deal, the Comprehensive Economic and Trade Agreement, which was signed on Sunday, comes into effect, much more imported cheese will be allowed to enter Canada duty-free from the Continent. And farmers worry that this one dent in their defenses could be the beginning of the end for supply management.

Later the article cites an estimate of over $200 per year in additional costs for dairy products for the average Canadian farmer, or roughly $.50 a day.  Some speculations:

So the Canadian system probably maintains a lot of smaller family dairies, farms which have been lost in the U.S. as dairies got bigger and bigger.  (Maybe I'll get ambitious and research the point--looks like 11,000 farms averaging about 90 cows.  It's hard to get comparable data but a quick skim of this says my generalizations seem valid. This seems to say that there's proportionately more organic dairies/cows in the US..)  The food movement would like that.  But the dairy products in the grocery stores are likely rather generic; with supply management protecting a farmer's place in the economy, there's little incentive to experiment with organic milk, raw milk, or niche cheeses.  The food movement won't like that.

The bottom line, very tentatively, is: families can pay more to preserve family farms or pay more for choice of milk products (i.e., organic).  The downside of supply management is the higher prices apply to all; the upside of the US system is consumers can choose whether to pay the premium prices for organic.

Rep. Lucas Says I'm Wrong

I blogged here that 2013 direct payments wouldn't be made.  The Chair of House Ag says they will be.

The same Farm Policy post notes Vilsack is also a bit skeptical.

Why Do Farmers Deserve Federal Help?

My title is a question which is often asked, particularly by fiscal conservatives and free market types. Why help farmers when we don't help restaurants or dry cleaners or other small businesses which fail.

The simple answer is: they don't deserve Federal help..

But simple is often wrong.

The heart tugging answer is: family farms are the cornerstone of the country.

But that's easy emotion, based on an agrarian myth which doesn't work these days.While most field crops are still grown on family farms, even though the family may be a corporation or partnership, those families are spread rather thinly over the landscape, so rural churches and organizations are at best on life support.  See Prof. Putnam's Bowling Alone.

The historical answer is: because they used to have lots of political power and they still have enough to get legislation passed.

But that answer isn't one of principle, it's one of power: farmers deserve help because they're powerful enough to get it.

So is there an answer which is principled, or at least plausibly principled?

Yes, I think so.  You start with the idea that we're one nation, one society, and part of that means we care for each other.  You add in the contrary principle that we believe in freedom and the market, so people should stand on their own two feet.  The free market principle says we shouldn't keep restaurants from failing (which they do at very high rates) because their success or failure is market-driven.  There are exceptions, of course: when the oil well blew out in the Gulf, BP and we compensated the businesses hurt by the oil spill.  When a hurricane comes through, FEMA will help to rebuild.  Those exceptions serve to clarify the rule: when success or failure is due to the efforts of the individual operating within the constraints of the free market, then no federal help is warranted. So if the failure is from exogenous causes, events outside the system, then one can argue for federal aid. Hence the long history of disaster aid, which gradually has consolidated into crop insuance.

Going further, I can argue for help based on the structure of the market system in which farmers find themselves, or at least found themselves in the past.  As commodity producers with no power to set prices, they were at the mercy of the market.  (Airlines are also commodity producers with no power to set prices individually, but they're so few of them they can signal each other when they're ready to raise prices.  Even so, I understand over its history the airline industry has never made a net profit.) Consequently it was justified for the government to use its power to permit cartels to be formed, as in the "marketing orders" for various fruits and vegetables and the classical production adjustment programs of the last century.

For the last argument, I can question whether, with modern means of information and marketing, hedging the risks, government intervention is still required.  It is true, I think, a disaster like this year's drought will cause oscillations in the supply/demand for field crops next year.

Budget Savings from Cutting Direct Payments

Chris Clayton reports on a study by FAPRI:

"If direct payments are eliminated and there isn't a rush to ACRE, there would be a 10-year budget savings of about $41.7 billion from FY 2012 to 2012.

Yet, if everyone jumped into the ACRE program, assuming it stayed as is, then the budget savings over 10 years would likely fall to about $18.9 billion, FAPRI stated.

The "Royal Assent" to Our North

I've sort of envied the Canadian system of government--tracking their agricultural programs it seems as if the ruling party can move faster and make decisions with less parliamentary input than in the U.S. (Of course, that's a bureaucrat's dream--no need to suck up to those @#$%'s in Congress.)

But, as this piece observes in passing, they do at times need to get Queen Elizabeth's assent (at least by proxy).

Across the Border

A reminder that the free market has not always been universally accepted--the Canadian minister of agriculture says:

"Attempts by the Wheat Board to invent an imitation marketplace fall far short of the expressed will of barley producers. Farmers have demanded marketing choice. No bureaucratic program can replace this. It is time for the CWB to stop ignoring this unavoidable fact.

It's also interesting that the Minister doesn't have power over the Canadian Wheat Board.

Canadian Programs

Amidst all the turmoil of enacting our farm bill, the Canadian process seems rather tranquil. The government and industry consult, after figuring out how much money to spend, and come up with a program, apparently without passing Parliament. I guess in the parliamentary scheme, much focuses on the budget process.

The Agrinvest plan sounds a bit like a 401K for farmers.

FArm Bill Status

This post seems a good summary of the status of the farm bill while our neighbors to the north still support supply management. I'm not clear on what all crops are supply managed (i.e., have quotas as our tobacco and peanut crops used to, or diversion/set-aside/acr production adjustment as our big 8 field crops had until 1996). So I went googling and found this summary. Because it's wrong in my unhumble opinion about US agriculture, take it with a grain of salt, but it's an interesting contrast.

[Updated--And then there's the EU, where the minister is bragging that she got her rules for 2008 (no set-aside and suspending import duties) in place. (She doesn't note that US wheat farmers are planting winter wheat with no program in place. She could.)]

And Peanuts Are Moving

There was a newspiece a while back about new farmers producing tobacco (i.e, in southern Illinois) under contract with companies. I blogged on it here. And the dairy farms are going out, or hiring immigrant labor to work the 15 hour days. (Actually, that's a lie--dairy farmers just want your sympathy. They don't actually work 15 hours every day. Their workday ends 15 hours or so after it begins, but there's down time and meal time in between. Another reminder: don't trust anyone.)

And now the peanut farms are moving, from Whitesboro (NE Texas on the OKlahoma border) to west Texas, according to this lament.It seems to be a pattern similar to that for tobacco--the old FSA quota program effectively locked in the farms that were growing the crop. End the program, or replace it with a nonquota program, and different farmers in different areas will grow the crop. In the lingo of the economists, it's "creative destruction". In the memories of the people, it's a lost heritage.

A sidenote: both the peanut piece and the dairy post previous refer to horses coming in. I guess all the rich yuppies with their ranchettes also want their own saddle horse? Trying to recapture the heritage of the cowboys (or the Plains Indians)?

Our Neighbors to the North Get a New Farm Program

Google Alerts is a good way to track stuff (actually, it's a good way to overwhelm yourself when you're curious). But Canadian farm programs are interesting, not only the different methods they use to administer them, but the different process for developing them. In a parliamentary system, the executive seems to have more power. This piece announces the program for 2008+:

The business risk management programs that replace CAIS include:

- AgriInvest, a program where both producers and governments contribute to a producers' savings account that will allow producers to easily predict the government's contribution and have the flexibility to withdraw funds to help address declines in income or to make investments to improve farm profitability.

- AgriStability, a program that provides support when a producer experiences a decline in farm income of more than 15 percent.

- AgriRecovery, a disaster relief framework which provides a coordinated process for federal, provincial and territorial governments to respond rapidly when disasters strike, filling gaps not covered by existing programs.

- AgriInsurance, an existing program which includes insurance against production losses for specified perils (weather, pests, disease) is being expanded to include more commodities.