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Dairy Subsidies Have Created A Mountain Of Surplus Cheese

Subsidies: According to the federal government, almost 1.4 billion pounds of surplus cheese now sit in refrigerated warehouses around the country. Yet dairy production is climbing. What gives?

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The amount of surplus cheese is growing fast — up 6% in just the past year.

According to news accounts, the reason is that dairy production is climbing, while dairy consumption is falling. Data from the Department of Agriculture show that between 2008 and 2017, milk production in the U.S. climbed 13%.

Over those same years, however, consumption has sagged — with per capita milk consumption down 14%, USDA data show.

The surplus milk gets stored as cheese. If formed into one giant wheel, the current 1.39-billion-pound cheese surplus would be about as big as the U.S. Capitol Building.

Two years ago, the Obama administration effectively bailed out the industry, when it bought up $20 million worth — 11 million pounds — of cheese, which it then used for food assistance programs. But the stockpile has grown 16% since then.

If all this sounds odd, it is.

In what other industry would you find producers continuing to ramp up production while demand slides, and then stuffing the growing pile of surplus into warehouses, hoping the federal government will buy some of it?

What makes the dairy industry different is decades of government efforts to “support” dairy farmers with various subsidy schemes. The 2014 farm bill did away with old federal price support programs, but replaced them with heavily subsidized insurance that essentially guarantees margins for those who sign up. This year, the dairy industry successfully lobbied Congress to expand this subsidy program.

Distorting the Market

By interfering with pricing signals, the effect of these subsidies has been to encourage production, almost regardless of market demand. It’s a problem not just with the dairy industry, but with other agricultural products on the receiving end of government largesse.

Each year, in fact, taxpayers fork over more than $20 billion to subsidize corn, soybeans, wheat, cotton, rice, dairy and a few other commodities. Critics of these subsidies say that not only do these programs distort the market, but they tend to benefit big agribusinesses at the expense of family farms.

The 2014 bill was supposed to include provisions to prevent dairy overproduction, but clearly it hasn’t worked as intended.

Dairy farmers say they need these programs to survive. We doubt that. Like every other industry, they’d learn to adapt to market changes.

In the meantime, ask yourself this question: Why should taxpayers hand over their hard-earned money to protect other people’s jobs in a declining industry?

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