Milk Prices Falling--What's The Scoop?

National Public Radio did a credible report on the farm-to-company fall in milk prices today. Go here for that story.

I'm not an expert on farming or the dairy industry. But we have spent some time on this blog talking about monopolies, rising and declining prices and the possibilities of deflation under controlled and uncontrolled circumstances. This report on the dairy industry fits into those blog conversations.

We believe that monopolies occur "naturally" or inevitably under capitalism. The drive for profits and the means used to maintain given rates of profit while cutting other costs works against competition over time.

The drop in farm-to-company milk prices may mark a specific moment in monopolization, as the NPR story suggests, or it may be part of a larger economic turn to deflation--or both. The story points out that two corporations (one of them a coop) controls most milk production and pricing in the US. The Bush administration investigated this monopoly but refused to take action. The Obama administration is indicating that a new investigation is in the offing. Senator Bernie Sanders is also taking lead on the issue.

Farmers who are prominent in the fight against the monopoly say that the companies are paying less than the cost of producing milk. It seems unlikely to me that this is true across the board and in every region, or that that situation can last over a long period of time, but it's clear that the two dominant corporations are linked to one another and that they are forcing small producers out of the market.

The NPR story accepts as fact the argument that there is a "milk glut" and that falling prices are due, at least in part, to this supposed glut and a drop-off in exports. I'm not sure that these are reliable facts or that they tell us much by themselves. Since the number of dairy products available are increasing, the costs of physical plant and equipment are generally holding steady or decreasing in value or cost and farm labor wages are set almost artificially low, there should logically either not be a glut or producers should be able to hedge against it--unless there is manipulation in the market or, perhaps, banks are unwilling to extend credit. Certainly feed and veterinary costs are increasing, but in the case of feed we can point to other monopolies as the culprit. In any case, farmers are getting squeezed and there is no obvious break in prices for consumers. In fact, it seems outrageous that anyone can speak of a "glut" in any food item given the numbers of hungry people in the world.

Finally, we are not hearing enough about inflation and deflation in economic reports. Can NPR, or anyone else, place what it is happening to milk prices in the larger context of what is happening now in the economy? Is it coincidental that prices in other markets are dropping as well, that certain monopolies are emerging from the economic crisis with lower production costs and more economic power and that US fiscal policy seems so uncertain?

The farmers who were interviewed said that they want a truly competitive market overseen and managed by real government regulation. I wondered as I heard them speak if their demands would be called "socialism" by the right wing. If so, the right could lose some of its rural base.