The price of milk depends on the price of corn

dairyA tidy little story on the rising price of milk in New York state reveals a taste of what we’re in for in surrendering the price subsidy that dirty and non-renewable fossil fuels have been providing us:

Beginning Tuesday, a gallon of milk will go up to $3.54 in New York state – 60 cents more than it was at the beginning of the year and 29 cents higher than two months ago.

Economists say the hike is caused by the demand for clean-burning ethanol, which is made from corn, the primary feed for dairy cattle.

It’s one thing when it’s just tortillas in Latin America, something else when it’s a gallon of kid-juice down at the Quick-E-Mart.

Corn is the standard inexpensive feed used on most dairy farms, at least in North America. It’s not what cattle really naturally eat, but it does the job. The need to farm cheaply has been entrenched in Canada, in particular, by the cartel system the government enforces. In Canada, if you want to produce and sell milk, you have to buy a piece of the national production quota, which is distributed among the provinces by an arcane formula that puts most of Canada’s milk production in Ontario and Quebec.

According to the Dairy Farmers of Ontario, if I’m reading this PDF on the most recent round of quota sales and purchases right, the going rate for the right to produce and sell one kilogram of butter fat per day is just short of $30,000. That’s a hell of a barrier to entry for anyone with a better idea for feeding cattle and making milk, or indeed anyone who wants to produce a higher-quality, smaller-footprint product — perhaps getting out ahead of where he or she expects the market to be in a few years and switching to pasturing cattle instead of feeding them corn — and is willing to accept a reduced profit margin right now to do it.

The effect is to support current farmers’ ways while pushing them to extract maximum short-term profit from their operations, and discourage innovation or preparations for any possible quake in the economy.

In other words, if you’re Canadian and you think the price of milk seems high now

Photo credit: “Silhouetted,” Flickr/Nicholas_T


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