1. Global milk prices have doubled over the last two years.
2. In some parts of the United States, milk is more expensive than gasoline.
3. There are reports of cows being stolen from Wisconsin dairy farms.
4. The rising demand for milk is coming mostly from developing nations; the average Chinese consumes six gallons of milk a year, up from two gallons in 2000. China is now the world’s leading milk importer.
5. Parts of New Zealand are booming.
6. Only 7 percent of all milk commercially produced is traded across national borders.
7. Sufficiently high (market-driven) milk prices may render many milk price supports and subsidies irrelevant.
Here is the article (NYT, permalink may be pending but not yet).
You could have added another fact. The subsidies will not go away. Farmers being farmers, it takes a lot more for them to be happy with what they get. (having an agricultural background myself). Just wait untill you hear the cries about subsidy reform from the coming WTO negotiations…
average Chinese consumes six gallons of milk a year,
Geez! I drink that much in three *weeks*!
6. Only 7 percent of all milk commercially produced is traded across national borders.
That’s not that surprising, since it’s milk, a more perishable good. (Interesting aside: John Kerry was under
attack in ’04 because his wife’s company, Heinz, “put so many of its operations overseas”, which, even
accepting protectionist logic, is unfair because Heinz makes a lot of foods that need to be produced near
their final destination.)
Sufficiently high (market-driven) milk prices may render many milk price supports and subsidies irrelevant.
Price supports yes, subsidies no. Subsidies always shift the supply curve, while price supports are only
relevant if the free market price is below the supported price.
High prices being the cure for high prices, count on dairy producers to over expand. Likely be a glut of milk in a couple of years.
You could have added another fact. The subsidies will not go away.
According to the article, the EU has been gradually cutting its dairy subsidies since 1993.
Isn’t it astounding that it would seem astounding that milk prices have risen above gasoline prices?
And as for milk not being traded, milk powder can be traded very easily.
Milk has always been more expensive than gas in Canada. At least in Newfoundland.
Dolohov,
No surprise to me.
Time for my venti mocha latte.
I don’t understand how China can consume so much milk – aren’t almost all Chinese ethnic groups lactose intolerant? Do Chinese treat their milk in some way to make it easier to digest, or do they just grin and bear it? Likewise, Japan consumes quite a bit of milk but lactose intolerance rates should theoretically be even higher than China.
Points 4 and 6 seem to be at odds. If most increased demand for milk is from developing nations, and very little milk is traded across national borders, then demand for milk produced in the US should be constant. This points to the supply explanation other commenters have mentioned.
This makes me sad. I drink a gallon a week easy. Milk is the only commodity where I am actively price sensitive. The idea that it’s only going to get worse is lousy. Hopefully it won’t ever get as bad as OJ currently is.
A shortage only occurs when consumers willing to pay the market price go unfulfilled. Anything else is just equilibrium of supply and demand.
China has many cashmere goats that are causing a great deal of environmental troubles. I wonder whether they (the female ones, of course) produce any milk. Many Chinese of my generation watched Heidi on TV while growing up. I think we would all be very happy to drink goat milk. Not to mention it is so much better to have two valuable outputs to offset one negative externality.
@Dewey: The marginal costs of oil are so much lower than the marginal costs of milk. Just think of the grains needed to feed the dairy cows. Oil on the other hand, is *there* for the pumping once the proper equipment is in place.
Yeah, but how else do you explain the difference between gas and milk prices? Market structure?
“how else do you explain the difference between gas and milk prices? Market structure?”
I’ll concede that packaging and distribution costs for milk are much higher. Spoilage costs also.
Really good quality milk (from grass-fed cows, not from Concentrated Animal Feeding Operations) costs way, way, way more than gasoline. I pay $16/gallon for my milk (from Organic Pastures dairy), and drink more than a gallon a week. Worth every penny.
The rising milk price is a good example to demonstrate the changing world in the era of globalization. New emerging economies particularly in south-east Asia and India challenge the “old† economies, which want to participate in the globalization. The hunger of those countries for raw materials, staple foods and other products will become bigger and bigger. In the long run this will result in a higher price, unless you can boost the supply. Consequently this will have an affect on all economies in the world you can find hints in the milk price or the prices for oil, steel and so forth. That’s why even small businesses and consumers will notice the impact of the emerging economies.
To avoid conflicts because of scarce resources or high prices especially for staple food some actions has to be taken.
In the past governmental regulation was and still is an instrument to protect especially the domestic industry and particularly the consumers. In my mind this is not the right answer for this challenge. As you can see in the US Regulation in the dairy industry, it can even have the contrary effect (see Article “Milk Madness† by Chris Edwards, Cato Institute, No. 47, July 2007). Instead of wasting money in regulating markets and protectionism, governments should facilitate competition and let the market regulate itself. New Zealand is an outrider in that field with his deregulated diary market. The country can now take full advantage of the higher demand for milk. Money should rather be invested in new technologies for producing more efficiently or (in this case) in more research for genetically modified cattle food or in any other innovation which helps the domestic industry to be competitive.
All in all, the milk price points out the high complex connection between the economies and the influence of technology, like biofuel. A bigger change in one has an impact on other economies direct or indirectly. Hence, an upcoming economic challenge should be answered with an economic reaction and not with regulation or any other governmental reaction. They should rather monitor the “game† and only intervene when rules of the game are not kept. I believe we will see a lot more of those kinds of problems in the near future, so boosting the supply with the help of technology seems to me the best and only answer in the long term.
Many situations are apparently affecting the prices of milk to rise. The econonmic problems with cows being stolen in Wisonsin is making milk become more scarce in some locations and causing prices to rise. Also the unlimited human wants and need for milk to be used in various foods is causing prices to rise. Just as everyone knows, as the demand increases the prices will also increase. At the rate we are going now, prices will stay high and i believe we will be looking for alternate solutions so people are not spending as much money. The only people being positvely affected by this increase of prices are the farmers. Since the price of milk is increasing they charge more to ship away their milk and in return get paid more money.
With there being a shortage in milk and a higher demand of it, people are going to have to start handing over more money for things they need. I believe in the future that the prices are going to continue rising and there is going to be a major shortage of milk.
Tetra-Pak milk just doesn’t taste the same.
Cow’s milks is suppose to be for cow’s babies. We will survive.
I need more info on this topic.
ghostes are stupid
hi,I University majoring in the legal profession.After graduation,I 徵信 the work of the strong interest.Has worked in several徵信社.Has a wealth of experience. Now I immigrants France,Hope to continue to engage in the work of徵信 credit.
now,is to wake up every day to drink å’–å•¡, shopping. I hope that early awareness of Boles.
thanks,thank very much.
Milk is actually green but the calcium reflects on the sun light causing it to turn white
Comments on this entry are closed.