Lordy be but some people do grasp the wrong end of the stick, don\’t they?
Milk prices have been falling since the 1990s
No, milk prices have been falling since the Neolithic. The prices of all agricultural outputs have been falling since then: that\’s the 8,000 year story of civilisation. That we get ever more efficient at producing the food people need. This leads to our needing fewer people producing it, freeing up that human labour to go do other things like run the NHS, do ballet and become diversity advisers.
If 100% of the people were still peasant farmers we couldn\’t do any of that, could we?
But while prices for the consumer have gone down, the margin awarded to the supermarkets has gone steadily up,
No one \”awards\” fucking margin. Dear God, have these people never heard of this \”market economy\” thing?
“The big problem that we face is what I view as the absurd level of price-cutting by some retailers, particularly those in what is known as the middle ground,” he says. “One retailer is openly selling milk at 99p for four pints. The reality is that such a price is completely unsustainable.
“Such retailers need to understand that if they go on like that, there will be no milk. There is a limit to cost-cutting. Maybe some producers can cut their costs, but not to that level. It is completely impossible.”
Err, no. Simply not true. As it says in the piece itself:
Three dairy farmers go out of business every week, which means not only that livelihoods are destroyed but that buildings fall into ruin and green pastures are sold for development. And as the small producers disappear, the trend will be towards US-style “mega dairy farms”, where up to 8,000 cattle are kept indoors, as the only business models able to produce milk for such low prices.
See? It\’s fuck all to do with processors, supermarkets or the price of butter in China. It\’s that some farmers are more efficient than others. The inefficient ones are going out of business: that\’s what we want to happen. That\’s what makes the entire society richer: producing more output from fewer inputs.
“No one “awards” fucking margin. Dear God, have these people never heard of this “market economy” thing?”
Not any more, but it’s only a relatively recent development. Just an old mindset.
http://en.wikipedia.org/wiki/Milk_Marketing_Board
And there’s still the CAP to “control” supply of dairy products
Generic Guardian Headline 1:
“HIGH PRICES A GOOD THING” (Because they keep employees in jobs. Hurrah!)
Generic Guardian Headline 2:
“HIGH PRICES A BAD THING” (Because poor people can’t afford things. Booh!)
How is a supermarket “awarding” itself increased margin when it sells milk at 99p for 4 pints?
“Lordy be but some people do grasp the wrong end of the stick, don’t they?” They certainly do. Nothing you’re saying is wrong but it was equally true last year and the year before and in no way accounts for the present problem.
We have a 2008-style food price crunch starting at the moment, for completely specific reasons, which, if you are aware of them, you’re choosing to ignore.
The problem is that the market economy is awarding all the margin (or more) to the supermarkets and none (or less) to the producers. It’s evident both from theory and from practice that markets don’t always produce good results – the assumptions of the first welfare theorem seldom hold.
Nevertheless, the bit about “One retailer is openly selling milk at 99p for four pints” is funny. What’s the alternative to selling milk openly? Perhaps there’s another retailer which employs a man in a dirty mac to sidle up to customers and whisper “psst, I’ve got four pints of milk in the back of the van I can do you a good price on, cash in hand”.
It’s interesting that several of the supermarkets have committed to paying prices linked to production costs. One interpretation is that they foresee a future in which there is a UK production shortage (I repeat that imports are more expensive) and they are paying up now in order to lock producers into long-term contracts. If that’s right, the market is working better than it might.
The same people who bang on about this are also loudly complaining about the allegedly ever-increasing need for food banks run by charities to feed people who, er, can’t afford to buy food. They don’t much do irony.
The village I grew up in had (40 years ago) six or seven working farms in and around it (ie within a mile of the edge of the village).
The roads were splattered with cow shit from the twice-daily herding up and down the village.
Now there is one farm, run by the descendants of a guy who ripped out all the hedges between us and the next village to create prairie-type wheat fields.
The man was a barbarian (though his grandkids are putting the hedges back, and yes, I know why), and I loved our shit-covered roads and the cows meandering along and stopping for a crafty munch of the flowers in people’s gardens; I wish it could be forever like that, with the toothless old farmers drinking Marston’s Owd Roger in the pub, binder twine for belts, talking bollocks and moaning (yes, they used to moan then, too) about the price of spuds/lamb/milk/combines.
But it can’t, because if every village worked like they used to we’d all starve.
It’s called progress, progressives.
“It’s evident both from theory and from practice that markets don’t always produce good results – the assumptions of the first welfare theorem seldom hold”
Balls. The fall in milk prices is a pretty good fucking result for me. And one fewer milk farmer is one more shoe shiner, or jester or whatever it is that makes our lives better.
Anyway, Tim has already pointed out that the supermarkets deserve the margin because they’re doing all the bloody work. When the milk farmer drives the milk to twenty yards out of my front door and keeps it chilled, then he may get my sympathy.
‘The fall in milk prices is a pretty good fucking result for me. And one fewer milk farmer is one more shoe shiner, or jester or whatever it is that makes our lives better.’
Amen to that. The (original) Luddites might have kept us all sitting at spinning jennies, in which case more of us would have been employed, but there would have been no iPads, jet aircraft, satellite TV coverage of the Ashes, stump cameras, snicko, hotspot or hard house.
Descendants of those who toiled in the mills were involved in all of the above, just as the children and grandchildren of dairy farmers will go on to do things other than produce milk at a price that people don’t want to pay.
We have a 2008-style food price crunch starting at the moment, for completely specific reasons, which, if you are aware of them, you’re choosing to ignore.
Specific reasons = bad weather. America being broiled and Europe being soaked, neither of which do crops much good.
I’m a firm believer in the existence of AGW, but suggesting the rubbish weather conditions in the northern hemisphere this summer are down to it is just as fatuous as saying “IT’S SNOWING HAHAHA WHAT DO YOU MAKE OF THAT YOU WARMENISTS!!!!!”.
My biased selective quotes from the BBC news today http://www.bbc.co.uk/news/uk-18898830
Headline:
“Two celebrity chefs have urged the public to boycott some supermarkets over cuts to the price of milk. ”
Final sentance
“Those cuts would not affect farmers supplying Tesco, Sainsbury’s, Marks & Spencer or Waitrose as they are paid directly by the supermarkets.”
I have to wonder – if a supermarket reduces a retail price in order to get people using them for that item, and by the way doing some more shopping while buying that item – in what way does that affect the producers of the item? Shop price is down to shop, selling price for farmer is between the farmer and whichever company buys the milk.
Morrisons have a special offer on lemonade at the moment – I don’t hear the media bemoaning the profit cut the lemonade company will experience. Possibly because the company won’t experience it?
Martin Davies: it’s a common complaint of farmers that supermarkets pass price cuts (and BOGOFs etc) directly on to the producers.
So price cuts and offers directly on to producers in relation to milk – do they do the same to other producers? Or is it just milk?
I’ve assembled data on the UK milk market here, together with my thoughts about the implications.
MD: The complaints I’ve seen have been mostly from fruit farmers. There was a code of practice brought in a couple of years ago to discourage supermarkets from doing this sort of thing unilaterally, so it may be more consensual now than formerly.