Free the milk market

June 30, 2010 05:52 AM
 
It was amazing to witness the polarization of opinions at the recent Department of Justice/Agriculture workshop/hearing. There is universal consensus that the present system of milk marketing is failing. All who attended the workshop would agree that the common dairy policy objectives are:
 
The milk marketing system must be fundamentally changed,
Competition is our friend, not our enemy,
We must reduce the complexity of milk marketing and make the milk price discovery process more transparent, understandable, and responsive to local, regional, and global circumstances, and,
Our milk marketing system must be unbiased and encourage diversity, choice, innovation, flexibility, and justice for all parties and all regions.
 
Some may feel that the pursuit of these lofty goals demand more regulation and central oversight. Others feel the exact opposite—we need less regulation and more freedom! It all boils down to the question of whether we trust centralized administration or decentralized free markets. There really is no “middle ground” on this fundamental question. Either we have regulated markets with centrally administered prices, or we have free markets with free prices.
 
Ironically, it is LAW that protects or preserves both—therefore, we either must change the law or at least change the way the law is administered. Antitrust law was enacted to protect fair, unbiased, and freedom promoting competition and free enterprise.
 
Nineteen years ago, the Department of Justice stated that “rather than perpetually re-engineering the current [milk] regulatory scheme to compensate for its shortcomings and misincentives, the most effective way to make milk marketing more efficient” is to “move decisively toward a free market.” (emphasis added)
 
On the other hand, there are those who sincerely feel that some kind of centralized administration is necessary in order to achieve the same common objectives. A wide variety of ways to “re-engineer the current regulatory scheme” were discussed at the workshop/hearing. All of these suggestions would empower or enable central administrators to “compensate for” the “shortcomings and misincentives” of our “current regulatory scheme.”
 
Milk Producers Council has proposed, promoted, and defended the Dairy Price Stabilization Act. The Maine Dairy Industry Association has proposed a new competitively determined base milk price. The Commodity Futures Trading Commission has proposed new efforts to assure that the Chicago Mercantile Exchange, the present basis for national milk prices, is not manipulated.
 
However, all of these suggestions do not make for the fundamental change we so desperately need. All of these suggestions simply preserve and “re-engineer the current regulatory scheme” that nationalizes profit margins based upon policy induced absolute minimum market clearing prices.
 
On the other hand, free market prices maximize producer prices, are simple, transparent, and easily understood by producers, processors, and consumers in all locations and circumstances. Free market prices are unbiased, flexible, responsive, and promote choice, innovation, and efficiency. Free market prices constantly and consistently reflect local, regional, and global supply and demand. Free market prices promote responsive regional and local milk price adjustments for feed, fuel, energy, labor, and other increasing costs. Free market prices allow competition to reduce and eliminate waste, inefficiency, market power, and excessive profiteering.
 
The Departments of Justice and Agriculture must recognize that where increased oversight is desperately needed is in the unbiased, impartial, and consistent administration of the law not in the administration of milk prices. The Department of Justice needs to phase out and sunset the Agricultural Marketing Agreement Act’s antitrust immunity. The Department of Agriculture needs to cease its futile attempts to find substitutes for free market prices, phase out of milk price regulation, and transfer its focus to the assembly and dissemination of free market determined milk prices for all regions of the nation. In my opinion, this is the only way to address our common concerns and to meet all of our common objectives in milk marketing.
 
Randal Stoker
Former dairy farmer and public servant
Woodbridge, Virginia

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