Tuesday, November 13, 2012

Why are cows leaving California?

It is not because of high taxes or unfunded pension liabilities.  Rather it is due to the low regulated prices that cheese producers get to pay
Some 100 California dairy farmers are shutting their doors this year, according to the Milk Producers Council, a group representing dairy farmers.

Those of you who read this blog know that markets would fix the problem, leading to higher prices which would reduce demand from processors and increase supply from dairies.  However, in California, they are using regulators, courts, and the legislature, rather than markets, to set prices:

Last week, four groups representing dairy farmers ... filed a lawsuit in August against Karen Ross, the secretary of the California Department of Food and Agriculture, which sets the price that cheese makers pay for milk.

But dont worry, help is on the way.  Last month, Ms. Ross "assembled a task force of producers and processors to study the issue."

I eagerly await their report. 


  1. Hi,

    I would like to point out that the prices are regulated as minimums, not maximums. The farmers can choose to sell at any price greater that the currently allowed minimum. The dairy farmers are basically asking the government to require a higher price. In other worlds, this particular regulation does not limit the market’s ability to adjust the price upward. Rather it is the dairy farmer’s desire to price close to the enforced minimum, in order to be competitive, which is causing the distress. It seems likely that in an unregulated market the price for milk would be even lower, not higher. I’d be interested to hear why you think the price would rise without this floor price.

  2. Nice blogging for information of California cows & dairy products but at the same time feel sympathy with cheese producers get to pay. :(