July 28, 2009
Where's The Outrage Over High Milk Prices?
William Watson, Financial Post, July 18, 2009
Interesting article in The Economist this week about the U. S. dairy industry. It seems global demand for milk has "plummeted" and "milk intended for export has spilled back onto the domestic market." The result, as you'd expect, unless you were Canadian, is that the price of milk has fallen. Sharply. The U. S. Bureau of Labor Statistics, which tracks consumer prices, says that in June the price index for fresh, whole milk in the average U. S. city was 178 (with 1982-84=100). Last June it was 216. That's not quite as steep a fall as in housing. But it's over 20% and that's big however you slice it.
Milk prices can fall. Who knew?
In the corner store where I buy milk, the price hasn't changed since January, when the milk marketing board announced the annual New Year price increases. Ottawa's Canadian Dairy Information Centre shows that the country's milk market is as perfectly oblivious to goings-on -- or goings-off -- in the world economy as Toronto garbage collectors. In Montreal, milk was $1.69 a litre in the first quarter of this year, 5¢ higher than last year's average, which was 6¢ higher than 2007's average, which was 6¢ higher than 2006, which was 7¢ higher than 2005, which was... Well, you get the picture. Markets may rumble, the Dow Jones may tumble, but nothing shall stay the stately ascent of Canadian milk prices.
The remarkable thing is that no one objects. Last year our supposedly "fractious" Parliament voted unanimously to continue the now four-decades-old price-fixing system in large parts of our agriculture and to let the World Trade Organization collapse, if need be, so our dairy farmers would continue to have price serenity. Out of 308 MPs, not one free-thinker roused him-or herself to express a dissenting opinion. Such group-think is unusual even in this conformity-loving country. I doubt that if you picked 308 Canadians at random you could get them to agree to anything unanimously.
To realize how truly peculiar our milk thinking is, consider another crucial liquid in Canadians' lives, this one black. When world oil prices fall and their decline is not instantaneously reflected at your local gas pump, the media, the man in the street and Liberal MP Dan McTeague all become apoplectic.
Take a taxi, talk to a neighbour, read a paper or watch the news: Outrage over the oil companies' supposed greed and opportunism is impossible to escape. Every Canadian must have at least a half-dozen conversations a year about how gas prices move up quickly when oil prices are rising but down slowly when oil prices are falling. But I bet not one in 50 Canadians has a conversation about how the local prices of milk, cheese, chicken and other supply-managed products are totally de-linked from economic reality.
One reason for this logical disconnect is, of course, that the world price of oil is quoted on the news every night and the price of gas hits us in the face whenever we drive. We're confronted with local milk prices a couple of times a week -- more if you've got still-growing teenage sons -- but we don't see the world price or even the average U. S. price unless we travel.
Maybe we should petition our TV anchors to start quoting world milk prices -- "Wisconsin crude fell 20¢ a hundredweight today in light trading" -- and then watch as people start to anticipate an effect in the grocery store: "Wisconsin crude has been falling, Charlie, I saw it on the TV. So how come your price per litre hasn't budged?" Knowing Canadians, and how kind and gentle we all are, many of us probably wouldn't object but would politely divert part of our hard-earned incomes as a sort of voluntary welfare payment to support the salt-of-the-earth small-scale dairy farmers we think run our dairy sector.
The reason our industry is de-linked from the world, of course, is that we have stiff tariffs on imports --measured in the hundreds of per cent in some cases. As far as dairy is concerned, we're like the North Koreans: paranoiacally standoffish.
Unfortunately, that's the direction more and more people seem to want to go in as the world recession continues and enviro-mania spreads. High tariffs on imports mean Canadians consume only local milk. The money does "stay in Canada," as the saying goes. But if people in other countries learn how to process milk better or cheaper, we don't benefit. Nor do our producers have to adapt in response. They can stick to their inefficient ways. Moreover, in those industries where we're the world leaders, supply management by others freezes Canadian producers out of foreign markets.
A couple of years ago, as milk prices took off, The New York Times referred to milk as "the new oil." If we Canadians could start demanding as much of milk prices as we do of gas prices, we'd be far better off.
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