This is how I see it in simplistic terms.
Farmers will not co-operate unless they are desperate. Your support
structures are there to stop agriculture reaching the level of
desperation needed for farmers to work together.
Farmers in the US have reached desperation numerous times in my lifetime.
Cow-calf guys went broke in droves during the mid-1970s. Dairymen went bust
during many times when milk prices cycled low. The real milk price stopped
increasing in 1979, relative to the rate of inflation and costs of
production.
Where you have protected and supported agriculture the co-ops are weak
and have a political focus rather than a commercial focus. This means
rather than trying to control as much of the supply chain as possible to
cut costs and add value they would rather just go to DC and lobby
politicians.
Co-ops control over 85% of the US milk supply. Capper-Volstad allows
co-ops to set price. One of the Co-op Principles is cooperation among
co-ops. What we have is co-op managers. What we don't have is co-op
leadership.
Where you have agriculture that is protected and supported farmers are
too far removed from the market, the signals they get are unclear and
received far too late.
The US has been a dairy deficit production country since the early 1990's.
The signal would then be produce more to meet consumer demands. The
problem is that dairy imports distort domestic supply. And all Kraft has to
do is see to it that there is just a 1% over-supply, and that 1% devalues
all the total supply, not just the 1% that is surplus. So much for
signals.
Your biggest dairy co-op does not control enough of the market to be
able to "set" a price.
Has grazing failed to take off in the US because distortions in the
agricultural economy created by government policies favour other ways of
farming ? i.e. cheap fuel and cheap grain.
One thing I overlooked while in the US was the taxation system, how is
expenditure on new buildings and machinery treated ?
Tom Mason
Grazing is not the sole way of making milk. And cheap fuel was just as much
a factor in NZ's past ability to dry product and transport it half-way
around the world. Oil is heading up again. (The only positive may be that
you Kiwis will stop being a drag on world dairy prices because higher oil
prices will force you to price your exports higher). US dairy and beef
farmers will adapt, incorporate more grazing, and utilize food factory
byproducts that you do not have in NZ. Nor do you have the corn silage
advantage the US does. The only ace you hold is the distance from NZ to Red
China is shorter than from US to China.
Dave G.
