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Monday, November 09, 2009

Monday

It is Monday morning and we are back on the rails again. There were some very interesting stories on the radio this morning. The most interesting thing for me has to be the economic issues of Oregon Dairy Farmers.

According to oregonbusiness.com the dairy industry in Oregon has been struggling since the financial crisis drove down dairy prices last fall. The article notes :

"The average price paid to Oregon dairy farmers in 2008 was $20.11 per hundred pounds of milk; the average for 2009 to date is $10.94. Most farmers need prices in the $15 range in order to break even."

Those are some pretty amazing numbers to me. That is a 50% drop in price in the space on one year. The article goes on to note that when dairy was selling for $20.11 many farmers bought more cows and increased operations but the substantial drop in price is forcing many of them out of business. A farmer in Rickreall is quoted as saying that he is losing between $6,000 and $8,000 a day, totaling $1.2 million so far in 2009.

What I find most interesting about this is that this farmer and some others across the country are calling for more price regulation to stop the cycle of boom and bust. I know that I have readers on both sides of this issue. I have one reader in particular who works within the dairy industry and I want to hear peoples thoughts on this issue. The way things stand right now there is what the article called a modest bailout coming for the industry from the federal government of $290 million in direct payments and $60 million to buy cheese.

That does not seem modest to me at all. I guess the question for me is since the precedent has apparently been set for bailouts is this not even something to worry about. Or are bailouts for agriculture a completely different issue and one that should be encouraged since it is a food and health issue? I am not sure what to think. I realize that the basic issue behind the price drop is that when prices went up farmers increased productivity and caused a glut in the market and that glut caused a price drop which is now forcing farmers out of business because they are still paying off loans they received while trying to capitalize on the price hikes.

So can we expect a new price hike once this glut goes away? Are we better off forcing a static price of say, $18, or is it better for the market and the country as a whole to ride the waves of boom and bust?
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