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Comment by ewams | Hacker News Reader

"A gallon of milk costs a farmer approximately $1.90 to produce, but in the last year, farmers have been receiving as little as $1.35 per gallon."

If it cost more to make it than they are getting, why are milk prices not higher?

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Subsidies distorting the market largely. Farmers continue to use rBST to over produce milk, and the fed pays to destroy some of it to avoid collapsing the market.

The situation would sort itself out better if we’d left it the hell alone, but now the pain that correcting this situation will cause is significant

Is this one of those purposeful sorts of policies where the government decided artificially ensuring too much food being produced is better than letting the amount of food produced naturally bounce between too much and too little, preferring the comfort of waste to the possibility of occasional famine?

Possible, but one could accomplish that without adding rBST into the equation. Letting farmers purposefully jack up production and then paying them to destroy the excess product is just incoherent policy.

Setting aside the specifics of milk, there are situations where it is more economical to run a business at a loss than not at all.

Let's say producing a product costs $5 in fixed costs (interest, depreciation, etc) and $1 in variable costs (labor, raw material, etc), for total of $6 per unit. If you can sell the product for more than $6, you make a profit. If you sell the product for $1-$6, you lose less money than you would if you didn't sell it, because you have to pay those fixed costs even if you don't produce any units. You should only stop production if the price falls below $1.

Agriculture subsidies. Farming in the US hasn't been a fundamentally profitable business for decades but the government provides a massive welfare program to ensure the survival of farmers, maintain a stable food supply, and keeping prices low for consumers.

Yes and no. Some some farming is naturally profitable. But much is subsidized.

> ensure the survival of farmers, maintain a stable food supply, and keeping prices low for consumers

Also, farmers are a powerful special interest group. I know a dairy farmer who was invited to meet with a state governor one on one. The farmer flew to the meeting on his family's private jet.

As a side note, a few years ago (~10 to 15 yrs) there was an article / op-ed in the NYT Sunday Magazine. In it the author's "theory" was the growing obesity crisis was due to farm subsidies. In short, cheap corn means cheap high fructose corn syrup.

Hard to argue against that logic.

Cheap food is great for votes. Unfortunately, it also seem to often have ill health consequences.

I'll take it over the health consequences of a food shortage any day.

Easy to say until the health consequences become so massive they suck up so much money you're going to bed hungry. And that __is__ in fact happening.

I hear ya. But that does not diminish the consequences and real cost of subsidized foods.

Fact: Worldwide, more people die from the effects of too much food than not enough.

Milk is heavily subsidized in the US, to the tune of 73% of returns.

https://www.realagriculture.com/2018/02/u-s-dairy-subsidies-...

Planet money did a piece the "government cheese" program during the Carter and Reagan administrations that was supposed to help dairy farmers

https://www.npr.org/sections/money/2018/08/31/643486297/epis...

A gallon in the stores costs $4-5

Yes if you buy "organic" milk in a glass bottle. Around here a gallon in a plastic jug at Kroger is about $2.00. Keep in mind milk is often priced as a "loss leader" to get people into the store..

I don't know where you're shopping. A gallon of milk this afternoon cost me $2.59.

A 1/2 gallon of organic whole milk at a grocery store in Portland, OR is 3.99 or 4.59 depending on if the store brand is available or not. Not disputing any of your knowledge of the industry, just adding another data point.

Even in San Francisco a gallon of milk at Trader Joe's is under $3/gallon.

There's some interesting mechanics in the milk subsidies. The original subsidy was based on the distance from Eau Claire, Wisconsin ( http://icetronauts.tripod.com/milk.htm ).

> Under the system established in the 1930s, the farther a state was from Eau Claire, the higher were the federal price subsidies paid to its dairy farmers on milk sold for bottling.

> For example, the maximum subsidy, or differential, paid to Wisconsin dairy farmers is $1.20 per 100 pounds of milk, while farmers in southern Florida are paid $4.18 per 100 pounds.

California is even further away.

The particulars of it are at https://www.gpo.gov/fdsys/pkg/GAOREPORTS-RCED-95-97BR/html/G...

It is still based in part on Eau Claire. https://www.bostonglobe.com/business/2013/06/08/what-does-bo...

Between water policy, oversupply during the Eau Claire Base Point and existing subsidies... California is a very odd place to produce milk and the cheap milk is a legacy of those policies.

And the last spring and hot summer in Eau Claire ( http://www.aos.wisc.edu/%7Esco/clim-history/stations/eau/eau... & https://madison.com/wsj/business/usda-wisconsin-milk-product... ) will impact the price of milk there, along with the tariff spat with Canada... which in turn changes the amount of the subsidy across the country.

I lived in both the Bay Area and Boston, two of most expensive areas in the US, a gallon of milk costs me less than $3. Trader Joe's is your friend. You can even get organic milk or non-dairy milk (soy, almond, coconut) for less than $6 a gallon.

Really makes you wonder why a country would implement supply management.

Oh America...

Just FYI the situation is the same in Austria, and possibly other EU countries, w.r.t milk prices.

Only thing I can think of is if the government sets price ceilings

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