Cato institute calls for significant reforms of U.S. dairy policies.
The large budget deficit, significant costs to consumers and downstream producers, and America's interests in free and open markets demand that Congress use its opportunity in the next farm bill to abolish the federal dairy programs. This is just one conclusion drawn by Sallie James, a policy analyst with the Cato Institute "Cato" redirects here. For Cato, see Cato.
The Institute's stated mission is "to broaden the parameters of public policy debate to allow consideration of the traditional American principles of limited government, individual liberty, free markets, and peace" by striving "to achieve , in a report on U.S. dairy policies.
The report also claims that U.S. dairy policies are "stifling innovation and irritating our trade partners and are egregiously out of date with modern dairy farming dairy farming
Form of animal husbandry that uses mammals, primarily cows, for the production of milk and products processed from it (including butter, cheese, and ice cream). ." Given historically high world dairy prices, now is an opportune time to implement fundamental reforms with a relatively small political and taxpayer cost of adjustment, says James. A better policy, she says, would be one that allows farmers to make their living, like other entrepreneurs, from markets rather than a government check.
According to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. the report, current U.S. dairy policies cost taxpayers more than $4 billion per year in subsidies and adds millions of dollars to the grocery bills of U.S. consumers and to the costs of food product manufacturers. "By boosting prices, the dairy program encourages overproduction o·ver·pro·duce
tr.v. o·ver·pro·duced, o·ver·pro·duc·ing, o·ver·pro·duc·es
To produce in excess of need or demand.
o and penalizes more efficient farmers in the futile attempt to prop up smaller dairy farmers Dairy Farmers is one of Australia's largest and oldest dairy manufacturers, established in 1900, supplying products to local and international markets such as eastern Europe, the Middle East and Asia. and stem the tide Stem The Tide
An attempt to stop a prevailing trend. Sometimes referred to as "stop the bleeding."
If a stock is continually falling, stemming the tide would be an attempt to halt the free fall and change its direction.
See also: Reversal, Trend of decades of changes in the dairy market," says James. By keeping prices artificially high, guaranteeing income supports and preventing import competition, U.S. farmers produce dairy products dairy products dairy npl → produits laitier
dairy products dairy npl → Milchprodukte pl, Molkereiprodukte pl regardless of market demand, James says. That encourages overproduction, which puts further strain on the price-support system and the stocks of dairy products the government must buy to maintain it.
And, James says, some dairy policies are in direct conflict with one another. As an example, she cites the milk income loss contract (which she says encourages overproduction and depresses prices) and the milk price support program (which attempts to hold the price up). In a recent USDA USDA,
n.pr See United States Department of Agriculture. report that touches on this conflict, the department wrote: "The result is that milk prices stay lower longer than they otherwise would, increasing the likelihood of larger CCC CCC
A very speculative grade assigned to a debt obligation by a rating agency. Such a rating indicates default or considerable doubt that interest will be paid or principal repaid. Also called Caa. purchases and raising government costs for both programs."
In addition, says USDA, "Because they have modest effect on prices and returns, federal dairy programs have a limited impact on profitability and viability of dairy farms.... [B]y increasing farm level returns, these programs may enable high-cost farms to remain in the business longer, but only in the short to medium term. In the longer run, high-cost farms will have difficulty competing with low-cost dairy producers."
As the farm bill comes up for renewal and as lawmakers look for ways to reduce the budget deficit, James says the federal dairy program "is a prime example of a policy that belongs in a bygone era. It is in America's interest to remove a program that the Office of Management and Budget The Office of Management and Budget (OMB), formerly the Bureau of the Budget, is an agency of the federal government that evaluates, formulates, and coordinates management procedures and program objectives within and among departments and agencies of the Executive Branch. says is 'causing unnecessary expenditures, product accumulation well above use, and significant market distortions.'"
Political considerations mean that eliminating dairy programs and a wholesale withdrawal of government intervention in dairy markets is unlikely without some sort of compensation for farmers. James recommends that if compensation is deemed necessary to enact reform, "the fairest way to finance it would be to tax those producers who choose to remain." As she sees it, producers would either decide to stay in the industry "and pay a tax to finance the adjustment for their least efficient brethren," or realize that they are no longer competitive and exit the industry.