Brent Rathgeber vs. The cows

by Aaron Wherry

The Conservative backbencher considers his position on supply management after visiting a dairy farm.

On August 2, I proposed in this blog that the system of Supply Management in agri-industries requires a “critical examination”.  I stand by that suggestion; however, it is quite possible that certain supply managed industries might actually survive that critical examination.

Many economists believe that Supply Management artificially reduces supply in order to increase price.  This is partially true; however, the reality of the dairy sector, for example, does not fit well into microeconomic theory.  For one thing, the input costs of a dairy farmer do not always conform to perfectly functioning markets.  But the bigger problem is the highly perishable nature of milk and milk products.  Unlike the notional widgets that economists are fond of, which can be stored indefinitely, milk must be delivered to the dairy within 48 hours and processed and sold within days or it is valueless.




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Brent Rathgeber vs. The cows

  1. “For one thing, the input costs of a dairy farmer do not always conform to perfectly functioning markets.”
    These input markets largely aren’t perfectly functioning due to other government policies, e.g. ethanol, low interest rates driving farm land prices through the roof.
    “Unlike the notional widgets that economists are fond of, which can be stored indefinitely, milk must be delivered to the dairy within 48 hours and processed and sold within days or it is valueless.”
    And despite this, the American markets have somehow figured out this problem.
    Shame to see Mr. Rathgeber cave in in this regard. I would like to see just how far Martha Hall Findlay would be willing to push this policy.

  2. Matlock, you clearly don’t know what you’re talking
    about.
    Americans haven’t figured this out… at all. Just google “California
    dairy pricing” and let me know how well their system is working for them.
    Oh, or tell me how much Americans pay in subsidies because their dairy
    farmers constantly need bailing out. Efficient? I think not. SM in Canada isn’t
    perfect, but I’d rather support local farmers than import the milk from the
    US.. that’s full of RBST.

    MHF’s report is FULL of holes. She said the price of milk
    was over $9! Please find me a retail location that sells milk for that. All the
    did was times the 1L by 4… stellar economics there.

    • Poor example on my part naming the Americans. But for you to argue for government intervention in dairy markets by criticizing a jurisdiction (California) whose government prices the milk? Their complaint is the gov’t isn’t raising the price to match the increased cost of feed due to this year’s drought. Let free markets take over, and the price of milk responds to the drought the same way the price of corn and soybeans did (i.e. it’ll go up).
      Ms. Findlay’s report states the March 2012 price of 4L milk was $6.48 (page 9 if you don’t believe me). Don’t know where you’re getting $9 from.

  3. I’m sure there is a technological solution to whatever storage and
    shipping problems that may exist. Of course we may be faced with
    a situation akin to the thoroughly modern tomato .. shipped in from
    Somewhere Down There .. looking wonderful and tasting like wood
    pulp.
    Fortunately I stole one from my neighbour’s garden last night. Ambrosia.

  4. The markets don’t perfectly function because the price of of a quota for single cow is $25,000. Land, equipment, and efficiency in the trade/profession do not affect this price. It’s a historical anachronism that ha no place in the real world.

    Other countries can deliver mail in 48 hours, sell great milk at 2/3 the price of Canada, and sell eggs in the store that don’t need refrigeration. Canada seems to have a hard time with this.

    I be interested to hear Mr. Rathgeber’s theories on this. No doubt it has something to do with Muclair’s carbon tax. Just make stuff up, if you’re a conservative MP,. Everyone else does.

  5. I am taking a real liking to this Rathgeber guy. Because, not only does he have at least a mouth in his head which does not always depend on Harper moving it for him, he also is apparently somewhat willing to look at facts and refine his opinion. Good on you, Mr. Rathgeber! Please, do try to convince your caucus-mates that behaving like a human isn’t all bad.

  6. I know that Rathgeber is a federal politician (so electricity isn’t in his domain), but he does live in Alberta, so I’d be interested to read about his views of the economic imperfections of Alberta’s electricity system, especially as compared to the previous system.

  7. There is a solution for perishability of dairy products; it is called cheese. And if you look at prices, the older and funkier the better.

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