Recession Causing Milk Industry to Suffer
January 4th, 2009 at 5:20 am - by admin
The milk industry, the target of a recent New York Times article, has a large surplus of milk-producing cows, as demand for consumer goods - even milk - falls with the lack of available credit, and deepening economic recession.
Food production, particularly that with live animals, is a notoriously inelastic industry: from the moral issue of dealing with the animals, to the simple fact production happens on a strict, uncontrolled schedule, it’s difficult for producers to react to sharp changes in the market, a fact which is causing many farms in the Western hemisphere to feel monetary pressures from many angles.
The last 5-or-so years have been marked with huge growth in dairy production (and food production in general) as consumption of staple products increased markedly with the scale of the running economic boom, yet, now, as the growth levels off, and recession sets in, farmers are having difficulty selling the product, which their effective assembly lines are producing - milk.
GM, Ford, and other true assembly line production facilities can easily turn off their machinery when it’s not cost-effective to run it, but farmers are stuck with huge supplies of product that is worthless on the market; and flooding the market, they feel, will simply reduce the long-term value and hurt their sales overall. A kind of oligopolic geopoliticking and price-fixing at it’s finest.
he bags of milk powder represent a startling reversal of fortune for the dairy industry, which flourished in recent years in part because of a growing appetite for milk, cheese, ice cream and pizza in places like Mexico, Egypt and Indonesia. Many of those countries were benefiting from a global economic boom led by free-spending consumers in the United States.
The New York Times cites that the national average for the price of whole milk was $3.89 per gallon in July 2008, a number which rose nearly 70 cents from 2006. A drop in prices in the last months, which of course - data is not clearly available yet - suggests that prices for processed milk foods, and infant formula may have fallen as low as $1.40 a pound; whole milk, however, is still holding fairly strong, at $3.67 per gallon - 6 per cent from it’s peak price.
