Dairy farmers throughout Europe sprayed about three million liters of fresh milk onto fields and roads to protest milk prices that have fallen so far -- 40 percent since spring -- that they have been unable to pay their bills. In the small town of Ciney in Belgium, where about 2,000 dairy farmers took part in the demonstrations, milk was sprayed onto fields and roads. A day's worth of milk production was dumped to highlight the dairy farmers' plight.On the surface this appears to be a report of unfortunate farmers protesting their mistreatment by adverse market conditions. Falling prices are, however, part and parcel of a receding economy, just as surging prices accompany a boom. Most agricultural communities and other commodity-based businesses have in place some mechanism by which farmers/miners/manufacturers can hedge their risk, purchasing or selling options and futures on the price of their product in order to guarantee a sale price well in advance. When done properly, the businessman or farmer can lock in a modest profit. Some choose to ignore these opportunities and instead hope that commodity prices will rise and/or that fertilizer and other costs will fall, allowing them to make a much larger profit.
I obviously don't know the details of the situation in Europe; it's possible that some government interventions or policies have screwed things up. Half of my genes come from a dairy and corn farming background (the other half from railroad workers), so I'm sympathetic to the difficulties and risks inherent in farming, but I'm also aware that there are risk-takers on farms just as there are risk-takers on Wall Street.
Ask them about the subsidies they receive; ask about use of fertilisers that then pollute the waterways; ask about research into milk wastes as a biofuel...ReplyDelete
But yes - being a grower/farmer will break your heart: if the prices don't get you, the weather will
The dairy farm down our little rural road went bust last month. The young couple who were running the farm said that milk prices had fallen so far that they could not make a living milking cows. They and we recognized the problem for what it is. There is a heavy risk inherent in any kind of farming. These unfortunate folks lost the bet. Very sad, but risk is a part of any business.ReplyDelete
Well said - risk is part of any business, and those that don't hedge their bets would actually make a nice nice living in boom times.ReplyDelete
An alternate example: a Cylcone/Hurricane in Queensland Australia destroyed the banana crops up there for about a year. We experienced high banana prices. But at the same time we all felt bad for the poor farmers losing their crop.
Turns out that the price rise was higher than the fall in production (it was seriously like a rise from $2 a bunch to $11 or something). We still wanted to buy bananas! They made higher earnings than before the disaster.
Not so sad a story.