Tuesday, June 27, 2006

Why should milk be any different than jobs or construction contracts?...

The price of milk in Chicago may be "rigged". [In fairness, everything in Chicago may be rigged] Actually, all milk prices are, but the system is getting way outta whack because, like all price fixing schemes, it cannot adjust to rapid changes in supply and demand.

Chicago was the most expensive market in the nation for whole milk in 2005, averaging $3.96 a gallon. In the first half of 2006, it has slipped to second behind New Orleans, which has Hurricane Katrina to blame.

For 2 percent milk, Chicago does a little better. It was the fifth-most expensive market in the nation in 2005--at $3.58 a gallon--in the USDA's survey of 30 urban markets. So far in 2006, Chicago has slipped to seventh place for 2 percent milk.

In comparison, a gallon of milk in Carbondale, Ill., just five hours away, was among the cheapest in the nation last year, averaging $2.68 for whole milk and $2.55 for 2 percent.

What amazes me about all these agricultural economic schemes is how the apparent losers - small farms - are the most ardent supporters. Even as consolidation rolls over them - assisted by the government payments - they troop to Washington to demand more of the same.

Government intervention will ensure a handful of enormous farms - my guess is 35-50,000 - producing 90% of our ag output in my lifetime. And it will be small farmers who will make it possible.

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