Milk-Seeking

Here's a depressing story about milk farmer Hein Hettinga, an independent farmer whose farms are so well run, he's able to dramatically lower the cost of milk to his purchasers:

By controlling all stages of production, Hettinga, 64, says he can produce milk so efficiently that he and his customers can make a hefty profit at dirt-cheap prices. Such vertical integration, as it is known, is increasingly popular in agriculture as farmers and processors try to find ways to eliminate costs and increase revenues.

But then you had to guess that this was coming:

But in the highly politicized world of dairy, efficiency could carry a price. Major dairy cooperatives and milk processors successfully persuaded federal regulators to write new rules that would prohibit the business practices that Hettinga has so successfully put in place.

Under the proposed regulations, Hettinga could continue to process his own milk only if he agrees to participate in a federally regulated pool of milk revenues, which would essentially require him to pay his competitors to stay in business. A bill that would have a similar effect is working its way through Congress.

Hettinga, who emigrated from Holland to California at age 7, said the pending regulations were an effort by dairy heavyweights such as Dean Foods and the Dairy Farmers of America, the nation's largest dairy cooperative, to monopolize the milk business.

Suprise!, just kidding, no surprise at all.  It's amazing that we fret about inflation, while the government is punishing farmers whose practices help to mitigate it.  Oh, but don't we need federal agriculture subsidies to preserve the American farmer, and that way of life?

Comments

[Robert Moss]

Definitely a depressing story. One interesting note is that the author claims "vertical integration" is growing in popularity "as farmers and processors try to find ways to eliminate costs and increase revenues." In most industries, though, vertical integration is on the outs as firms try to specialize in their value-add portion of the chain and let more efficient vendors handle the other parts. Vertical integration here is not a way to improve efficiency but rather escape burdensome regulations, a reflection of the ongoing perverse side-effects of such ill-conceived laws.