>Not in a free-market economy. Supply & demand set prices. As long as there's
>another co-op in the next county willing to undercut your price by a nickle
>(maybe they're more efficient than yours and can function on less margin, or
>maybe they need cash-flow -now-), your co-op cannot control prices.
By and large, Mr. Fischang, you have the better of the argument. If
you don't mind, I'd like to canvass interested newsgroup readers' reactions
to a few thoughts that your posting inspired:
Cooperative price-fixing is as viable (and, I might add, as
normatively desirable) as corporate price-fixing. Geographic market power,
once wielded to extract an extracompetitive price, immediately invites
outside entry. The only markets where this sort of strategy is
economically "sustainable" are those for commodities characterized by high
perishability, high weight-to-value ratios, and absence of adequate
substitutes. Not since the advent of interstate trucking and international
shipping has cooperative marketing really enhanced returns on capital
in most sectors of production agriculture.
Milk is a different matter. It's perishable, heavy, and well-nigh unique.
That's why dairy cooperatives can and do command prices above levels set by
federal milk marketing orders and by state milk stabilization boards.
(In fact, the federal milk marketing system is in one sense a very big,
nationalized cooperative.) Is it any wonder that 4 of 12 Fortune 500 ag
co-ops are dairy co-ops? In addition, "Big Milk" enjoys quite a few
economies of scale, among them the ability to absorb some of the high
storage and transportation costs in this line of business and -- critically
-- the ability to supply processors during "peak loads." Finally, large
producers have the capital to comply with environmental rules that would
bankrupt many of their smaller counterparts; they also have, I might add, a
measure of visibility and political vulnerability that makes them fatter
targets for ham-fisted law enforcement.
What might happen if we go ahead and admit to ourselves that New York's
Big Milk producers can cover the metropolitan New York City market and
still supply New England with the surplus? Remember: milk is heavy and
perishable, but modern transportation and refrigeration have trimmed the
impact of these problems. Vermont and Massachusetts could leave the dairy
business altogether. Would someone please tell me why this is so
horrible? Would former dairying lands fall into environmentally pernicious
uses? I can't imagine that New England could hold more towns like North
Conway, N.H. (A very ugly, air-polluted, car-clogged cluster of outlet
shops.) Even if it could, we can all rest assured that the old-fashioned
Yankees in rural New England will be getting a good price for their souls.
(Compare Stephen Benet's "The Devil and Daniel Webster"!) My suspicion is
that the "open spaces" would remain open; they would simply cease returning
rents to their (erstwhile) dairy farming owners.
The bottom line is this: Can anyone defend, on the normative terms by which
we all try to make agriculture "sustainable," measures to preserve dairying
in Vermont and Massachusetts? Given the reasonable assumption of largely
stable demand for milk, shouldn't the most relevant environmental questions
in the dairy industry be the number of hundredweights of milk produced per
(a) cu m methane, (b) kg bovine manure, (c) liter bovine urine, or (d) kg
plant protein? It seems that much of the posturing over the American dairy
industry after the Posilac approval (58 Fed. Reg. 59,946) and after the
Supreme Court's West Lynn Creamery decision (114 S. Ct. 2205) is concerned
with an altogether different question: the identity of the humans who will
be managing the reduced number of cows and dairy herds. Since when did
"sustainability" include an implicit entitlement to fix a bygone era's
allocation of human labor resources?
I apologize for the length of the message, but I invite either
private responses or responses posted to SANET.
University of Minnesota Law School
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