This week’s “Daily Journal” guest columnist is Michael Sanera, Research Director and Local Government Analyst for the John Locke Foundation.
North Carolina’s farmers have been on the federal dole for so long they know no other way of life. Returning to a free market in agriculture is simply out of the question. In recent testimony before a field hearing of the U.S. House Committee on Agriculture in Fayetteville, a Norlina, North Carolina, dairy farmer commented on the eleven federal programs that govern his farming activities. Surprise! He wasn’t against any of them.
In fact, it seems that he cannot produce milk with just eleven federal programs because in his statement, he recommended the addition of three new programs. One wonders how milk ever appeared on our tables before all of these federal programs were created.
But wait, there’s more. North Carolina’s dairy farmers are not satisfied with the multiplicity of federal farm programs. They want state price supports because federal price supports do not produce the income they think they deserve. Now most of us believe we are worth more than we are being paid, but most of us don’t have the audacity to lobby the General Assembly to force taxpayers to pay us more. But no one said farmers were timid.
A dairy price support bill (S.B. 1156) has passed both houses of the General Assembly, and it is waiting for the Governor’s signature. When signed, it creates a program that will pay the state’s dairy farmers when the “Federal Milk Market Order Class I” price drops below a baseline amount established in the bill. In other words, North Carolina’s dairy farmers are not satisfied with a federally determined price guarantee that is already above the market price.
They want North Carolina’s taxpayers to make up the difference between the federal price and their arbitrarily determined “baseline” price. I am sure that donut shop, bookstore, and shoe store owners wished that they had state subsidies that paid them when their prices fell below a level that they thought they deserved.
The justification for this taxpayer subsidy is even more comical than the program itself. The bill notes that “since 1985 the State has lost sixty-seven percent (67%) of its dairy farms and thirty-five percent (35%) of its milk processing facilities.” This is an economic crisis because the state must now import milk from other states. Of course, everyone knows that North Carolina must produce all of the milk we consume just as we produce all of our cars, shoes, and frying pans. We must be “milk independent!”
For that matter, North Carolina’s legislators need to talk to legislators in Utah and Arizona and inform them of the economic crisis they face because they are importing sweet potatoes from North Carolina. Arizona and Utah need to become “sweet potato independent” by subsidizing their sweet potato farmers.
Our legislators can even provide draft wording for their sweet potato independence bill: sweet potato farms in Arizona and Utah “help maintain green space, keep prime agriculture land under production, maintain water quality, enhance food security and provide a local supply of sweet potatoes….” Since these reasons are used to justify subsidizing milk farmers in North Carolina, they also justify subsidizing sweet potato farmers in Arizona and Utah.
Paragraph “c” of the bill provides a lesson in advanced economics. “The General Assembly finds that one of the primary reasons for the decline in milk production in the State is the gap between the price paid farmers for milk under the federal milk programs and actual cost of production.” Translation: Since the federal price supports provide no incentives to cut costs of production, the state taxpayers must kick in to guarantee that farmers make a profit.
Most businesses would love to have the taxpayers fill the same gap, but most are forced by market forces to compete for customers’ dollars by reducing their production costs or going out of business. Oh, I forgot, North Carolina must use subsidies in order to prevent any more dairy farmers from going out of business. Legislators have divined the exact number of dairy farmers that the state needs and will use taxpayer funds to keep that number constant.
The General Assembly also justifies this program because the state must not lose any more “prime agricultural land and green space” to “rapid population growth and urbanization.” Two important points must be remembered. According to the U.S. Census Bureau, only 7.3 percent of the state’s 48,711 square miles are urbanized. There is not much chance that the state will be paved over by development anytime soon.
Second, by subsidizing dairy farmers to keep their land out of the hands of homebuilders, less land is available for new homes for newcomers, driving up housing prices. Thus urban taxpayers who are 69 percent of the total population pay direct tax subsidies to farmers and indirect costs in higher housing prices.
One need not speculate about the consequences of a free market in milk. A California dairy farmer and milk processor has been exploiting loopholes in the federal and state milk subsidies and regulations. He has lowered his production costs and sells his milk to retailers at 20 cents per gallon less than his competitors.
Obviously, the milk industry cartel is not happy. Republican Rep. Devin Nunes and Republican Sen. Jon Kyl have introduced a bill to eliminate these loopholes. As I said before, dairy farmers are not a timid group when it comes to protecting their government dole.