Monday, March 12, 2012

What Business are Dairy Farmers In?

Another of the 1300+ blogs in our readers that we haven't linked to. We're devoting 2012 to rectifying the oversight.
From Food Politics:
Adam Davidson in the New York Times Sunday Magazine asks how come dairy farmers have such a hard time making a living?

His explanation: Dairy farmers thought they were in the business of raising cows.  Wrong.  They are in the business of betting on feed prices.
…in the last decade, dairy products and cow feed became globally traded commodities. Consequently, modern farmers have effectively been forced to become fast-paced financial derivatives traders.This has prompted a significant and drastic change.

For most of the 20th century, dairy farming was a pretty stable business…at base, dairy-farming economics are simple: when the cost of corn and soybeans (which feed the cows) are low and milk prices are high, dairy farmers can make a comfortable living.

And for decades, the U.S. government enforced stable prices for feed and for milk, which meant steady, predictable income, shaken only by disease or bad weather....MORE