Dairy Trade and Food Security Essay
In case public policy for dairy trade protects the quality, food security, worker’s safety, and environmental abuses. I am in favor of public policies that minimize the intervention of government subsidies, restrictions, and penalties. The purpose of favoring public policy is that government intervention in public matters disturbs the stability and the structure of the free market. Another reason is that government decisions do not lead to desired results more often. Researches show that the federal programs have intervened in the dairy product trade in the United States for years. That causes economic performance, and other factors in the industry have changed drastically. These changes highlight the consequences of government intervention in the industry, but still, the structure of federal dairy price policies and federal programs regarding the performance is unchanged (Blank, 1984).
Countries that are producing dairy products at large across the world; the government controls dairy industries through implementing subsidies, penalties, and taxes. The primary control of the government is on the federal pricing policy of dairy products. Dairy policies by the government criticized for being at the consumer’s expense. Researches (Manchester, 2007) states that policy intervention of government is biased, and this biasness in policy practice affects both performances of the dairy industry and marketing system. Policy biases affect policy itself of countries. Free market trade of dairy products is a flexible way to operate into the market and to earn more revenue compared to the regulations of government subsidies and taxes. The highest impact of government pricing policies has noted into an economic sector that has been managed with the large stocks of feed and by managing cash expenses of the dairy farmers. The maintenance between the milk-feed prices also required for a stable market relationship. Government intervention causes fluctuations in the price strategy of the industry that is a week point. Public policies can perform better because they know the better competition in the market.
There are several dairy policies and acts into the country that was implemented from time to time to regulate the functioning of the dairy industry. For example, the Agricultural Act of 2014, implemented by Congress, introduce a new program, “Dairy Margin Protection Program.” This program aimed to financially assist farmers against adverse conditions in the industry. Apart from this program, other programs include the dairy product price support program, the milk income loss contract program, and the dairy export incentive program that has been removed because of a lack of effective implementation. After the expiration of these goal-oriented programs, many others have been introduced but fail to approach desired results every time. And, in turn, cause fluctuations and contrasts in feed-milk prices (Pettinger, 2019).
In 2014, another risk-management policy initiation was started that concerned with the financial risks and milk pricing faced by dairy farmers. Trade requirements and policies have been changing over time, but there are no exemplary changes that have been seen in policies enacted by the United States. On the other side, public concerns regarding dairy policies are reluctantly changing time-to-time. Production of milk has been moving to a lot bigger homesteads for quite a long time. Creation costs at the biggest all things considered, then costs at littler homesteads. These auxiliary changes have prompted lower normal creation costs in the business and lower item costs. Nonetheless, auxiliary change confuses arrangement; with dairy creation currently covering a wide scope of group sizes, creation expenses, and obligation, approach instruments influence various homesteads in various manners.
The public policy ensures free trade within and outside of the country and removes barriers that restrict the production and consumption of dairy products. Exports and imports should be on easy terms that explain the affectivity of the industry. Exports are important for the growing share of the economy, but still, policies should be politely explaining that need. The United States is among those countries where demand for dairy products is higher, but the intervention of federal pricing policies threatens the demand scale of dairy products into the country. Start during the 1970s, household milk use moved from refreshment items to cheddar, furthermore, other dairy items utilized in foodservice and food-producing. Since liquid milk preparing thinks close to populace focuses, changes in the dairy item blend adjust the geographic scene of milk creation, preferring progressively remote areas. Changes in the dairy item blend may additionally change dairy value connections and consequently may influence dairy value instability.
The purpose of dairy public policies is to protect public preferences and farmer’s rights. But the government subsidies and penalties in different cases affect planned outcomes of policies. Federal pricing policies pose two types of risks for dairy farmers. Dairy farmers get the most part of their income from milk sales, but farm-level milk prices cause fluctuations in the sale of milk and, thus, on the income of farmers. Fluctuations in feed shares are another thing that highly contributes to the total costs. During the 2000s, because of government policy interventions and market development, milk and feed prices have increased. This increase until 2009, cause a crash into the dairy industry when these rates have been largely converged (Cessna, 2016).
After that crash, public policy has been changed again. That shift has been taken to protect farmers from income loss and the industry from economic loss. Although dairy policies have been changed over time, we cannot say that these policies bring satisfactory results. I am favoring public policies that protect trade from any extra-economic incentives. Still, the purpose is not to oppose or criticize government efforts that have been changed from the past few decades. Policies that protect the environment, workers, and ensure the safety of dairy products could be considered for a change. Dairy programs that have been initiated for the purpose of stability into the industry respond to the system and function in numerous ways. On the one hand, it protects farmers by providing incentives and financial assistance. Still, on the other hand, it affects taxpayer strategies, milk production, farm’s financial performance, and price volatility of milk. In the United States since 1949, milk production and milk marketing were somehow regulated by government orders and the way they want. For example, the federal milk marketing order says, the first buyer of milk should have to buy milk from farm or dairy farmers. There are several MMOs into the country and regulate practices of dairy farms. And those regions where FMMO is not operating, prices are regulated through similar state programs. These MMOs have been created by the hearing process, the Secretary of Agriculture of the United States. MMOs make decisions and then, through a referendum process, approve it from dairy farmers to implement decisions and to gather outcomes (Manchester, 2007).
But again, these governments enacted programs that provide minimum prices and income for formers and other associative cooperatives. These settled milk prices are interrelated with the prices of dairy products. Minimum dairy product prices mean minimum milk prices, and these could be increased simultaneously. These programs need to change and improved because FMMO is using government subsidies and penalties to interfere with natural economic incentives. The FMMO is aimed to address two features; pricing and pooling. MMOs divide the milk into categories and then set prices based on classes. FMMO divide the milk into four classes;
Class I: In this class, milk will be used as beverages or fluid milk.
Class II: In this class, yogurt, cheese, frozen dessert, and cream products.
Class III: Cream cheese and hard cheese types.
Class IV: Dry butter and milk products.
This division of classes affects the pricing of products and change the position of farmers. In the 1940s, FMMOs has been used to stabilize dairy markets that were not stable and taking voluntary actions. To limit optional activities, these programs have been introduced. In particular, transportation costs, perishability, and changes underway related to liquid milk promoting prompted broad changes in milk costs and fluid milk accessibility just as unreasonable interest in milk assortment and handling limit. Besides, there was a worry about what might now be named monopsony power held by neighborhood processors over dairy makers. Endeavor’s to elevate cooperatives to address these issues had seen constrained accomplishments during the 1920s.
The United States, as a developed country, has its resources to produce dairy products, and some numerous laws and policies regulate the products and circulation of dairy products. But still some programs and laws discriminating rights of farmers in some regions and this is because of penalties and extra taxes by the government. Everyone is indeed responsible for playing their role, and this individuality creates a meaningful whole. FMMO is also responsible for ensuring the quality of milk products. FMMO ensures that products are healthy and secure before exporting to other countries (Cessna, 2016).
To support my claim about government intervention and the effect of subsidies, taxes, penalties, and restrictions, I have focused on the pricing policies of the United States and how the price of milk products affects the sustainability and expectations of farmers and everyone involved in the dairy industry. Booms of the dairy market have turned into busts since 2007. The budgetary threat was a further acceleration of feed costs or a value inversion in dairy item costs. Item costs have, truth be told, dropped. Feed costs have declined a few, however insufficient to counterbalance the drop in milk costs. To improve the productivity of prices and to improve the demand for dairy products, stability is crucial. Researches (Shields, 2009) shows that the decline in several cows affects the demand for dairy products. To fill the gap between supply and demand, government policies and programs have enacted. These programs regulate dairy export programs. But after that period, government systems failed to maintain export balance, and the export forecast started dropping. The decline in export demand has been because of increased subsidies and taxes that lead to the global recession, higher dairy production, lower incomes, and farmer payments and make the dollar stronger. These consequences make this claim right, “Many developing or low-income countries argue that the policies of developed countries stifle the growth and development of agriculture in low-income countries by the combination of subsidizing production at home and exports abroad. They argue that they, the low-income countries, could do a better job of feeding themselves if developed countries didn’t have the double whammy of production and export subsidies. They further note that they lack the financial resource to compete with taxpayer-funded programs in rich countries.” (Cessna, 2016)
Natural ways to shape, produce, and consume dairy food products are stable and efficient and bring equitable opportunities for developing and developed countries. In the United States, strong planning and public policy support are strengthening the country’s agricultural sector and, thus, dairy products. This is a point to be a worry for developing countries because massive dollar value will put pressure on the foreign economy. Instead of spending on cattle and cows, developing countries will fulfill or balance imports for dairy products. As a free trade supporter, I would say that policymakers should exclude pressuring elements based on the outcomes of subsidies and taxes. Export subsidies should be matched with the trade policy of the respective country (Shields, 2009).
To sum up, instead of putting restrictions and limitations on the dairy product trade from the side of the government, they should be traded openly by using public policies. Researches state that government policies and restrictions and pressure on the developing countries. Different factors, including pricing policies, reveals the fact that government programs are not good in all its forms. One major program FMMO discussed in the paper that highlights benefits as well as disadvantages of the program. Government intervention into dairy food products trade and policies is not always the right thing. The paper also highlights many eras that show consequences on farmers, investors, and producers of government intervention into the dairy food trade. Public policies should be enacted and supported that limit government restrictions and interference into economic matters.
References
Blank, S. (1984). The Impact of Government Intervention in the Australian Dairy Industry. Department of Economics Staff Paper, 22.
Cessna, J. M. (2016). Changing Structure, Financial Risks, and Government Policy for the U.S. Dairy Industry. United States Department of Agriculture, 21-52.
Manchester, A. C. (2007). DIARY PRICE POLICY. U.S. Department of Agriculture, 12-74.
Pettinger, T. (2019). Pros and cons of government intervention. https://www.economicshelp.org/blog/151818/economics/pros-and-cons-of-government-intervention/.
Shields, D. A. (2009). Dairy Market and Policy Issues. Prepared for Members and Committees of Congress, 2-12.