Wednesday, April 01, 2015

Milk!

This BBC report on the ending of the EU milk quota system is unduly negative. It's true that small operators will suffer when prices come down and supply goes up, but the decision will be a great net benefit to consumers and efficient producers across the EU. For example, the Irish agricultural minister is very happy to see the change enacted as Ireland, a big dairy exporter, will finally be able to ramp up production.

In the 1980s the EU would guarantee prices to dairy producers, effectively removing market risk by being a buyer of last resort. Of course, supply sky rocketed and the EU had to buy up the surpluses (in 1986 the EU bought a whopping 1.23 million tons of unwanted butter). After this debacle, the EU moved to a system of quotas to restrict supply, which has the opposite effect; wine lakes and butter mountains are avoided but the market impediment also kept prices artificially high.

Finally, they have seen sense. Hue and Cry provide a most appropriate music video to celebrate:

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