Posted by rrlund on February 17, 2023 at 10:23:04 from (173.225.203.213):
In Reply to: Re: price of farming posted by Stuart on February 17, 2023 at 08:47:54:
I'm not going to spend all day talking about it, but dairy farming was HEAVILY subsidized in the 70s and 80s. Price was tied to parity. Milk was subsidized at 85% of parity with adjustments made every six months. We could borrow money at the bank knowing that the price was always going to be propped up by the government. We were due for an increase in March 1981, about six weeks after Reagan took office, but one of his first acts was to put a halt to it and we never got another one.
Warehouses were bursting at the seams with government owned cheese and powder. Michigan Milk Producers Association had a powder plant and a butter plant, but no cheese plant at the time. They bought an old butter plant in Remus and converted it to an American cheese plant. I remember going to a delegate meeting after it opened and the general manager of MMPA was complaining about lack of profits because that cheese plant was loosing money. I remember another delegate asking why we were making American cheese then if there wasn't any money in it. Before the GM could answer, I said ''Because that's what the government buys.''. Walt got red in the face, but didn't deny it. A good amount of the powder we were making at Ovid was going right to government storage, so why wouldn't management think we'd make money selling cheese to them too.
Not a saying what Reagan did at the time wasn't necessary, but don't wax over it, the whole dairy industry ran on government support. MMPA eventually got in to a partnership with Laprino Foods and started making Mozzarella in that plant, built another plant about ten times the size and got out of the government cheese business, but that was the way the whole industry had to go. Processors had to find an actual market for their product and supply and demand set the price. It was a classic case of trickle down economics. It trickled down to the producer too. If you couldn't produce milk for what the market would pay, the bank foreclosed and they had an auction for you if you wouldn't do it yourself.
Remember the government cheese giveaways? My dad drove truck to all the drop off points for a few years. Once a month, low income folks and senors could go and pick up big blocks of cheese and other commodities. Sometimes there was even powdered milk out of government storage included. I'm not ''blaming'' Reagan, but the cost saving policies of his administration changed the entire dairy industry from a big government supported industry to one that became totally market oriented. I can remember sitting in an MMPA delegate meeting in the mid 80s and were just getting started with the resolutions part of the meeting, where we discussed and voting on resolutions that would guide the co-op for the coming year. The first several resolutions always involved what we were going to ask the government for that year. As soon as we started in, I told the president of the co-op that we might as well move on, we had already gotten all we were going to get from this administration. Painful to say, but it was the truth.
My wife and I survived the transformation, but a lot, and I mean A LOT didn't. If I had been financed through FHA or Farm Credit, I honestly don't think we would have made it, but I was banking through a little single location bank and the bank president was all that saved me. He called me in one morning. I was expecting the worst. He told me he wanted to see me make it, but I was going to take some lessons in finance from him and he was going to be the one to work out the plan that would save me. He gave me homework that day and I spent several days in his office getting things straightened out and getting educated. The days of two predictable milk price increases a year were over. He knew it and so did I. Thank God he cared enough to work with me, or, painful as it is to say, The policies of the Reagan administration would have sunk me in the 80s, no doubt about it.
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