Quotas Termed Humane Way Of Reducing Surplus
BY MARTHA SHELDON
New York Staff Correspondent
SYRACUSE - Mandatory
production quotas for the dairy
industry are a more humane way
than bankruptcy to bring supply in
line with demand, according to
Texas A&M University
agricultural economist Ronald
Knutson.
“Nobody says farmers shouldn’t
make a profit,” rebuts Cornell
University agricultural economics
professor Bernard Stanton. “What
they do say is, some farmers
should not get their cost of
production.”
Economists Knutson and Stanton
argued the pros and cons of
mandatory supply management
recently as part of a day-long
conference exploring the history of
supply-management programs
and their implications for the dairy
industry. The conference was
sponsored by Cornell University in
response to an increased grass
roots interest in the topic. Over 150
farmers, milk handlers,
agricultural journalists, and
representatives of dairymen from
New York, adjoining states,
Canada, and states as far away as
California attended the con
ference.
Knutson set the stage for ad
vocating mandatory supply
management by explaining that
the current national dairy policy is
in disarray - volunteer production
control programs have failed to
restore the balance between
supply and demand,- a
technological explosion is on the
horizon, there have been regional
shifts in production, and the
support price for milk will have to
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drop to |8 per hundredweight to
bring supply back in line with
demand.
“The dairy program is outdated
and, worse than that, will fall of its
own weight. Only mandatory
controls can effectively solve the
problems,” he maintained.
Knutson said dairy farmers need
mandatory supply controls
because there is no escape valve
for the dairy industry - there are no
profitable alternatives in
agriculture today for dairymen to
turn to. “We can drive farmers out
by prices or we can provide or
derly transition to lower
production through mandatory
controls.” Knutson contended that
mandatory controls are more
humane.
Although Knutson argued for one
national milk market order and
centralizing all dairy support
programs into one office of the
United States Department of
Agriculture, he recognized the
comparative production cost
advantage the West now clearly
has in the dairy industry.
Knutson advocated establishing
national quotas based on expected
consumption, using 1985 produc
tion as the base for producers over
which quotas would be propor
tioned. Prices paid producers
would be determined by a “free
market.”
Such a mandatory supply
control policy would solve the
dairy industry’s problems, said
Knutson. Production would equal
consumption, the government cost
would be minimal, effects of
technology would be controlled,
and the value of the quota would
reward farmers and provide them
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Hollis Hatfield (right) and Robert Jacobson (left) listen to Judd Mason's point at the
recent Cornell University Conference on supply management programs for the dairy
industry.
with a monetary incentive for exit.
A side benefit, he said, would be to
encourage the movement of milk
production to the most efficient
producers.
No one can argue that supply is
not exceeding demand and that
technology will change the in
dustry, said Stanton, but history
shows that voluntary quotas do not
work and that producers become
interested in mandatory quotas
only when other programs fail.
Once adopted, mandatory controls
will “always be with us,” he said.
Mandatory controls limit the
farmer’s ability to change and
respond to new technology,
Your Oiu Slop
Horton -
Form Supply
Sion
Stanton asserted. They penalize
for over production as well as
under production. The value of the
quota will be built into the
production costs and passed on the
consumer.
Regional shifts will not occur,
Stanton said, because once a
region gets a base it will hang on to
it, just as has happened in the
peanut and tobacco industries.
Mandatory production controls
with built-in price increases to
producers will mean higher costs
to consumers and the inevitable
development of substitute
products, which will in turn lower
demand, he argued.
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Peanalties for overproduction
will be one of the hardest things for
our country to deal with, Stanton
said, but enforcement is essential
to making the program work.
Furthermore, the value of the
quota will present farmers with a
windfall gain and pose a
capitalization problem for the next
generation of dairy farmers who
want to enter the industry.
In his rebuttal, Knutson con
tended the only “freedom” dairy
farmers now have is to go broke.
With quotas, they will have the
freedom to sell their quota. As for
the capitalization of the quota,
(Turn to Page A 22)