Don't sell that milk for too little

[patches70]

In Louisiana a supermarket chain got slammed by State regulators because the chain was selling milk for too little.


Louisiana state regulators recently cracked down on a supermarket chain’s weekly promotional deal because it was selling milk too cheaply — which violates state law.

The upscale Fresh Markets was selling gallons of milk for $2.99 as part of a weekly promotional deal. Louisiana requires that retailer price markups be at least six percent above the invoice and shipping costs of the product.

“They can sell it six percent over cost all day long. It’s when they sell it below cost that it becomes a problem,” State Agriculture and Forestry Commissioner Mike Strain told The Advocate.

After getting a complaint about Fresh Market’s promotional deal, Strain’s office sent an auditor to a French Markets store.

At least one Fresh Market shopper was outraged when he found that the state government had intervened to control the store’s milk prices.


You know, selling milk too cheaply hurts the poor.

Is this the proper role of government, to force minimum sale prices for retailers?
The regulators got a complaint, I wonder, who was it that complained? The customers? A rival supermarket?
How did the State come up with a minimum of 6% markup? Why not 5%? Or 1%? Or even sell it at a loss if the supermarket so deems?
Who does this law really protect?


Full article-
http://dailycaller.com/2013/01/26/state ... heap-milk/

[DoomYoshi]

Welcome to the over-regulated world of industrial agriculture.

[Army of GOD]

I remember in my 8th grade US history class, some oil businessman from the 19th century (maybe it was Rockefeller) essentially put his competitors out of business because he sold is oil for so low that he incurred losses, but since everyone was buying his oil his losses weren't as bad as his competitors (in after run-on).

I imagine this has some sort of anti-trust reasons behind it though it could be for "f*ck poor people" too.

EDIT: it was Rockefeller...from "standard oil's" wiki:

The government said that Standard raised prices to its monopolistic customers but lowered them to hurt competitors, often disguising its illegal actions by using bogus supposedly independent companies it controlled.[35]
"The evidence is, in fact, absolutely conclusive that the Standard Oil Company charges altogether excessive prices where it meets no competition, and particularly where there is little likelihood of competitors entering the field, and that, on the other hand, where competition is active, it frequently cuts prices to a point which leaves even the Standard little or no profit, and which more often leaves no profit to the competitor, whose costs are ordinarily somewhat higher."

[patches70]

Yes, that's called "dumping", but that's not what this supermarket is doing. It's just putting out a "loss leader" is all.

Dumping is banned by the WTO as an unfair business practice but the ban does not include retailers. What you are describing, AOG, is not possible for a retailer to do, which is what the supermarket is. Your example is between two producers.
This supermarket does not produce the milk. If they sell it at a loss or even at a lower margin, it doesn't affect the producer.

[Funkyterrance]

I remember in my 8th grade US history class, some oil businessman from the 19th century (maybe it was Rockefeller) essentially put his competitors out of business because he sold is oil for so low that he incurred losses, but since everyone was buying his oil his losses weren't as bad as his competitors (in after run-on).

I imagine this has some sort of anti-trust reasons behind it though it could be for "f*ck poor people" too.

In this example I don't think one chain is going to put the other out of business because of their milk prices, however.
So to put this all in perspective, I would think that a law such as this is enacted to prevent the price of milk from dropping below a certain point where farmers are not making a certain profit for the production of something that is more or less irreplaceable. If milk supply goes below a certain level it's not like you can just start up a bunch of dairies on a whim. When there are animals involved, it takes time for them to grow so you can't just "make more" to fill back the supply. In the meantime people would be screaming bloody murder because there is a milk shortage. If we were talking about oreos or something I would say this case is ridiculous but there is more here than meets the eye.

[BigBallinStalin]

I remember in my 8th grade US history class, some oil businessman from the 19th century (maybe it was Rockefeller) essentially put his competitors out of business because he sold is oil for so low that he incurred losses, but since everyone was buying his oil his losses weren't as bad as his competitors (in after run-on).

I imagine this has some sort of anti-trust reasons behind it though it could be for "f*ck poor people" too.

EDIT: it was Rockefeller...from "standard oil's" wiki:

The government said that Standard raised prices to its monopolistic customers but lowered them to hurt competitors, often disguising its illegal actions by using bogus supposedly independent companies it controlled.[35]
"The evidence is, in fact, absolutely conclusive that the Standard Oil Company charges altogether excessive prices where it meets no competition, and particularly where there is little likelihood of competitors entering the field, and that, on the other hand, where competition is active, it frequently cuts prices to a point which leaves even the Standard little or no profit, and which more often leaves no profit to the competitor, whose costs are ordinarily somewhat higher."

Yeah, but that slippery slope didn't happen. If Rockefeller is selling oil for so cheap, then his competitors would simply buy it, sell it at market prices, and reap the profits. Or the competitors would limit production, and let Rockefeller incur heavy losses, and when he stops selling for below-cost, then the competitors step in. Or they could emulate his business model, thus becoming as efficient. Etc. etc.

Rockefeller was successful because he supplied oil so efficiently, thus cheaply. There's nothing wrong with that, but his competitors hated it (so there's these stories of how bad Rockefeller was on the oil scene and how regulation is necessary to... prevent consumers from reaping the benefits of drastically lower prices from profitable business models...?)


The slippery slope (where the big bad guy sells stuff for so low and drives everyone out of business) simply doesn't happen in competitive markets. Burger King and McDonald's have occasional "price wars," but eventually they stop because they incur such a heavy loss. The competition isn't destroyed.

With milk, so what? Prices go down, consumers benefit, and producers have to become more profitable (thus more efficient). If not, some go out of business and more efficient producers will purchase them with the expectation to profit--or they'll use the land for more valuable uses.

Price fixing with the power of government is only good for current producers (who hate competition), but consumers will benefit less. OP's article is another story of crony capitalism.

[BigBallinStalin]

I remember in my 8th grade US history class, some oil businessman from the 19th century (maybe it was Rockefeller) essentially put his competitors out of business because he sold is oil for so low that he incurred losses, but since everyone was buying his oil his losses weren't as bad as his competitors (in after run-on).

I imagine this has some sort of anti-trust reasons behind it though it could be for "f*ck poor people" too.

In this example I don't think one chain is going to put the other out of business because of their milk prices, however.
So to put this all in perspective, I would think that a law such as this is enacted to prevent the price of milk from dropping below a certain point where farmers are not making a certain profit for the production of something that is more or less irreplaceable. If milk supply goes below a certain level it's not like you can just start up a bunch of dairies on a whim. When there are animals involved, it takes time for them to grow so you can't just "make more" to fill back the supply. In the meantime people would be screaming bloody murder because there is a milk shortage. If we were talking about oreos or something I would say this case is ridiculous but there is more here than meets the eye.

Oreos? That requires some serious production facilities. Imagine if the price of cookies fell! Poor Oreos! We would need to prevent the price of cookies from dropping below a certain point where cookie producers are not making a certain profit for the production of something that is more or less irreplaceable (e.g. cookie-producing machines). If cookie supply goes below a certain level it's not like you can just start up a bunch of cookie production facilities on a whim.

When there are capital-intensive goods involved, it takes time for them to be built and then shipped, so you can't just "make more" to fill back the supply. In the meantime people would be screaming bloody murder because there is a cookie shortage. If we were talking about cars or chicken or something I would say this case is ridiculous but there is more here than meets the eye.

[Funkyterrance]

Oreos? That requires some serious production facilities. Imagine if the price of cookies fell! Poor Oreos! We would need to prevent the price of cookies from dropping below a certain point where cookie producers are not making a certain profit for the production of something that is more or less irreplaceable (e.g. cookie-producing machines). If cookie supply goes below a certain level it's not like you can just start up a bunch of cookie production facilities on a whim.

When there are capital-intensive goods involved, it takes time for them to be built and then shipped, so you can't just "make more" to fill back the supply. In the meantime people would be screaming bloody murder because there is a cookie shortage. If we were talking about cars or chicken or something I would say this case is ridiculous but there is more here than meets the eye.

I'll buy your analogy if you can name me one real substitute for milk.
I can name a number of alternatives to oreos:
Chips Ahoy
Hydrox
Homemade cookies
Vienna Fingers
Store-made cookies

Also, when a dairy facility closes down, the equipment remains. If you bring more cows back into the picture, you've got full production back. Same goes for the cookies, you just start the machines back up, they're not going to be disassembled in the time it takes for people to realize there is a cookie shortage. And once again, the response time to the market is the difference in the scenarios. Once a dairy farm closes down, it's most likely not going to open back up.
Your mockery of my post doesn't quite work because cows are living, growing things while cookies are not and therefore the response time is considerate. You can always pull together a thousand people to build another cookie making facility; you can do it in a day if you wanted to but as of yet there is no way to make an optimally producing dairy cow in a day or even a year for that matter. It's more like 3 or 4 years. So, your cookie analogy stinks because it's not taking into account functionality in a real world.
The bottom line is, once again, that people are too short sighted for a completely free market to work.

[kentington]

Also, when a dairy facility closes down, the equipment remains. If you bring more cows back into the picture, you've got full production back. Same goes for the cookies, you just start the machines back up, they're not going to be disassembled in the time it takes for people to realize there is a cookie shortage. And once again, the response time to the market is the difference in the scenarios. Once a dairy farm closes down, it's most likely not going to open back up.

Depending on the reason the business closes, there is a good chance the equipment is gone very quickly. This equipment is expensive and I have seen companies go out of business. Some of the equipment may have been leased. I assure you that leasing company is going to do everything it can to get that equipment. Also, I have seen business owners know they are going out of business and start to sell the equipment to try and make some quick cash before filing bankruptcy.

Your mockery of my post doesn't quite work because cows are living, growing things while cookies are not and therefore the response time is considerate. You can always pull together a thousand people to build another cookie making facility; you can do it in a day if you wanted to but as of yet there is no way to make an optimally producing dairy cow in a day or even a year for that matter. It's more like 3 or 4 years. So, your cookie analogy stinks because it's not taking into account functionality in a real world.
The bottom line is, once again, that people are too short sighted for a completely free market to work.

Depending on the size of the facility and type of cookie, set up time for new equipment will vary. A small production of cookies will have large ovens that will have to be built and shipped and installed. Also, conveyed multi-leveled cooling racks for the cookies to be the right temperature to package. You will need packaging equipment shipped in. Mixing machines are probably the easiest to get but that depends on the type of cookie and the size of production. You need food grade metal detectors, scales, and nutritional testing thingies. You will need inspectors, and depending on the county they can take their sweet time. All of this can take months to a year or more.

I know of a company that has been waiting over a year for their equipment, and it is pretty simple equipment, to be set up and completed. They just receive ink cartridges and repackage and ship them. I know this was a rambling pile, but it actually takes a lot to get businesses going efficiently.

[Johnny Rockets]

You guys are comparing whisky to cornflakes.

Producing milk is tricky due to the high % possibility of food borne illness, so the whole supply and demand has huge impact fluctuations that require strict quotas. If you discount milk in one area, it causes surplus in another which causes supply chain imbalances. The quota system is inefficient but it's the only way to ensure a steady supply of fresh milk to your population.

The downside?

All of the dairy farmers I know and do business with dump thousands and thousands of gallons of milk into the field because of their quota. If they do not meet their quota, it gets cut. So they need to exceed it with a healthy cushion in case of any setbacks. (disease, barn fire, equipment failure, ect.)

In a perfect world the excess would be powdered and shipped as aid to the poor in starving countries, but until someone figures out how to make a profit at it, it's never going to happen.

JRock

[AndyDufresne]

I'll buy your analogy if you can name me one real substitute for milk.

What about powdered or dry milk? I use dry milk for cooking and recipes that need milk, since it is cheaper and always around when I need it.


--Andy

[Funkyterrance]

Depending on the reason the business closes, there is a good chance the equipment is gone very quickly. This equipment is expensive and I have seen companies go out of business. Some of the equipment may have been leased. I assure you that leasing company is going to do everything it can to get that equipment. Also, I have seen business owners know they are going out of business and start to sell the equipment to try and make some quick cash before filing bankruptcy.

But the fact remains that the cookie making machines are owned by someone and those people can fill the demand for the cookies. It may not be the same cookie producer but anyone who is looking to make a profit can easily swoop in with enough money and start things back up relatively quickly.

Depending on the size of the facility and type of cookie, set up time for new equipment will vary. A small production of cookies will have large ovens that will have to be built and shipped and installed. Also, conveyed multi-leveled cooling racks for the cookies to be the right temperature to package. You will need packaging equipment shipped in. Mixing machines are probably the easiest to get but that depends on the type of cookie and the size of production. You need food grade metal detectors, scales, and nutritional testing thingies. You will need inspectors, and depending on the county they can take their sweet time. All of this can take months to a year or more.

I know of a company that has been waiting over a year for their equipment, and it is pretty simple equipment, to be set up and completed. They just receive ink cartridges and repackage and ship them. I know this was a rambling pile, but it actually takes a lot to get businesses going efficiently.

Again, it's just a matter of someone with the cash coming in and "setting up shop". No amount of money can make cows grow faster so even if it was worth it, monetarily speaking, to come in and "set up" a dairy, there is no way to have that key ingredient faster than is physically possible.

[Funkyterrance]

I'll buy your analogy if you can name me one real substitute for milk.

What about powdered or dry milk? I use dry milk for cooking and recipes that need milk, since it is cheaper and always around when I need it.


--Andy

I thought of that but I'm pretty sure you need real milk to make powdered milk...

[AndyDufresne]

I'll buy your analogy if you can name me one real substitute for milk.

What about powdered or dry milk? I use dry milk for cooking and recipes that need milk, since it is cheaper and always around when I need it.


--Andy

I thought of that but I'm pretty sure you need real milk to make powdered milk...

From the manufacture POV, you mean? Yes.


--Andy

[2dimes]

In a perfect world the excess would be powdered and shipped as aid to the poor in starving countries store Andy shops at, but until someone figures out how to make a profit at it, it's never going to happen.

JRock

Want some powdered eggs with that?

[BigBallinStalin]

Oreos? That requires some serious production facilities. Imagine if the price of cookies fell! Poor Oreos! We would need to prevent the price of cookies from dropping below a certain point where cookie producers are not making a certain profit for the production of something that is more or less irreplaceable (e.g. cookie-producing machines). If cookie supply goes below a certain level it's not like you can just start up a bunch of cookie production facilities on a whim.

When there are capital-intensive goods involved, it takes time for them to be built and then shipped, so you can't just "make more" to fill back the supply. In the meantime people would be screaming bloody murder because there is a cookie shortage. If we were talking about cars or chicken or something I would say this case is ridiculous but there is more here than meets the eye.

I'll buy your analogy if you can name me one real substitute for milk.
I can name a number of alternatives to oreos:
Chips Ahoy
Hydrox
Homemade cookies
Vienna Fingers
Store-made cookies

Also, when a dairy facility closes down, the equipment remains. If you bring more cows back into the picture, you've got full production back. Same goes for the cookies, you just start the machines back up, they're not going to be disassembled in the time it takes for people to realize there is a cookie shortage. And once again, the response time to the market is the difference in the scenarios. Once a dairy farm closes down, it's most likely not going to open back up.
Your mockery of my post doesn't quite work because cows are living, growing things while cookies are not and therefore the response time is considerate. You can always pull together a thousand people to build another cookie making facility; you can do it in a day if you wanted to but as of yet there is no way to make an optimally producing dairy cow in a day or even a year for that matter. It's more like 3 or 4 years. So, your cookie analogy stinks because it's not taking into account functionality in a real world.
The bottom line is, once again, that people are too short sighted for a completely free market to work.

There's substitutes for milk as well, e.g. water, flavored water, calcium pills, milk-flavored water--if there's a demand, or even smaller quantitities of milk, e.g. 1 liter instead of 1 gallon. In other words, as the price rises, people seek substitutes, and they purchase on the margin (1 liter, reduced consumption, etc.). Hell, substitutes can be found from different geographical areas (e.g. beyond Louisiana from States which sell milk at lower prices at a profit). Who knows, it depends on consumer preferences; therefore, you've bought my argument.

A dairy farm need not close down. If it's unprofitable, it can be bought while still operating. If it's profitable enough to continue producing milk at the current quantity, then milk operations will resume. If not, then maybe 10% milk production is reduced, or maybe 100%. The uncertainty on continued production, response time, and other possibilities exists within my analogy and your example.

Response time? Dairy production is capital-intensive, so is cookie production. But your claims aren't true. Cows are alive and take years to produce milk, but so what? Import milk from other States while waiting for cows to attain the correct age. Or, ship those milk cows in. So, it's not 3-4 years, but probably on par with shipping in cookie-producing equipment. If not exactly, then this is a really trivial contention.

"The bottom line is, once again, that people are too short sighted for a completely free market to work."

if that was true, then we could make the same argument for almost all other economic goods. Therefore, if this is true, we must impose price controls on everything. Prices don't work on the market, but they definitely work with central planning, amirite?

(Hey, if the Mafia held a gun to your head, would you voluntarily accept my argument?)

[BigBallinStalin]

You guys are comparing whisky to cornflakes.

Producing milk is tricky due to the high % possibility of food borne illness, so the whole supply and demand has huge impact fluctuations that require strict quotas. If you discount milk in one area, it causes surplus in another which causes supply chain imbalances. The quota system is inefficient but it's the only way to ensure a steady supply of fresh milk to your population.

The downside?

All of the dairy farmers I know and do business with dump thousands and thousands of gallons of milk into the field because of their quota. If they do not meet their quota, it gets cut. So they need to exceed it with a healthy cushion in case of any setbacks. (disease, barn fire, equipment failure, ect.)

In a perfect world the excess would be powdered and shipped as aid to the poor in starving countries, but until someone figures out how to make a profit at it, it's never going to happen.

JRock

Remove price controls, and that avenue opens.

[BigBallinStalin]

I'll buy your analogy if you can name me one real substitute for milk.

What about powdered or dry milk? I use dry milk for cooking and recipes that need milk, since it is cheaper and always around when I need it.


--Andy

BOOYA! Another substitute.

[AndyDufresne]

I'll buy your analogy if you can name me one real substitute for milk.

What about powdered or dry milk? I use dry milk for cooking and recipes that need milk, since it is cheaper and always around when I need it.


--Andy

BOOYA! Another substitute.

What about non-dairy milks? Like Almond, Soy, Coconut, Rice milks? There are probably others, but I can't recall. Some are more expensive, but I found rice milk for 2.99 online.


--Andy

[kentington]

I'll buy your analogy if you can name me one real substitute for milk.

What about powdered or dry milk? I use dry milk for cooking and recipes that need milk, since it is cheaper and always around when I need it.


--Andy

BOOYA! Another substitute.

What about non-dairy milks? Like Almond, Soy, Coconut, Rice milks? There are probably others, but I can't recall. Some are more expensive, but I found rice milk for 2.99 online.


--Andy

Can you bake well with non-dairy milks? I know that Almond milk gets stringy if you try to steam it like a latte. I'm sure if there is a problem with obtaining dairy milk more substitutes will arise. Perhaps goats milk or sheep milk will step up if cows are hard to keep going.

Rice Milk for 2.99 for what quantity?

[Funkyterrance]

There's substitutes for milk as well, e.g. water, flavored water, calcium pills, milk-flavored water--if there's a demand, or even smaller quantitities of milk, e.g. 1 liter instead of 1 gallon. In other words, as the price rises, people seek substitutes, and they purchase on the margin (1 liter, reduced consumption, etc.). Hell, substitutes can be found from different geographical areas (e.g. beyond Louisiana from States which sell milk at lower prices at a profit). Who knows, it depends on consumer preferences; therefore, you've bought my argument.

Ok so you've listed a bunch of poor if not unacceptable substitutes for milk. You forgot piss on that list.

A dairy farm need not close down. If it's unprofitable, it can be bought while still operating. If it's profitable enough to continue producing milk at the current quantity, then milk operations will resume. If not, then maybe 10% milk production is reduced, or maybe 100%. The uncertainty on continued production, response time, and other possibilities exists within my analogy and your example.

Response time? Dairy production is capital-intensive, so is cookie production. But your claims aren't true. Cows are alive and take years to produce milk, but so what? Import milk from other States while waiting for cows to attain the correct age. Or, ship those milk cows in. So, it's not 3-4 years, but probably on par with shipping in cookie-producing equipment. If not exactly, then this is a really trivial contention.

You're cheating there though. Importation of adult cows is not a solution. There is no way to get "instant" adult cows, even if you import them from South America. Whoever else has adult cows, they most likely wouldn't have them if they didn't need them for themselves. So you can import baby cows maybe but you're in the same position with immature cows. The supply is just as slow to recover since the problem is not like oil or ore where you can just mine more.

"The bottom line is, once again, that people are too short sighted for a completely free market to work."

if that was true, then we could make the same argument for almost all other economic goods. Therefore, if this is true, we must impose price controls on everything. Prices don't work on the market, but they definitely work with central planning, amirite?

(Hey, if the Mafia held a gun to your head, would you voluntarily accept my argument?)

With central planning there is enough milk to go around at least. With the market you can get screwed into a situation where for a time there is no milk. I never made any deals with the mafia so I think I'm safe but in the meantime I suggest you mull this over while eating a bowl of cornflakes doused in flavored water.

[TA1LGUNN3R]

I'll buy your analogy if you can name me one real substitute for milk.
I can name a number of alternatives to oreos:
Chips Ahoy
Hydrox
Homemade cookies
Vienna Fingers
Store-made cookies

Technically Oreos are an alternative to Hydrox, since they came first.

-TG

[Dukasaur]

You're cheating there though. Importation of adult cows is not a solution. There is no way to get "instant" adult cows, even if you import them from South America. Whoever else has adult cows, they most likely wouldn't have them if they didn't need them for themselves. So you can import baby cows maybe but you're in the same position with immature cows. The supply is just as slow to recover since the problem is not like oil or ore where you can just mine more.

The market for cows is no less flexible than any other market. At any given moment, someone is realising he has too few and is out buying more, and someone else is realising he has too many and is selling.

If you wanted a million new cows, you might need a year to assemble them, but if you want just twenty thousand or so, give me the cash and I'll acquire them for you tomorrow. The first of your new herd will start arriving within 24 hours, and you'll have them all in about two weeks.

[kentington]

You're cheating there though. Importation of adult cows is not a solution. There is no way to get "instant" adult cows, even if you import them from South America. Whoever else has adult cows, they most likely wouldn't have them if they didn't need them for themselves. So you can import baby cows maybe but you're in the same position with immature cows. The supply is just as slow to recover since the problem is not like oil or ore where you can just mine more.

The market for cows is no less flexible than any other market. At any given moment, someone is realising he has too few and is out buying more, and someone else is realising he has too many and is selling.

If you wanted a million new cows, you might need a year to assemble them, but if you want just twenty thousand or so, give me the cash and I'll acquire them for you tomorrow. The first of your new herd will start arriving within 24 hours, and you'll have them all in about two weeks.

That was one of the points I was trying to make. Cows are not some special resource compared to everything else. It can take just as long or longer to get certain equipment for production. A lot of which have custom elements in them. In some cases it would be faster if you need cows and in some cases not.

[Funkyterrance]

I'll buy your analogy if you can name me one real substitute for milk.
I can name a number of alternatives to oreos:
Chips Ahoy
Hydrox
Homemade cookies
Vienna Fingers
Store-made cookies

Technically Oreos are an alternative to Hydrox, since they came first.

-TG

Since when does the order in which things were introduced affect them being used as an alternative/substitute? Just asking. If I usually buy hydrox and I can no longer get them would not oreos be an alternative/substitute?