What’s [Not] New Under the Sun (Or the Moon Over Which Jumped the Cow)

Whoa. Just had THE weirdest case of historian’s deja vu.

A little background: I’ve spent the week reading testimony from a series of Congressional hearings held in late 1888 and early 1889. The subject was the transportation and sale of meat products. Livestock producers complained about low prices for their cattle. They blamed a collection of meatpackers that they called the “Big Four”: Armour, Swift, Morris, and Hammond. The farmers told senate investigators that the Big Four colluded on prices at stockyards, driving prices into the ground and cattle producers into bankruptcy.

As I read the hearing testimony, however, it became clear to me that there is and was little historical evidence of these charges and that the true culprit was over-supply of livestock and decreasing demand for meat (mostly in export markets).

Moreover, this downturn in prices came only after record high prices which, no surprise, had led many investors to buy land and cattle (investors who, for the most part, had no experience and no idea what they were doing). They then flooded the market with (mostly poor) livestock and prices plunged. Anyway, the cattle producers were dead certain there was a conspiracy against them and had no interest in hearing any facts to the contrary.

So today I’m reading an article in the Wall Street Journal about rising milk prices. Same deal, except with milk rather than cattle. Dairy farmers want a federal probe of prices because, they say,

they have too few buyers and too little competition for their milk. The industry is dominated by two players: Dean Foods Co. of Dallas, which is creating a national brand in what had been a fragmented industry, and Dairy Farmers of America Inc., a Kansas City, Mo., cooperative that buys milk from farmers and sells some of it to Dean Foods.

Only toward the end of the article do we learn anything to the contrary:

Many economists doubt that Dean Foods — which benefits from being able to buy plentiful supplies of cheap raw milk to make everything from bottled milk to cheese to ice cream — is to blame for this year’s depressed milk prices. Indeed, the company’s market clout wasn’t enough to stop the prices farmers received for their milk from hitting record and near-record high levels in 2007 and 2008.

Yes, I realize this is milk, rather than cattle, but the principle is the same: When the going gets tough, food producers are quick to blame “monopolists” for the sharp price gyrations that are a normal part of the food industry.

Moral of the story? Hmmmm. Beats me. Those who don’t know history are bound to repeat their mistakes? We should all read more history? We should all listen when historians speak? We should step back and take the long view? I dunno. (Hey! It’s the best I can do on a Friday afternoon after a looooooooooong week.) (Long week, you say? Aren’t they all seven days long? Not mine, buddy. Not this week. MY week ran 75 days.)

Tip o’ the mug to Dan Mitchell of Daily Bread.

One thought on “What’s [Not] New Under the Sun (Or the Moon Over Which Jumped the Cow)

  1. I read this, and think that it could be a big game of historical Mad Libs” You could take out the name of the commodity and monopolizing boogie man and replace it with any other current commodity and their evil nemesis overlord. Think Craft Beer:Big Distributors, or Oil:OPEC, or Healthcare:Big Insurance/Pharma, or individual wealth/Big Corp.I actually do believe that monopolies are at play in much of this, but maybe not as a primary cause. Even in your examples, the actual driving factor in the bubble that leads to hardships is greed. Greed on the part of the middlemen, creating a false market, then greed on the part of the producers, trying to game the system to over-maximize their profit. And then finally, greed on the part of the financiers, taking advantage of the swings and hardships with arbitrage. Unfortunately, everyone looses, but it is only the producers whose livelihoods depend on it, are unable to absorb the losses.


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