Socialist Cow

commycow-300x234The Facebook page, Bellingham Costco needs a special time just for Americans has been in the news over the past few days because of our ever increasing frustration over the crowd situation at Costco, not because the FB page offers some amazing insight or even humor.  I looked at the page awhile back because my wife had FB-liked it.  I found it to have too much of an anti-Canadian flavor for me and my wife has recently FB-unliked the page for the same reasons.  It’s not that we aren’t just as frustrated as anyone else trying to shop there, we just don’t think that either bashing or appearing to bash Canadians is the answer.  Both of us were interested in the page because we wanted to add our voice to the chorus of people who want the problem fixed, mostly because we used to like shopping at Costco and now we consciously avoid Costco and most of the businesses that surround Costco.

The problem we are experiencing is not with Canadians, but rather, has it’s roots in socialist aspirations on both sides of the border, with socialism being centralized control of the economy in one form or another.  On our side, the people of the Bellingham decided that big-box stores above a certain square footage didn’t jive with their vision of a socially and economically just world, so they asked their city government to ban them.  And the City of Bellingham did just that, snuffing any future expansion that might have eased the situation.  On the Canadian side the people are suffering with higher prices due to current social control of milk production and residual effects from socially controlled/government operated fuel industry that began in the early 70’s and has just recently returned to private ownership.  Even so, according to WSJ Market Watch, “Canadians pay about 33% in combined taxes on average on the price of fuel, and Americans pay about 11%.” I can’t blame Canadians for coming here to shop.  They save so much money that we are like a black market.

I only mention milk and gas because anyone who has been to the Costco in the last year or so knows that Canadians buy milk and gas.  They may buy other things, but they buy milk and gas…and we have a milk cave in our Costco…and it’s dangerous in their…and you don’t send your kids in there alone unless you really don’t like them.

I’ve read all the rumors about people in Canada bathing in milk and such, but really when you look into milk prices you find that the reason all dairy products are outrageously priced in Canada is because dairy is a heavily regulated, in fact socialized industry.  The gov’t decides how much milk consumers will consume and then determines through a quota system, how much milk farms will produce and at what price.  There really is no incentive for a farmer to work smarter or better because they will earn nothing more for their extra work or ingenuity.  That is the problem at the heart of socialism and the reason that Canadians buy cart loads of milk at the Bellingham Costco.  Here’s a great story I ran across about a generational dairy farm and their struggles with the socialized Canadian system.

Ten months ago we sold our eastern Ontario dairy farm and ­relocated on another dairy operation 20 miles away as the crow flies, in northern New York. My son lives on the U.S. farm while my wife and I remain in Canada, from where we are actively involved in the new operation.

Money and freedom were the reasons for our decision. We moved our dairy cattle and machinery south of the border, but sold all Canadian immovable assets. The land, quota and farm buildings came to $45,000 per cow, while 20 miles away we purchased a more modern state-of-the-art operation for $5,200 a cow.

There is no milk quota in New York, so that accounted for $25,000 of the difference in price per cow. The rest was driven by a far higher price for land on the Canadian side, which is due in part to the higher price of milk, since grain prices for crop farmers are the same throughout North America.

Another contributing factor to the land price difference is the American recession causing their banks to be skittish.

Having started our Canadian dairy operation in 1981 with an 18% mortgage and a 21% operating loan, being wary of heavy debt became part of one’s DNA. Hence when my son came home from agriculture college to dairy two and a half decades later, the necessary expansion — which would have brought the farm debt to $25,000 to $30,000 per cow — didn’t balance with my Glengarry Scot sensibilities. The credit would have come courtesy of the government-created and backed Farm Credit Corp., which is Canadian agriculture’s Freddie Mac and Fannie Mae.

The average per-cow debt in Canada is $15,000 and it is $1,500 in the United States. The cost of buying an actual cow is the same either side of the border, since the actual net profit after costs and servicing debt is the same on average.

If one simply Googles Census Canada and the Canadian Dairy Commission they will find that Canada’s population has more than doubled since supply management started in 1967 and that — shockingly — the Canadian actual total milk production per year has not changed, other than slightly dipping, over those four and a half ­decades.

The stats show a 19% to 35% larger per capita consumption of dairy products — depending on the category — in the United States, as compared to Canada.  A recent study has shown that the amount of dairy imports into Canada, despite high tariffs, has risen from 8% more than a decade ago to 24% today. In 2008, it was at 17%.

So, rightly or wrongly, unlike so many others, we didn’t base our family’s future on an industry spinning its wheels, plus having an investment-to-earnings ratio similar to where Nortel was when things went into the manure pit.

Quota prices were $1,400 a cow in 1981, rising to $33,000 a cow by 2007. Farm Credit taking quota as an asset — which it didn’t used to be — freed up borrowing to unprecedented levels for dairy producers seen nowhere else in the world. They also kept expanding the payback terms from five to 25 years, so things would cash flow.

Ironically, to service that quota expansion debt, a Canadian producer — despite the continued rising price of milk in conjunction with the quota price increases — had to make milk at U.S. prices.

We made quota payments every month from 1981 to 2010 and that was always the case, although we didn’t go longer than a 10-year quota loan.

Due to milk marketing board quota policies a couple of years later, quota prices were capped at $25,000 per cow. However, it soon became virtually impossible to obtain more quota than for a cow per year, since the quota for sale was prorated and evenly ­distributed among those wanting
to buy.

Before, the highest-quota bidder got as much as he or she wanted. If this sounds like moving from a semblance of the most efficient prevailing to Joseph Stalin-type policies, it is. Totally and completely.

Provincial milk marketing boards were granted enabling legislation under the Milk Act decades ago to do whatever they want. They cost more than $100-million to operate across the nation for 13,000 producers, yet not a single politician of any political stripe has the courage to even suggest reforms at any level. Or, quite simply, removing the marketing boards’ monopoly over producers.

In the dairying sector, it’s laughingly referred to as “the Quebec factor.” Which means tremble in fear if you’re a politician.

Diversity, because of freedom, is prevalent in New York’s Franklin county’s dairy sector. Farmers range from a 2,100-cow producer to the Old Order Amish man who milks 17 and is raising nine children. Or the legal, small raw-milk producer and retailer making incredible profits, who would be arrested if living two miles to the north.

Knowing your farming operation is in a nation where, unlike Ontario, some semblance of property rights is installed in law, gives one the freedom to invest for the future.

The Canadian dairy industry is keeping its system. But it lost my son, whose United Empire Loyalist ancestor built the oldest house in Ontario.

Ludwig von Mises Institute

I hope you caught the part about “some semblance of property rights is installed in law, gives one the freedom to invest for the future.” because minute by minute and day by day this is changing for the worse here in America.  If we don’t watch out what our own socialists are doing, we may someday find ourselves more Canadian than American.

So are we doomed?  No, not at all.  We just need to tear down the wall, take the hammer out of the hands of government and put it back into the hands of producers, retailers and consumers.  We need to focus on real justice.  The kind of justice that allows producers to profit from their labors and ingenuity, the kind of justice that will allow retailers to choose their sources, manage their facilities, make sound business decisions and profit from their hard work and ingenuity, the kind of justice that allows a consumer to choose products they want at a price that is affordable to them.  We need to vote and talk and vote and talk, all about retaining opportunity in our nation.   It isn’t always about community good, it could be about retaining opportunity for individuals to succeed and then give back to the community.

Had either we or our Canadian brethren backed off a little on gov’t control and steered a course even slightly less towards socialism and more towards individual liberty and opportunity, we wouldn’t be having this problem that we now experience.  Canadians could come and visit because they like us not because we have cheap milk and we Americans would find plenty of parking at Costco for us to by our cheap milk, or even to pop into Office Depot without donning a tracksuit for the 5k walk from your parking spot.

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