AP's Coverage of Calif. Dairies' Peril IDs Price Controls as Culprit, But Not Corn Crop Diversion to Ethanol

At the Associated Press on Saturday, Gosia Wosniacka did something one rarely sees any more in wire service coverage, actually blaming a government policy for an industry's financial problems -- in this case, state-imposed price controls on the California dairy industry.

But price controls in the highly tarnished Golden State, while very relevant, have been around for decades. Ms. Wosniacka ignored the most recent cause of farmers' difficulties, namely the government-mandated diversion of much of the corn crop towards ethanol production. Several paragraphs from her report (also carried at CNS News) follow the jump:

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CALIF DAIRIES GOING BROKE DUE TO FEED, MILK PRICES

... "I have been in this business for 57 years and I have never been in financial trouble like I am right now," said (82 year-old Mary) Cameron, who runs the Atsma-Cameron Dairy with her two sons. "I'm on the verge of bankruptcy. It's horrible and inexcusable."

... Across California, the nation's largest dairy state, dozens of dairy operators large and small have filed for bankruptcy in recent months and many teeter on the edge of insolvency. Others have sold their herds or sent them to slaughter and given up on the business.

Experts say California dairymen face a double whammy: exorbitant feed costs and lower milk prices. The Midwest drought has led to corn and soybean costs increasing by more than 50 percent this summer, stressing dairymen from Wisconsin and Minnesota to Missouri. But in California, milk prices have also lagged behind those in the rest of the nation, exacerbating the crisis.

... Since 2008, California has lost nearly 300 dairies, with 1,668 remaining as of January, according to the California Department of Food and Agriculture. There are no official estimates on how many dairies have shuttered in 2012 - but interviews with dairymen and experts indicate several hundred dairies could be in danger of going under.

... For her woes, Cameron blames state officials' decision to keep milk prices lower than those in other states.

California has had its own milk pricing system for dairy since the 1930's, separate from that operated by the federal government in other states. The California Department of Food and Agriculture sets minimum prices that must be paid to farmers in the state for five classes of milk.

According to a New York Times op-ed by UC-Davis economics professor Colin A. Carter and Hoover Institution fellow Henry I. Miller in July, 40% of the U.S. corn crop goes to ethanol production mandated by government regulations. They believe that "The combination of the drought and American ethanol policy will lead in many parts of the world to widespread inflation, more hunger, less food security, slower economic growth and political instability, especially in poor countries."

The heavy diversion of the corn crop to ethanol production is also currently contributing to dairy farm bankruptcies. Gosia Wosniacka should have incorporated that sad reality, and U.S. EPA's failure to this point to at least temporarily waive the ethanol mandate (permanently abandoning ill-advised government market intervention would obviously be a better idea), into her AP story.

To be cross-posted at BizzyBlog.com.