How do you establish a price for commodities? This is one of the great classic dilemmas facing farmers and we see it all over the world. The price of wool barely pays for the shearing, grain is at the same level as 35 years ago and milk first hit an old pound/gallon in 1988 – the equivalent of 28c/l today.

Meanwhile, the offerings to consumers increase in terms of quality and sophistication.

In the developed world, coffee prices now account for 1p in a cup of coffee costing £2.50 according to an analysis done by the Financial Times and published last June. Yet in every town and city, we see an upsurge in specialist coffee outlets.

Dairy farmer incomes have grown only because of increases in farmer productivity driven by research and breeding

The new uses for milk which have developed and the surge in infant formula sales have done nothing to sustainably lift milk prices.

Dairy farmer incomes have grown only because of increases in farmer productivity driven by research and breeding. It is hard to think of one agricultural commodity where prices to producers have, over the long term, kept pace with inflation.

Several countries have tried to counter this seemingly inexorable trend by forming state marketing boards where these had a statutory right to all the national output of a commodity and in theory, had a stronger bargaining position in the market place.

Canada still continues with its rigid dairy quota system to maintain farmer returns

This was the thinking behind the old pre-EEC Irish Dairy Board and the Pigs & Bacon Commission while Britain had its Milk Marketing Board and both the Canadians and Australians had their State wheat marketing boards.

Canada still continues with its rigid dairy quota system to maintain farmer returns and I suspect many Irish tillage farmers look back fondly at this stage on the highly regulated sugar beet industry.

The nub of the problem, of course, is that once a farm commodity moves into surplus, then price support policies for farmers, such as intervention, can either insist on quantitate restrictions/quotas or else price reductions in real terms, so that prices reflect the new supply realities.

This latter policy puts farmers at a huge disadvantage – inevitably there are a small number of key purchasers and multitudes of farmers.

These dilemmas are playing out now in the Irish beef sector but, in reality, the phenomenon is much wider than that.

This is one of the core reasons for governments getting involved in agricultural policy but politicians’ enthusiasm inevitably varies and reduces in times of surplus when food security is not threatened.

The question of appropriate pricing policies for farm commodities has received too little attention from economists and politicians alike.

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