Why can’t dairies sell milk to China?

Published on Saturday, 22 June 2013 23:03 - Written by

It takes a bureaucracy to fail to make these connections. California has a surplus of milk. China has a great hankering for cheese. What could be simpler?

But the state’s business-unfriendly climate, environmental regulations and sheer intransigence will more likely drive many of those milk producers out of business before they’re able to respond to a real market opportunity across the Pacific.

“A growing demand for milk and cheese in China has the potential to bring California’s beleaguered dairy industry back to life — and with it, renewed concern about its damaging effects on the environment,” says the Berkeley-based Center for Investigative Reporting. “As China’s middle class grows, so does its penchant for dairy products such as milk, cheese and yogurt.”

According to the California Milk Advisory Board, that’s a good thing.

“Many people in the industry believe we make too much milk,” board Ross Christieson told PBS. “My view is, we don’t make enough milk here in California. If you take a global view of the international dairy market, there’s actually a shortage of milk around the world. We know a lot of these markets in China will grow 10- or 20-fold over the next few decades. By being there now, we can be at the start of that growth and we can capture that growth in the early stage.”

But lawmakers and regulators in Sacramental aren’t so sure. They control the price of milk in that state, which means milk producers have had to absorb a recent increase in the price of grain in cattle feed. The producers’ only option is to offset the increased expense with volume — by increasing production.

That’s where lawmakers and environmental regulators come in. They want the dairies to produce less.

“Critics and scientists point to studies showing the dairy industry, with roughly 1.8 million cows, is the single largest contributor of smog-forming volatile organic compounds in the (San Joaquin) valley’s already-polluted air,” the Center for Investigative Reporting says. “Government and academic research indicates that gases emitted from fermented feed, cows and cow waste combine with other free-floating particles in the atmosphere to form smog. The dairies also have been implicated in the pollution of groundwater.”

Although dairies are working to improve that (and indeed, a United Nations study says California dairies lead the world in sustainable methods), environmentalists say they should be further restricted.

Environmental lawyer Brent Newell told PBS that “continuing to produce milk to put on a ship and ship across the Pacific Ocean to China to satisfy some kind of growing demand in China for dairy products really makes no sense at all.”

But it makes perfect sense — if we simply let the markets work.

First, price controls on food, particularly food for export, pervert the market and lead to unintended consequences (such as bigger dairies). California should lift price controls.

Second, barriers to selling milk to China should be lifted. Suppliers will respond to demand — that’s how it works.

If California wants to become competitive again, it must loosen its bureaucratic grip on markets.