Econ Commentary 2

• Subsidy: An amount of money paid by the government to a firm per unit of output. Basically, the government’s way to encourage the consumption of a product by lowering its price
• Infrastructure: The large-scale public systems, services and facilities of a country that are necessary for economic activity; Social overhead capitol.
• Demand: The quantity of a good or service that consumers are willing to buy at a given price in a given time period. In this case it’s dairy products.

All of these have a large impact on the average dairy farmer’s future. The concepts are referred to in the article as so:

• Subsidy: It says in the article that these dairy farms in Maine rely heavily on government subsidies to close the gap between sales prices and production costs. So, if subsidy program is cut, that means that these farmers will have to sell their products for higher prices. This will make them undesirable to buy, the farmer’s will lose profit and may go out of business. The whole purpose of a subsidy is to guarantee the supply of a product that the government thinks is needed for the economy. I don’t really understand why they’re taking out money of such and essential subsidy program.
• Infrastructure: The article also goes off on the horrible consequences of the dairy industry as a whole collapsing. If most of the 330 farms went out of business this would greatly affect other infrastructures like trucking and veterinary services. If they did get a subsidy then their infrastructure would grow and they’d be able to increase output by either buying more cows or hiring new workers.
• Demand: The article barely touches on this but I think it’s worth it to say that, when interviewing an organic dairy farmer, he says that the demand went down for his product when his farmed turned into an organic one in 1998. This, obviously, is expected because his organic products were probably sold for a higher price than regular dairy products. I wish it would have said if he had profited on the switch though.

        In terms of completeness in this article it’s mainly from the point of view of the farmers. At no point does it say why the government is taking out money from the subsidy program or what they’re planning to do with it. It also says that they rely on the federal subsidy system before using up funds in the state dairy-stabilization program (the one that’s getting partially cut). We do not know any specifics on how much they use either program nor do we know how much they can do without it. It also isn’t very clear on the consequences of a loss of local dairy farms to larger corporate farms, and it doesn’t say much on other industries that rely on dairy products.

        In my opinion, I believe that we shouldn’t cut funding for dairy farm subsidies because, if the industry fails, it could be disastrous for other industries not to mention Maine’s economy.