Tuesday, July 25, 2006

Aid to ranchers was diverted for big profits

Page A1 of today's Washington Post:
When a drought left pastures in a handful of Plains states parched in 2003, ranchers turned to the federal government for help. Officials at the U.S. Department of Agriculture quickly responded with what they considered an innovative plan. They decided to dip into massive stockpiles of powdered milk that the agency had stored in warehouses nationwide as part of its milk price-support program. Livestock owners could get the protein-rich commodity free and feed it to their cattle and calves. The milk would help ranchers weather the drought while the government reduced its growing stockpile. But within months, the program spawned a lucrative secondary market in which ranchers, feed dealers and brokers began trading the powdered milk in a daisy chain of transactions, generating millions of dollars in profits.

I guess it's true what they say: people respond to incentives.

Oh, and just how massive were those stockpiles of powdered milk?
For years, the government has periodically purchased powdered milk -- as well as butter and cheese, the other byproducts of raw milk -- as part of a congressionally mandated price-support program for milk producers. By 2003, the Agriculture Department had accumulated a record 1.4 billion pounds of powdered milk in warehouses and in a huge limestone cave in the Kansas City area.
Even the USA is not immune to wacky government policies that can be easily gamed for personal gain.

Via Marginal Revolution which in another post has this amusing tale:
I solicited donations with the promise that I would run just one lap. Unsurprisingly, the other students were most displeased when I sauntered around the track finishing just as everyone else was beginning to work up a sweat. More surprisingly, the charity organizers didn't like my methods even though I raised a lot of money.


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