I'm actually on your side, i think it's ridiculous as well.
The logic is that a free market with lean and fat years would result in wild price fluxuations. When yields were really good, prices would drop and some farmers would end up out of business. The cartel brings stability to prices. Each farmer agrees to produce X and in return has confidence they will get Y price.
The system undoubtably results in higher prices than a completely free market.
Oil price being one particularly topical. Over investment in marginal fields that are economical at an artificially inflated ~$100/boe due to speculation. This is particularly evident in the US in hiring booms and busts in the industry and the direct influence at the price at the pump (it is cushioned more in other countries by taxation for example in the UK tax is circa 80% of the pump price for fuel, whereas in the US it is circa 17%).
This wild variability in food prices would be very very bad for not only farmers but the public. Sure, in gluts, $0.50 milk per gallon would be great, but in times of say severe drought, $8/gallon would be devastating to those people for whom food is a large part of their budgets, or most people.
That's the idea behind it anyway. The same is done world wide and cannot be unwound in isolation. The US and EU both have farm subsidies or price smoothing.
I'm sure the system is gamed, like all systems are - but a completely unfettered free market, globally, for staple foods is unlikely to ever happen.
> Sure, in gluts, $0.50 milk per gallon would be great, but in times of say severe drought, $8/gallon would be devastating to those people for whom food is a large part of their budgets, or most people.
You can't stockpile milk, this argument makes no sense.
The logic is that a free market with lean and fat years would result in wild price fluxuations. When yields were really good, prices would drop and some farmers would end up out of business. The cartel brings stability to prices. Each farmer agrees to produce X and in return has confidence they will get Y price.
The system undoubtably results in higher prices than a completely free market.