So how does this work then?


It would appear that someone, somewhere, is confused. It could be us that is confused but we're a bit, umm, confused about that. For the claim is that if retailers are providing a subsidy to the consumption of milk then this could devastate the milk producing industry. Which is confusing:

The price of milk has fallen to just 22p a pint thanks to a fierce war between supermarkets. Farmers have warned the UK dairy industry faces extinction if retailers continue to drive down the price – now at its lowest level in seven years. Asda, Aldi, Lidl and Iceland are selling four pints of milk for just 89p, while Tesco, Sainsbury’s and Waitrose are not far behind at £1. Pint for pint, milk is now cheaper than mineral water in most supermarkets. Retailers insist they are funding the cost of the price reduction from their own profits, rather than paying farmers less. Many supermarkets have guaranteed the price farms receive will stay above the cost of production. But farmers say the price war is also devaluing milk as a product at a time when they are under unprecedented pressure.

It doesn't get any less confusing on consideration, does it? The retail price of milk is lower, given the supermarket subsidy to it, leading to higher consumption, while the producer price is "guaranteed" to be above production costs. And this is going to devastate the industry? We don't think it is us getting confused here. Of course, the real background to this is that, as has been happening for the past couple of centuries as farming techniques improve, milk has been getting cheaper and cheaper to produce. And as has been happening over that time the higher cost producers have been pushed out of the market by the lower cost ones. This is, after all, the universe's way of telling you to go do something else, when the price of what you produce is lower than the cost of producing it. That's what is devastating farming, we're in general becoming more efficient at it. And the supermarkets are, through their subsidy, restricting this process which is the very opposite of devastation, isn't it?