The Butter Mountain & Investing; A Story Of Intelligence

The Butter Mountain & Investing; A Story Of IntelligenceThat one is a classic!

A couple of decades ago, EU farmers – i.e. milk producers (pork hasn’t been that heavily subsidised) needed a price boost. This meant that the milk production per cow doubled. That meant the so-called “butter-mountain”, which led to butter export to the Soviet Union at subsidised prices – and import of the same butter for re-export. So railroad cars were shunted to and fro until the butter turned rancid. The move to export by rail to the Soviet Union was the smart part – everybody knew of the terrible inefficiency of the Russian rail system, so chances were that the surplus butter would just disappear into the vastness of Russia – they were known to misplace locomotives by the dozens – never to be found again.

This gave an occasional shortage of rail cars – though.

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Now then, you had to do something, so you turned the butter into butter oil – to be sold off at subsidised prices.
Why do you think Danish butter cookies are so hugely popular – just set the price high enough, and the crazy Americans will buy it! It is just butter-oil, sugar (heavily subsidised as well – don’t get me started on that one – or I’ll make You regret You ever bought the Virgin islands) and flour. Package it nicely and advertise.

But that was just half the problem: You had an awful lot of skimmed milk left over, so to reduce volume for storage, it was turned into skimmed milk powder. That solved the problem for a time – until the warehouses burst at the seams. Then one bright official got the idea of selling it off – at subsidised prices to farmers – to feed the calves. Just one hitch: The calves wouldn’t EAT it! – NO WAY!

To survive mentally as an economist you have to have a sense of the grotesque.