Monday, May 11, 2009

Broken System

Trading at the Chicago Mercantile Exchange (CME) of block Cheddar accounts for all the price volatility of both farm milk and wholesale cheese. In order for anyone to think this is the market at work, one would have to believe that when a farmer buys seed and fertilizer, the processor also buys something of equal costs.

Capitalism is based upon costs plus a profit equals selling price. There is no way to have two segments in the supply chain taking price signals from one source – the CME.

The pricing system is broken.


  1. Can you please explain something to me? I milk cows in New York, my milk is sold in NYC for fluid consumption. On my milk check the price I am paid is based on components- milkfat, protein and other solids. Where is the payment for the other 85%, water. I paid to cool it to 37 degrees, I paid to haul it to the plant, they sold it, people drank it but no payment to me. What would it take to add this major component to the price? Also why is my other solids price negative? How can something be of negative value? Is it toxic waste? I thought "other solids" contained sugars, aren't sugar prices up? Just my thoughts, any comments appreciated.

  2. The federal order reform of 2000 changed the system of farm milk pricing - making it all needlessly complicated. The system begins with product prices, cheese, butter NFDM plus whey and works backwards to obtain farm milk price.

    A "make allowance", which covers processors costs plus a profit is deducted from the product price.

    The "other solids" price is for whey and the make allowance is higher than the product price. Hence the final number is negative.

    The 1996 Farm Bill require only changing the number of federal orders - not the instituting of a totally new and unduly complicated pricing system.

  3. The negative other solids price bothers me too, I'm sorry but we should not be paying anyone to take any part of our cows milk. They are taking our other solids for "less than free".
    Hopefully the prices don't drop too much more, because if that happens with this pricing system, we will soon be paying someone to take all our milk.
    Jeff Suehring