Wednesday, May 27, 2009
By all appearances, farm milk price will be historically low in real dollar terms until some kind of panic sets in.
Most of the media dutifully report the problem is soft demand. As logical as the “demand” explanation sounds there is no factual basis. USDA keeps track of demand in their “commercial disappearances” numbers, just as they keep track of farm milk production.
Commercial disappearances have exceeded farm milk production every year and I do mean every year since 1996. In 2000 the all milk price was $12.32 when farmers produced 1.57 billion pounds less milk than the commercial disappearances indicate. In 2003 the all milk price was $12.52 and the commercial disappearances exceeded production by 4.3 billion pounds.
So, if you are looking for a hard and fast rule regarding supply and demand, you may as well give up. Farm milk pricing seems to be as Plato said about justice – it is the will of those in power.