Tuesday, June 23, 2009

The Real Problem

The numbers vary but, the story is the same – there is a surplus of milk in the U.S. and until supply and demand are balanced, farm milk prices will remain low. This is not quite an honest statement of the problem.

Everyone has heard the proposed solutions. Kill a bunch of cows to save the dairy industry has reached an almost religious fervor. The other solution, which has a bit less support, is supply management – some kind of quota.

People consume dairy products mostly, and very little raw milk. So, we hear people are not consuming as much as they did and this has created a backlog of dairy products.

Most farm milk is made into cheese. Farm milk is priced, with a near perfect correlation with block Cheddar traded on the Chicago Mercantile Exchange.

If you take average milk to make Cheddar you will get a yield of 9.6 pounds per hundredweight of milk. This is based on the Van Slyke formula. Perhaps, you will get 9.95 pounds but not much more. If you are a large corporation and are making Cheddar, you will “fortify” the cheese system – no big plant uses cheese vats anymore – with additional protein to bump up the yield.

As mentioned in an earlier post, additional fat is needed when the cheese milk is fortified. The relative levels of butter in storage compared with cheese in storage confirm fortification.

In the early days of fortification domestic NFDM (powdered milk) was used. Then along came imported milk protein concentrate (MPC) and ultrafiltration. Either system provides a slightly inferior product. So, what has been the result?

California keeps track of dairy product manufacturing costs. The most recent data:

“For 40-lb. blocks: the weighted average yield was 13.72 lbs. of cheese per hundredweight of milk. The weighted average moisture was 38.31%”

A yield of 13.72 pounds of Cheddar is an increase of 43% in the yield. That means you can make the same amount of Cheddar using 30% less milk.

The problem is not too much milk. The problem is the artificial gimmicks used by manufacturers to boost yields. Without the garbage in, garbage out, maximizing the bottom line at any cost, there would presently be a shortage of dairy products with current farm milk production.

When you know the stories of what dairy farm families are suffering through – this is a crime.


  1. I'll keep it short so as not to be considered culpable.
    John, this is your best blog yet.
    My way of simple thinking is this, dealing with whole milk only;
    Using known numbers for dairy cows and US population, we have about 1 dairy cow for every 35 persons - give or take.
    Using an average of 19,000lbs of milk per cow, per year, if everyone shared the milk equally, we would all be allocated about 1.5lbs of milk per person per day or about 2-3/4 cups, almost enough for a bowl of cereal and glass of milk, that's as long as you didn't have butter on your toast or cheese in your eggs.
    But as everyone knows we don't deal with whole milk, it's much more complicated than that.
    Jeff Suehring

  2. John, Interesting Blog. You need to help me get the word out on how the CCC is doing an end-around on the 110% sell-back price statute in the 2008 Farm Bill. Sec. Vilsack's plan to barter the CCC powder is flooding the supply chain with 47-50 cent powder despite how the program is supposed to work (i.e. buy and hold until selling back at 110% of support prices). I have the research details here: http://milkmarketwatch.com/blog/2009/06/ccc-sales-june-18.asp

    The Co-op's are full participants in this cheese barter for powder (at least CDI and DFA) and they are getting their make-allowance again on powder they turn into cheese! I'd be interested in your comments!

    -Marvin Hoekema

  3. The farm bill says:

    (f) SALES FROM INVENTORIES.—In the case of each commodity specified in subsection (c) that is available for unrestricted use in the inventory of the Commodity Credit Corporation, the Secretary may sell the commodity at the market prices prevailing for that commodity at the time of sale, except that the sale price may
    not be less than 110 percent of the minimum purchase price specified in subsection (c) for that commodity.

    Key phrase: "unrestricted use" The NFDM sold at the lower price was "restricted" to making casein. Pretty clever.