Friday, July 24, 2009

Thin Market

Both farm milk price and wholesale cheese price is tied by formulas to thinly traded cash cheese trading on the Chicago Mercantile Exchange (CME).

Many experts say there is no problem with a thin market, as long there are countervailing forces. But, the fact is, the powerful players can only act in their own perceived self-interest. These people are not saints.

As Lord Acton said, “Power tends to corrupt, and absolute power corrupts absolutely.”

Jim Miller, of the USDA is testimony before Congress on July 14, 2009 said dairy farmers had lost $7 billion.

A genuine market is rich with information. Licensed imports of butter are up nearly 20% over the same first six month period last year. According to USITC butter imports (HTS 040510) January through May of 2009 are up 129.70% over the same period last year.

Meanwhile, people are crunching numbers for CWT applications. Everyone, or at least the so-called experts, claim there is too much milk. Last I knew, cows give both skim and cream.

A thin market is, in the final analysis, an ignorant market.

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