What seems to work for this blog is keeping everything short and simple. Unfortunately, everything about dairy calculations seems to be designed to be unduly complex to aid creating an environment of confusion.
Pooling and depooling were brought about by the federal order reform of 2000 under the banner of efficient movement of milk. Depooling occurs because Class I prices are calculated for the current month. Class III prices lag a month so, when there is a rapid run up of cheese price on the CME, effectively Class III would actually be higher than Class I. So, Class III milk is, on paper, held back from the pool volume although the milk actually went into the vat – a scam.
Another scam is distant pooling. A small percentage of milk from the southwest is pooled on the Southeast to gain a higher price for Southwest producers shipping to the big new cheese plants – effectively a subsidy for those new plants.
What is needed, rather than a long explanation of just exactly how dairy farmers are short changed, is a new pricing system which truly is in the public’s interest, with oversight which assures the cards are not stacked against dairy farmers.
However, look back at yesterday’s post and note how there would have been less milk in federal order one for the first six months of this year compared with 2008. According to NASS, New York produced 9 million pounds more in the first six months of 2009 compared with the same period of 2008. There is something funny with the numbers.