Wednesday, September 30, 2009

What recession?

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Today, I noticed in my local supermarket whole milk price at $2.75 per gallon. Not in line with NY’s milk price gouging law.

However, today a reader sent a photograph of Wal-Mart’s NFDM price. Every pound of solids-not-fat in one hundred pounds of farm milk makes a pound of NFDM. Then to that you add 4.3 pounds of butter from the same hundredweight of milk.

All of which adds up to over $50 per hundredweight at you local friendly Wal-Mart. Probably, farmers got $9.90 for the milk that went into Wal-Marts NFDM product. H. Lee Scott, Jr., CEO of Wal-Mart reportedly makes $5.99 million. One has to wonder how many Chinese peasants and how many American dairy farmers it takes to get Mr. Scott up to the level he so richly deserves.

Cargill Non-dairy "Cheese"

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A number of people have called or emailed regarding Cargill’s “non-dairy cheese” so, above is their press release.

A quick look at U.S. patent applications entering the words “Cargill” and “cheese” yields quite a haul.

For example:

United States Patent Application 20060198938
Kind Code A1
Chen; Wen-Sherng ; et al. September 7, 2006

Processed cheese made with soy
A method for preparing processed cheese containing significant levels of soy protein which possesses melt, firmness, and flavor characteristics similar to regular processed cheese is provided. The method provides a mixture including a dry particulate soy protein ingredient containing soy protein having a molecular weight of about 4,000 to about 40,000 Daltons in combination with dairy fat and dairy protein without pre-emulsification of the soy material, and the mixture is cooked and a soy cheese product thereof is then packaged. This method provides a processed cheese product having the requisite textural and flavor properties, while avoiding competitive adsorption problems between dairy and soy protein ingredients and opportunities for microbial growth which can occur with aqueous emulsified soy compositions.

This is hardly surprising. Additionally, there is no way to compete effectively on the price of used oats. However, I suspect the best defense is a defense of the integrity of dairy products. Cheap analogs (imitations) containing MPCs and caseins have no place in the dairy case.

Tuesday, September 29, 2009

Who Wins?

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USDA announced today:

WASHINGTON, Sept. 29, 2009 -- The U.S. Department of Agriculture's Commodity Credit Corporation today accepted a bid from an exporter under the Dairy Export Incentive Program for cheddar cheese to Asia and Eurasia.
The award totaled 40 metric tons of cheddar cheese.
Delivery period: Oct. 1 - Nov. 30, 2009
Bonus: $275.00 per metric ton
Remaining global DEIP balance: 2,103 metric tons
CCCs bonus was awarded to Interfood, Inc.
For further information, call (202) 720-3224.

That amounts to $0.125 per pound bonus. Block Cheddar today was $1.4125 per pound. So, if you take the DEIP bonus off that would put Cheddar at $1.288 per pound.

On September 17, 2009 Dairy market News reported the high side of Oceania Cheddar at $1.49 per pound. With a $0.202 per pound advantage there is a hefty profit to be made.

One big question remains. Will/has the DEIP program helped the farmer’s bottom line? No guessing!

Monday, September 28, 2009

DFA Import Twist

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In the fall 2009 DFA Leader DFA claims they hold 13 import licenses “Most of them acquired with our Borden Cheese purchase in 1999.”
If you go to:
you will find import licenses must be renewed every year.

DFA claims “Ninety-five percent of the volume associated with these licenses are for European cheeses, which are not available in in the United States.”
If you go to:
you can see for yourself, the claim cannot be substantiated. Only six of the licenses are for the EU and it is hard to claim the uniqueness of the cheeses.

DFA import licenses:
Country of Origin – Other Countries
*Dried Skim Milk
Country of Origin – Any Country
*Other Cheese – NSPF
Country of Origin – EU
Country of Origin – New Zealand
*Blue Mold
Country of Origin – EU
*American – OT- CD
Country of Origin – Australia
Country of Origin – EU
Country of Origin – Other Countries
*Edam and Gouda
Country of Origin – EU
*Italian Type
Country of Origin – Argentina
Country of Origin – EU
Other Cheese – Low Fat
Country of Origin – EU

Sunday, September 27, 2009

Imports Continue

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There seems to be no end of conventional dairy experts trying to minimize the impact of dairy imports.

My thought is fairly straight forward. No one imports dairy products as a conversation piece. Imported dairy products indicate a demand greater than domestic production.

Above are two graphs on imports of basic dairy products. The imports for cheese include all kinds of cheese. For butter, the graph includes butter, butter substitutes (which include butter as an ingredient) and butter oil.

The raw data is from U.S. International Trade Commission (USITC) database.

Saturday, September 26, 2009

Busy doing nothing

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Festering in the back of my mind has been a statement, made at a meeting a couple nights ago, by a New York Senator that milk pricing is a federal issue which the state can not do much about. Not so!

NY has a milk price gouging law:

The law states:

“any time when the retail price of fluid milk exceeds two hundred percent of the price for class I fluid milk, it shall be the responsibility of the commissioner in consultation with state and local agencies as the commissioner deems appropriate, to examine the price of fluid milk at retail to determine if the prices of fluid milk sold or offered for sale in the state or in any area thereof appear to the commissioner unconscionably excessive.”

That means twice the price of farm milk – plain and simple. Around my neck of the woods, that means price in the local supermarket should not be higher than $2.23 per gallon.

How many people will be amazed to know this law has never, ever been enforced?

In January 2009 New York Commissioner of Agriculture, Patrick Hooker, posted some spin the department’s web site (see above). They stopped collecting data in November 2008.

Here’s the point, and the point could be repeated ad infinitum at both federal and state levels, if the laws on the books were enforced, farmers would be getting a decent milk check right now. Most law governing co-ops is state law.

If, the processors and the retailers had had to live with what the New York dairy farmers have had to live with this year, they, the processors and retailers would be begging for farm milk prices to go up immediately. Instead they are enjoying the trip to the bank.

At the same meeting at least two farmers told me the commissioner will not return their calls.

Friday, September 25, 2009


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Banks must be in a world of hurt.

“If New Mexico is your home and agriculture is your livelihood, then Ag New Mexico is the right choice for financing.”

“As a cooperative that is part of the nationwide Farm Credit System, Ag New Mexico has been financing agriculture-through good times and bad-for more than three generations. We can finance all aspects of your farm, ranch or agribusiness, as well as your country home or other rural property.”

AG New Mexico is listed as “CREDITORS HOLDING UNSECURED NONPRIORITY CLAIMS” in one New Mexico dairy bankruptcy of $2,856,271.00.

Needless to say the letter above is sincere, very sincere.

But, rumors are, many ag lenders for dairy are merely carrying a large number dairies until cow prices recover and they hope, banks will not be left holding the bag.

Thursday, September 24, 2009

Deans PR

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Vermont was a bit of a hot seat for Dean Foods. The Senate Judiciary Committee held hearing last Saturday which included remarks by the head of the antitrust division of the Department of Justice, Christine Varney.

Deans PR firm for this event can be found at:

There are several statements which deserve further attention but, for the moment note:

As National Milk Producers Federation CEO Jerry Kozak recently said about the current dairy situation, “We have to first admit that the biggest problem is also one that no one organization or government can possibly fix, and that is the global recession. A worldwide decline in dairy demand, owing to the worst economic downturn in 75 years, is at the heart of the price crunch on the farm. If it were just America's farms that were suffering, that would be one thing. But when the same dynamic plays out on dairies from Argentina, to Austria, to Australia, there is no swift unilateral, or multilateral action, that can alleviate the problem….it’s all over the world.”

It is most definitely not all over the world. Canadian dairy farms are not being hit by this centralized milk mafia. Canada has made certain their dairy farmers are not globalized.

Wednesday, September 23, 2009


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Indexes are a way of measuring relative change. For instance the consumer price index is used to calculate inflation. This is done by dividing the current year’s prices for all items by the base period (1982 -84 = 100) and multiplying by 100.
In 1980 the all milk price was $13.05. Adjusted for inflation the 2009 milk price should be $34.18. Parity at 100% would have been in August 2009, $45.00. This shows that dairy farm input costs have risen faster than inflation.

The consumer price index for dairy products tracks very closely with the CPI for all items. In other words retail price tends to be all the traffic will bear.
Farm prices are another matter. In the above graph farm price index for milk was 148. So far this year, the farm milk price index is 91.21. The average of the farm milk price index from 1980 through August 2009 is 101.55.

Put another way, all of inflation has been captured by those in between the farm and the public. At the same time dairy farm costs have put a double squeeze on dairy farms.

Essentially, the problem is structural. Lack of antitrust enforcement above the farm level has created large monsters who are as dedicated to planning as the former Soviet Union. Farm milk price appears to be both variable and volatile (or did I repeat myself ), when, in fact, it is fairly predictable. “You ain’t goin’ nowhere.”

What we are actually measuring in not distance or dollars but, power, or the lack thereof.

Tuesday, September 22, 2009

1939 NY Milk Strike


Is a very interesting history of one of the most successful milk strikes ever.

I know I posted this link a while ago but, it bears repeating. Milk strikes are not simple matters.

More on the European Milk Dump

I received this email yesterday with some links to youtube.

Dear John,

Thanks for your mail

Links under this mail will give you an idea of the milk dumping in the Netherlands and Belgium.
Farmers give there full support or deliver a part of their milk voor the actions.
Collection of the milk was orginized by the most active milkfarmers.
In France up to 45% is striking

Best Regards


Met vriendelijke groeten

Eric Bals
Nederlandse Melkveehouders Vakbond

Monday, September 21, 2009

Letters From the Country

This is probably the first time in anyone's memory when the suppliers to dairy farms have been in such rough financial shape. This time is different


Indeed, the only sure outcome of NAIS are the windfall rewards, which tech companies and the trade groups that support them are currently jockeying to catch. The
consortiums they form with private technology providers and federal and state governments are too cozy and too lucrative to give the system an appearance of anything
but a cash cow for corporate beneficiaries. The tens of millions of dollars in taxpayer money that has already poured into NAIS has done more to enrich a handful of money-minded organizations than to ensure food safety,and it is time that the USDA jettison this program.

Saturday, September 19, 2009

Vermont Hearing

If you go to:

All of the testimony from today's hearing in Vermont are listed.


There is something ironic about European farmers willingness to stand up:

Type "Jose Bove" into Google news:

I am reasonably convinced Jose Bove would be in prison today had he done the things he has done in France. Instead, he addresses the European Parliament on the plight of dairy farmers.

Dairy farmers in Europe poured milk into rivers. I am certain they would be arrested if they did that in the U.S.

Friday, September 18, 2009

Formula for Failure

Conventional experts insist the crash in dairy farm milk price is all about supply and demand. How accurate that claim may be is heavily dependent upon the validity of the data at each stage.

At the first step milk production data is release. This information is not audited. Next the dairy products report is released. This data is not audited. Next the import/export data is considered and again, particularly the export data may not be accurate.

Then, the cold storage data, on a monthly basis is released. This data is not verified or audited.

And of course, imported dairy proteins are not counted.

From all the above, the experts conclude there is a problem with supply demand. Never mind the scanner data points beyond any doubt, to increased consumption.
So, we have a best guess, not a firm fact regarding supply/demand.

All of this justifies the product price, which is nearly perfectly correlated with block Cheddar price on the CME. The NASS survey is a smoke screen and nothing more.
The price of block Cheddar can rise or fall with no cheese traded from the motivations of just one trader. This means the pricing system cannot be regulated.
One thing which is certain the problem lies in the formula which, as long as the government is will to put 100% of the pricing ability in the hands of a few, there will be a continuing strangle hold on dairy farmers milk checks.

Thursday, September 17, 2009

Market Abuse

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Yesterday the Consumer Price Index (CPI) for August 2009 was released. Earlier, the Producer Price Index (PPI) was released.

An index compares present prices with a base period. In the case of CPI and PPI the base period is 1984 – 1984 and that period equals 100. All of the indexes began at 100.

As can be seen from the above graphs, which covers cheese and farm class II milk price, the spread between farm, processor and retailer has grown since January 2008.

The fact that the retail, CPI, has grown so large is an indication of market power.
Notice too, the processor PPI rose in August 2009 after the Secretary of Agriculture increased the “Dairy Product Support” price, effective August 1, 2009, whereas the farm PPI did not rise in August.

Taken together the graphs indicate market failure because there is not an efficient transmission of price signals through all stages.

WSJ Article

Take a look at:

Quite a few comments.

Wednesday, September 16, 2009

Trade Away

IDFA is concerned about trade. So far, I have not seen IDFA worry about American dairy farmer income:

President Obama Agrees to Restrictive Duties on Chinese Imports
Late last Friday President Obama responded to a trade issue involving lower-cost Chinese tire imports by handing down a decision to implement the trade restrictions recommended by the International Trade Commission. His decision includes imposing duties of 35 percent in the first year, scaling down to 30 percent in the second year and 25 percent in the final year. In addition, the President also decided to extend trade adjustment assistance to laid-off workers in the domestic tire industry.

The United Steelworkers recently filed a complaint with the International Trade Commission, blaming Chinese tire exports for the loss of more than 5,000 American jobs. Because the group has no authority to implement the plan, the recommendation was sent to President Obama for review and action.

The response from the Chinese already has implicated the U.S. poultry sector, and IDFA remains concerned that other agricultural products, including dairy, may be vulnerable to retaliation. IDFA had previously signed onto an industry-wide letter, urging the president to consider the ramifications of agreeing with the ITC and warning against the dangers of protectionist trade policies.

"President Obama's mandated tariffs impose duties at a slightly lower rate than the ITC's recommendations, but the trade ramifications and protectionist implications are still potentially dangerous for IDFA and its members," said Clay Hough, IDFA senior group vice president.

Tuesday, September 15, 2009


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What can be said about NMPF latest plan. For the most part when someone is claiming to save you, reach for your billfold because that is what will be gone if the plan works.

NMPF wants a mandatory checkoff, which they would run (who else. All they need is $.25 per hundredweight from every dairy farmer.

Nice lifestyle support system.

Monday, September 14, 2009

Real Numbers

Milk Producers Council, a California dairy organization has been at the forefront of promoting supply management. The Holstein Association joined in and therefore, the idea of supply management has achieved some traction. Supply Management seems to be the one thing those in power are concerned about.

Naturally, land-grant institutions have been enlisted in the cause to demote supply management. After all, land-grants need money too.

Richard J. Sexton is Professor, Department of Agricultural and Resource Economics, University of California, Davis has been called to duty. Milk Producers Council has generously made his thoughts available:

Dr Sexton lays out a claim:

“Both the demand and supply of raw milk in the U.S. are price inelastic in the short run, meaning that small shifts in demand or supply cause proportionally larger changes in price. A rule of thumb for the price elasticity of demand for raw milk is ‐0.5, meaning that a one percent increase in production will cause a two percent decrease in producer price, other factors constant.”

Rule of thumb is no rule at all and “other factors” never remain “constant.” The point is many people believe these experts without questioning the validity of the data. None of the data is precise.

Barbra Martin has a blog:

and she would like to see the data audited. She is asking for support in that effort.

Sunday, September 13, 2009

Sale Canceled

Last week, California Dairies, Inc canceled their sale of 1,237,947 pounds of NFDM to the CCC. The sale from LOL has not as yet been canceled.

While it is tempting to see this as just one more example of a tightening milk supply, there could not have been much new information regarding milk supply in the time when the sale was first made and the sale canceled.

Maybe it is just as well to accept we have entered a new economic dimension ¬ the twilight zone.

Saturday, September 12, 2009

Market Distortion

We are burdened with labels in this country. Take conservative and liberal. At one point, there may have been some meaning in the terms but now, conservative and liberal are just substitutes for good or bad, depending upon your perspective.

“Market” is another term which seems to have lost any original meaning and now, again, is just a substitute for good/bad.

International Dairy Foods Association (IDFA) is very concerned about how the $350 million in the Sanders amendment is used:

IDFA is particularly concerned about “market distortion.”

F.A. Hayek won the 1974 Noble Prize for economics said:

“The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.”

So, just how close to conservative economist F.A. Hayek's important concept of dispersed knowledge is the dairy market? Not very.

The Commodities Futures Trading Commission (CFTC) regularly publishes a report on futures trading:

More than 50% of the open interest in class III milk futures is held by 8 or less (sic) traders. There are about 50,000 dairy farms in this country, all of whom hold “bits” of knowledge but the ‘knowledge” held by “8 or less” rules.

While 50,000 dairy farms go through some kind of economic fire and brimstone, IDFA and NMPF are worried that the “8 or less” will lose their iron grip.

I would suggest that the real distorters of the "market" are those who are represented by IDFA.

Friday, September 11, 2009

Latest Request

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Here is proof positive of why farm milk price is so low.


USDA regularly publishes “World Agricultural Supply and Demand Estimates” (WASDE). The issue for September states regarding milk:

“The milk production forecast is raised for 2009 and 2010 as milk per cow is forecast higher. Lower feed costs and plentiful supplies of alfalfa hay into 2010 are expected to support increased feeding of higher quality rations. Imports for 2009 are raised as fat-based product imports have been stronger than expected; the commercial export forecast for 2009 is raised as cheese shipments have been firm. Net removals are adjusted to reflect lower expected sales to CCC in 2009. Class III and IV price forecasts are reduced for 2009 due to weaker butter and whey prices. Cheese and nonfat dry milk (NDM) prices are unchanged. The Class III price forecast for 2010 is unchanged; the Class IV price is reduced due to lower butter and NDM prices. The all milk price is forecast at $12.05 to $12.25 per cwt for 2009 and $14.55 to $15.55 for 2010.”

For January 2007:

“Milk price forecasts are reduced from last month as increased nonfat dry milk (NDM) and whey prices are offset by reduced cheese and butter prices. Demand for NDM and whey for both domestic ingredient use and international sales continues to support relatively strong prices. In the absence of other international supply sources, U.S. prices are expected to remain high. Cheese prices are reduced slightly and butter prices are reduced more as supplies are expected to remain ample in the face of robust demand for NDM. Class price forecasts are also adjusted to reflect the recently announced interim manufacturing (make) allowances for cheese, butter, NDM, and whey that will take effect February 1. The increase in make allowances results in lower Class prices. The all milk price forecast for 2007 is reduced to $13.60 - $14.40.”

The actual “all milk” price for 2007 was $19.13

Thursday, September 10, 2009

Clever, too clever

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National Milk Producers Federation (NMPF), on September 9, 2009 wrote to members of congress:

"On behalf of America’s hard-working and struggling dairy farmers, the National Milk Producers Federation is writing to express our support for the $350 million included in the Senate FY 2010 Agriculture Appropriations by Senator Bernard Sanders (I-VT) as an amendment to the Farm Service Agency budget with the intent of assisting dairy producers."

NMPF claims to have provided the service of analyzing the best means of spending the $350 million. NMPF comes down strongly in support of the government buying processed cheese stating:

“If these same additional funds were used to purchase processed cheese for food program distribution, then $350 million would fund the purchase of an additional 210 million pounds of processed cheese, assuming the current outlook for market prices plus a $0.20 per pound cost for processing, packaging and transportation. The natural cheese content of 210 million pounds of processed cheese represents about 60 percent of total monthly production of American-type cheese, so it is assumed that purchases and donations would be spread out over a year, over which time they would represent an additional four percent of production.”

Members of congress need to be aware, there may be little U.S. produced cheese in “processed cheese.”

Here is a letter from FDA to Kraft in 2002:

Then in a 2004 report the USITC said:

“56 percent of all MPC purchased in 2002 was MPC 70-79 used in the production of processed cheese products (MPC 70-79 accounted for 91 percent of the MPC used in the production of processed cheese products.”

NMPF cannot claim ignorance regarding the use of MPCs in processed cheese. NMPF has been involved in virtually every major discussion of MPCs in Washington DC.

NMPF cannot honestly claim anything, “On behalf of America’s hard-working and struggling dairy farmers.”

Wednesday, September 9, 2009

Vilsack's Toolbox

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Tomorrow, September 10, 2009, in Federal Court, Eastern District of Tennessee, at 9 am the Court will hear the arguments on the NYT, NPR request for documents.
At 10 am the court will consider “class certification.” Both are extremely important. The documents filed thus far confirm a failure of DFA to behave in the best interest of members.

However, there is an even more important issue which needs to be brought into the light of day.

Secretary Vilsack said in California, recently, he had used all the tools in his toolbox on behalf of dairy farmers.

This is not so. According the Agricultural Marketing Act 7 USC § 608 c (7) “Terms common to all orders “ (A) “Prohibiting unfair methods of competition and unfair trade practices in the handling thereof.”

Clearly the defendants in this case walked around the Department of Justice with ease but, there was no need to walk around the Department of Agriculture as no one can recall that they have ever been a force in “Prohibiting unfair methods of competition.”

Tuesday, September 8, 2009

SPC Cheese?

Frozen Pizza Recall
Reported by: Web Producer
Tuesday, Aug 18, 2009 @10:29am

If you have some frozen pizza sitting in your freezer, you might want to check it before eating. The Food Safety and Inspection Service of the USDA have recalled 8,000 Kraft Jack's Pizzas. The Jacks original sausage and pepperoni pizza products may contain soy protein concentrate, an undeclared allergen. The pizzas were sold in 17 different states including Indiana, Illinois and Kentucky. The FSIS has not received any reports of any allergic reactions from eating the pizza.


Here's a shocker - soy protein concentrate has no GRAS status.

Here's another shocker - Kraft has three patents using soy to make imitation dairy products.

Monday, September 7, 2009


In the past five years we have imported 20,207,364 pounds of casein and caseinates from China.

You might want to look at:

Imports From China and Food Safety Issues

By Fred Gale and Jean C. Buzby

Economic Information Bulletin No. (EIB-52) 37 pp, July 2009

The U.S. Food and Drug Administration’s (FDA) increased attention to food imports from China is an indicator of safety concerns as imported food becomes more common in the United States. U.S. food imports from China more than tripled in value between 2001 and 2008. Addressing safety risks associated with these imports is difficult because of the vast array of products from China, China’s weak enforcement of food safety standards, its heavy use of agricultural chemicals, and its considerable environmental pollution. FDA import refusal data highlight food safety problems that appear to recur in trade and where FDA has focused its import alerts and monitoring efforts. FDA refusals of food shipments from China suggest recurring problems with “filth,” unsafe additives, labeling (typically introduced in food processing and handling), and veterinary drug residues in fish and shellfish (introduced at the farm). Chinese authorities try to control food export safety by certifying exporters and the farms that supply them. However, monitoring such a wide range of products for the different hazards that can arise at varying points in the supply chain is a difficult challenge for Chinese and U.S. officials.

Sunday, September 6, 2009

SE Case

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The New York Times and NPR jointly requested the court in the South East dairy case to make public some documents.
The court agreed and the defendants appealed.

Howery, the dairy farmer plaintiff’s law firm filed a motion supporting the release of the documents, rumored to be 90,000 pages, in question.

There are 28 pages in the document which not only support release of the document but also, indicate scope of the case. Above is just one page of the document filed September 4, 2009. The one page alone, makes clear the need to clean house in the dairy industry.

Saturday, September 5, 2009

CME Falls and Rome Burns

CME block Cheddar prices fell to $1.27 per pound this week. Butter closed at $1.17 per pound.

Compare the CME with Dairy Market News report on fluid milk in the East for September 2, 2009:

"Milk supplies are tight in the Northeast. Production declines are due to herd culling and typical seasonal reductions. Increased Class I demand, due to
school openings, is also limiting the available milk supply. Short supplies are
necessitating reduced production schedules and shorting contracts in some areas.
Tropical storm Danny had very little impact, skirting only the coastal areas.
Milk volumes are down in the Mid Atlantic area with plants scrambling to secure
enough supply to meet their contract needs. Balancing plants are working with
their contracted customers to adjust production schedules to better match
current supplies. Milk supplies in the Southeast are very tight. Reduced
availability from the Southwest and Mid Atlantic has heightened the shortened

Long Term Habits

Dairy Market News in their September 3, 2009 report, covering August 21st and 28th for California NFDM said, “Prices for both periods were influenced by effects of long-term contract sales.”

It goes without saying; those long-term contracts were for depressed prices. This sounds like an echo of the 2007 NFDM misreporting to NASS.

Friday, September 4, 2009

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USDA Economic Research Service (ERS) has new data on farm income for 2007. Naturally, dairy farm income is up in 2007.

Beef operations get very little income from farming operations. Probably beef producers can count on even less farm income now that Wal-mart has signed a deal with Brazilian corporate giant JBS S.A. to produce all Wal-Mart’s beef in Brazil. Since much beef, especially ground beef is from cull dairy cows, the JBS Wal-Mart deal cannot bode well.

One important thing for all to note is the heavy reliance of dairy farm families on farm income.

As mentioned in a very early post, citing the 1940 “Yearbook of Agriculture” all economic question are really moral questions.

Thursday, September 3, 2009

Who pays the bill?

Type “milk protein concentrate” into Google “News” and you will see quite a few stories pop up. This, of course, is worrisome to all those trying to cut costs by using MPCs.

A host of MPC defenders and, for lack of a better term, minimizers, are rushing to counter the claim.

For example, at the end of August, on Dairyline:

Jerry Dryer of JDG defends MPCs:

“A fair amount of MPC is used by food companies for various applications, according to Dryer, because it has a lot of the lactose removed from it, whereas nonfat dry milk does not, “so MPC has a specific application and specific uses so it is sought after by some food manufacturers.”

“U.S. MPC output last year amounted to about 88 million pounds, according to Dryer, who also reported that MPC imports in 2008 amounted to about 109 million pounds and the U.S. actually exported about 62 million pounds “so it’s one of those give and take products.”

Where did the output data come from so that the number can be independently verified?

Futhermore, what is not mentioned is that JDG (Jerry Dryer Group) is a contractor for “your” checkoff money.


On page 140, you will find: “JDG Consulting–Dairy Issues Management”

I have tried my best to find what “Dairy Issues Management” is all about and just exactly what the pay for the position is, to no avail.

My guess is that it is exactly what it seems to be – for some nice work. And, probably, little volatility in the dollars rolling in.

Wednesday, September 2, 2009

Definition Needed

Fonterra’s latest internet auction for whole milk powder saw the average price rise 24%. This is on the heels of a 25% increase last month. This just completed auction announced today averaged $1.30 per pound.

Dairy Market News international price reports indicate a smaller spread between skim milk powder and whole milk powder than one might think – about $0.045/ pound.

Therefore the sale of NFDM to the CCC for $0.92/ pound has overnight become more curious.

Today’s CME spot block Cheddar price fell four and a half cents to close $0.005 more than Fonterra’s whole milk powder price.

Who ever thought of the term “price discovery” should be sought out and asked for a new definition. Additionally, what would be the definition of the activity on the CME?

Tuesday, September 1, 2009


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A comment from the last post is: “how is the market right now in America for the dairy farmers?”

Right to start, the term “market” is such a vague term, that although there are definitions of the term, the definitions fail to explain the workings of the “market.”

Dairy farmers should realize all the variation in farm milk price is, quite simply, determined by the working of the cash market at the Chicago Mercantile Exchange (CME). Block Cheddar price at the CME has a near perfect correlation with farm milk price.

Block Cheddar, traded at the CME, has a very, very weak correlation with farm milk production. Block cheddar, traded at the CME has a very, very weak correlation with Cheddar production.

So, while the term “market” is used, the term in this case really means shenanigan – defined as, “a devious trick used especially for an underhand purpose.” Consider the above graphs.

Having said all that, milk is drying up fast. As we move into winter, milk is likely to get even tighter. Replacement prices are beginning to rise. All signs point toward better prices. But, they never should have fallen as low as they have. Milk price has assumed the form of legal plunder.