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.


  1. John,
    That pretty well sums it up in a nutshell! I have one question. How niaeve are we all to believe in their projections? I think honest men in the dairy reports are just a little harder to come by than honest politicians, add to that all the experts and dairy magazine editors who swallow this eroneous info hook line and sinker and presto, you have the present crisis. No answers, no money, no hope for relief anytime soon. Hope we all can survive untill the "market" straightens out.
    robert lieb

  2. Barbara Martin aka Dairy Goddess is calling on Congress to use the 350 million to conduct an audit on the dairy processors. She urges us to contact Dairy Programs Office of Chief Economist John Mengle @ (202) 720-4664. As things stand now, there ARE NO AUDIT REQUIREMENTS!!!

    This must be changed!

    July/August production/consumption reports released yesterday absolutely DO NOT SUPPORT THE CHEESE PRODUCTION/COLD STORAGE REPORTS FOR JULY!

    Steve Barton

  3. The days of John Wayne and true American grit are apparently gone. You're all a bunch of cry babies and refuse to do anything to help yourselves - blame it on the next guy, blame it on this or that or we should do this and we should do that, this is a good idea and that is a bad one, while in reality nobody does anything, (besides complain)! Meanwhile the Europeans including the Germans, Austrians, Belgiums, Italians, and even the French prove they have more backbone and resolve than any or all of you. American elitism indeed! Keep complaining, it will get you nowhere. As Uncle Ted would say "when the going gets tough....."

    Silence equals surrender.

  4. "Silence equals surrender".

    As a descendant of European immigrants, and posessing a fairly comprehensive understanding of the socialist governance in continental Europe, I have a hard time associating Frenchmen, Belgians, and Italians with backbone.

    What, exactly, do you propose we do?


  5. I called the office of Mengel and got a recording to leave a message; or call this number for immediate assistance. It was an education calling the next number. I found out that the number of people who earn a living off of dairy programs is more than I can imagine and that to find the anwer you have to divide your questions down into more components than there are in milk and by the time you talk to a seemingly gazillion folks you still have not found the answer. To get anywhere requires alot of time and persistence; so even if you don't get the answers you are looking for I don't think it hurts to rattle cages because sometimes they don't hear from anyone and whoever calls and rattles the cages might get listened too. I just told them I was tired of getting "robbed" they seem to understand that!

  6. Note to Foggy,
    "Anonymous" has a point: right now the Belgians, Dutch, Germans, Italians, and yes, even the French dairymen are showing considerably more backbone,and intestinal fortitude than we Americans... they have the "cahoneys" to dump their milk rather than sell it at a loss.Damn the bankers,damn the co-op exects,damn the government! The milk's going down the storm drains or on to plowed ground, millions of gallons of it!
    We American dairymen love to see ourselves as rugged and independent; truth is, as the Mexican bandit said about "his" peasants, "If God did not wish them sheared, He would not have made them sheep!" That's what Rick Smith, Gary Engles, and the nice folks at J.R.Kraft are thinking of us and so far they seem to be right!
    I had the dubious honor of hearing House Ag Chair Collin Peterson speak in Canandaigua a coupla' weeks ago: if you think that load of old stinkers has any intention of doing anything positive for U.S. dairy farmers you are sadly deluded.
    We've waited months for something or someone to solve OUR problem: Maybe its time WE took responsibilty and control of our own destiny: maybe, just maybe, we take a page from our European cousins... God help us, we'll have to orgainise and sacrifice our individual selves to the common good.That and standing up and getting some NUTS, Foggy!
    And a note to "Anonymous", why don't You grow a pair and sign you brave observations??? Later... Nate Wilson.

  7. Remember there was a German milk strike last year, I believe the German government responded by making it illegal to organize or promote such a strike again. It's unlawful in this country for farmers to form true unions and bargin in kind. Will the European milk dump raise prices paid to farmers? My guess not much, if any, as John has shown you time and time again, the supply of milk seams to have little to do with the price, same with the supply of oil and the price of gas, but for our sake and the sake of the Europeans I wish them well and hope they succeed.
    Will a U.S. milk strike raise prices? Not in the short term I'm guessing. But I think if enough of us commit to dump a little milk for the next few months the "market" may react. Will it ever happen? I doubt it... by in large, I think we have forgotten why we are exceptional as Americans, how our fathers fought and toiled to carve out a place for us (their children) in this land. My forfathers fled from their homelands in Europe to escape some of the very persecution we now endure. They cleared this land with axes, picks, shovels, mules and horses and often times lived a short, hard life to better those that followed. Now just a few short years later we seem to have lost the resolve to stand-up to our own oppressors, those who cheat and steal from us, our children and our country.
    For reasons, that are beyond my simple thinking, we seem to have spent the last decades working to destroy our priceless animal agriculture, not to mention de-industrializing our economy, we have banks failing, social security and medicare near bankrupt, heck our whole country is near bankrupt. Recently the pace seems to have quickened, to what end?
    As farmers you are still the foundation this country sits on, the distribution cycle starts at your door and supports this country like nothing else. I hope and pray that more farmers like Nate come to reason soon, as I believe not only our futures depend on it, but perhaps the future of our entire country.
    Will dumping a days worth of milk get us little press? Yes it will, will it fix all our problems? No, but maybe it's a start towards getting something done before it's too late. If we succeed here, maybe we can fix social security next?
    Jeff Suehring