Thursday, September 17, 2009

Market Abuse

(click to enlarge)

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.


  1. There was a petition at the farm show yesterday to increase milk prices and farmers stood in line in front of me and refused to sign it because their coop told them they would lose their market if they did. How do you get around that kind of thing?

  2. Threecollie - it's not their market in the first place, this is just wrong headed thinking and most will relize thier folly when presented with simple reason and a little time.
    Now for a few other thoughts; I like some imports; Columbian coffee and Belgium ideas top the list today.
    A few post ago I ranted about a proposed idea by NMPF to have congress authorize a proposal that would steal from each farmer a twenty-five cent per hundred weight "fee" that would be used to administrate a quota system for U.S. dairy farmers. I advocated a milk strike... Steve Barton replied with how, or what method of getting organized?
    I thought about it and here's what I think; We don't need a formal organization; we simply need to pick a couple of days and get the thing started - everyone does a little, tell a few others, hang a sign at the feed mill, or auction barn, the sign can be simple and made by your kids with construction paper and crayons or can be more formal and printed by you on your computer.
    I think we should only advocate a one day dump - two milkings for most of us. I know some of you want to dump more than that (three to five days seems to be common), but I don't think we should deprive school children of milk. A one day dump will divert much more of our milk into fluid milk, and reduce the supply, but shouldn't cause catastrophic shortages of fluid milk for the children of our country.
    For those of you that think this will not be enough - I agree and continue that we could dump milk one day a month for six months, this will take out all of supposed milk surplus we've heard about (even though there is now a milk shortage in the west). Don't worry I think the dairy farmers in the west will still support such a plan as they're getting jerked around more than most of us.
    The retail prices of most dairy products are already high enough to support a fair and equitable price be paid to farmers. As for the "record high" prices paid to dairy farmers in 2007-2008 I agrue these prices still weren't really all that good; adjusted for inflation $20.00 in today's money only buys $3.60 worth of goods in 1970 - nobody was getting $3.60 cwt in 1970, think about it.
    There are many things in this country that need a little fixing, but we (dairy farmers) need to start with the dairy industry.
    Please leave your thoughts and let's "pick a day". Everything starts somewhere, a U.S. milk strike might as well start here.
    Jeff Suehring

  3. Until a whole bunch of DFA members grow some balls and decide they want a "farmer owned and controlled COOP" I have little sympathy.


  4. Who are the coops? DFA LOL, etc. they are the problem, and they are the ones we need to go after. We can't just raise the milk price, we need to have a unified strategy and plan to attack these coops and processors. If any farmers are at the All- American Dairy Show, there is to be a survey there. Please fill it out. This will help present a unified voice for our industry. There is a group that is working to make change happen (and better change than what we are getting in DC now).

    Jared Smith

  5. Jeff--Instead of dumping some milk which might get a few seconds of video of milk going down the drain, how about "dumping" a few semi loads of cull cows on the DC mall?

    As for the COOP's lets get a little radical here too--what we got to lose? Find out the date of the next corporate board meeting in KC, load up and go, and 100,200,500 pissed off farmers enter the boardroom and physically throw the crooked bastards out and take the whole thing over.

    Just some random thoughts from someone getting more pissed by the day.............


  6. I'm with you Rusty a good old-fashioned hostile take over. I ain't scrapped in a few years but I'm worked up enough I could hold my own. I think alot of us are...

  7. I'd hate to watch a days work go down the drain, but I hate even more watching the milk truck pull away after my milk was just stolen. How much longer can we all pray the price will go up enough to cover costs? How many more meetings can we go to? How much more of your equity would you like to give away? They don't hear us. If there is truely too much milk then it won't work. I say lets find out. I say STRIKE. As Pete Hardin says, early in the week, early in the month. How about October 5, 2009 National Dairy Farmer Strike Day.