Saturday, October 31, 2009

Product of Mexico

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The Organization for Co-operation and Development (OECD) measure or surveys a great number of things. One item I recently came upon is a survey of the perception of corruption in the various member countries.

Poland fared the worst, followed by Mexico. Not far behind came the U.S. at sixth.

This raises a question: should the consumers in the United States trust a dairy product made in Mexico? Is the above product made in conformance with the Code of Federal Regulation “Standard of Identity”?

Furthermore, what is the trustworthiness of Nestles?

Friday, October 30, 2009

PCE Data

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The Bureau of Economic Analysis (BEA), which is part of the U.S. Department of Commerce regularly publishes economic information. One Item published is called Personal Consumption Expenditures (PCE). For dairy BEA tracks two categories, fluid and manufactured dairy products.

In the above PCE graph I have combined the two, which shows total dollars spent on dairy.

The Bureau of Labor Statistics (BLS)publishes Consumer Price Indexes (CPI). The CPI - the costs of each unit - has fallen for dairy in the first nine months of 2009.

Consumers have spent more money total on dairy and the items costs less. Translation - more, not less dairy was sold. Where is the money?

email from Australia

Below is an email from a dairy farmer down under:

A friend sent me the link; said that a dairy farmer friend told her that "listening to all the farmers at the local hearing was like a eulogy".

Did you attend?

MG just gave us a step up; media is lapping it up making out all our probs are over, saying it equates to 1.5 - 2c per litre! In order to get 2c a litre you would need to be doing a bit better than a 5bf and 4.5 prot.

Sooooo, it brings us up from 19.6cpl to maybe 21cpl. Whoo hoo?

Ave cost of prod. even in our neck of the woods is said to be 30-35cpl.

Many farmers say they are getting out. Many say that the minute prices increase a bit, they will put their farms on the market. Some are concerned this glut will then dump the land prices.

Issue 2 in Ohio

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Issue 2 in Ohio would change the constitution of Ohio to create a "livestock board" with unlimited power - seems like a NAIS 2.

Here is a link to an organization opposing Issue 2:

There seems to be a lot of out-of-state money behind Issue 2. I count 82 different mostly corporate donors.












Very strange.


Thursday, October 29, 2009

Senate Hearing

Maybe it is just me but, if you've seen one hearing you've seen them all. For instance, Mr. Paul Kruse, testifying for IDFA said:

Why? First, our Dairy Product Price Support program encourages the production of nonfat dry milk, even as few food processors want to use that product. On the other hand, there is growing demand for products like milk protein concentrates which many food processors now source from other countries because the United States does not produce near enough. Simply put, our policies encourage investment in plants to produce nonfat dry milk and not the specialized milk proteins demanded by today’s marketplace. Our problem is not that our domestic industry can't compete with imports but that our government encourages the production of other products.

Where have we heard that logic before? And, what exactly does it mean? Does it mean the government will buy NFDM at less than world prices? Does it mean the big co-ops are totally dependent upon government programs? Who knows?

We do know, because there is data to support the knowledge, instead of pure speculation, the U.S. export value of a unit of MPCs has fallen 28.4% year to date through August. On the other hand, imports of MPCs have only fallen 3.6% per unit. sounds like a win/win - not really.

Wednesday, October 28, 2009

New Dairy bill

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Today a new bill was introduced in the House of Representatives HR 3935.

The bill creates a floor price under Class II and Class III farm milk price. The floor price for Class III is based on the average costs of production for the 23 lead dairy states. The Class II price is based on the recent relationship of Class II & III.

Class I was not used as to protect consumers. Class IV was used because of world trade issues.

The bill could use all the support which can be mustered.

Tuesday, October 27, 2009


The Dairy Export Incentive Program (DEIP) helps exporters of U.S. dairy products meet prevailing world prices for targeted dairy products and destinations. Under the program, the U.S. Department of Agriculture pays cash to exporters as bonuses, allowing them to sell certain U.S. dairy products at prices lower than the exporter's costs of acquiring them. The major objective of the program is to develop export markets for dairy products where U.S. products are not competitive because of the presence of subsidized products from other countries.

Here is the latest condition as reported by Dairy Market News:


BUTTER/BUTTEROIL: European butter markets and prices are firm. Butter prices
have reached levels not seen since late last summer. Butterfat is in tight
supply and very competitive. Butter stocks are also limited and clearances to
intervention and PSA have virtually stopped.

Prices in Europe, according to DMN for butter adjusted to our 80% butterfat standard are $1.87 per pound. Butter, today, at the CME is $1.35 per pound.

USDA yesterday, announced a DEIP bonus:

WASHINGTON, Oct. 26, 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 anhydrous milkfat to Africa and Middle East.

The award totaled 100 metric tons of anhydrous milkfat.

Delivery period: Nov. 20 - Dec. 30, 2009
Bonus: $450.00 per metric ton
Remaining global DEIP balance: 3,765 metric tons butter equivalent

CCC's bonus was awarded to Burt Lewis International Corp.

The links on the food chain show the average butter price on the CME for the first nine months of 2009 was $1.192 per pound. Someone, unnamed converted the butter to anyhydrous and a broker gets a bonus of $450 per metric ton. Meanwhile, the dairy farmers producing the milk which made the product were paid a price which did not cover costs.

Farmers then worry and fret about "government handouts."

Monday, October 26, 2009

Corporate Profits

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The Bureau of Economic Analysis publishes an immense amount of data. The above graph compiled from BEA's data is of interest in that it is one more contradiction of the "truth" as revealed by conventional experts.

Sunday, October 25, 2009

NFDM Prices

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The latest NASS price for NFDM is $1.046 per pound. Notice the CME and NASS NFDM price graph above. At the moment, the DairyAmerica, the co-op's marketing agency-in-common for NFDM, lists the NFDM price as $1.3025.

So, it appears,just now when NFDM is hard to find, the NASS price reported by DairyAmerica's member is much lower than DairyAmerica is charging for NFDM. Who is the customer?

And, by the way, virtually no NFDM is traded (changes hands)on the CME.

Saturday, October 24, 2009

Global or not

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With the aid of imprudent borrowers, Wall Street brought down the economy. This act of sabotage was rewarded with taxpayer’s money funding a bank bailout.

Dairy farmers may have received some taxpayer money in the form of MILC payments, still it is nothing compared to with the bank bailout.

USDA is ready to blame low farm milk prices on the Wall Street failure as if there was some divine guidance in the whole debacle. For instance: “this year’s collapse in the all milk price was brought about partially by the collapse in world demand and partly by decreased domestic demand as a result of the U.S. recession.” See: (page 9).

Maybe. Farm milk price in the United Kingdom fell from January 2008 to August 2009 a total of 9.9%. In the U.S. the drop farm in farm milk price was 41.4% for the same period.

American dairy farmers have lost an immense amount of income but, equally important, equity has shriveled to the point where borrowing is an impossibility. One area where equity has fallen is in cattle prices.

Close cows in the U.K. have dropped only about 5% this year. See above graph.

The tragedy in the U.S. dairy farm community need not be exaggerated to see that U.S dairy farmers are bearing, a needless load.

Friday, October 23, 2009

Holding all the cards

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The Dairy Production Stabilization Act of 1983 (Dairy Act) authorized a national producer program for dairy product promotion, research, and nutrition education to increase human consumption of milk and dairy products and reduce milk surpluses. This self-help program is funded by a mandatory 15-cent-per-hundredweight assessment on all milk produced in the contiguous 48 States and marketed commercially by dairy farmers. It is administered by the National Dairy Promotion and Research Board (Dairy Board).

Probably for many the association of the checkoff money with manure is not a very big stretch, however, it is a bit of a stretch from the mandate.

Thursday, October 22, 2009

Cold Storage

Today the numbers for "Cold Storage" published came out.

If anyone can make heads or tails of the butter numbers, I would like to hear from them because, I can't.

We made 13 million pounds less butter, -1.2% than last year yet, the inventories are up 23%. Sure imports are way up but, not enough to explain the numbers in today's report.

Another mention of conspiracy

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Above, published at about the same time as Dairy Herd Management is a farm paper from the Northwest.

I suspect the "conspiracy" idea came from Dean's PR firm Global Prairie

Wednesday, October 21, 2009

The Fed

The Federal Reserve is the central bank of the United States. Several times a year the "Fed" publishes the Beige Book which covers current economic conditions in the U.S.

Below is the bulk of what is said about dairy:


Agricultural conditions were mixed. The sugar beet harvest was larger than previously expected. Montana winter wheat crop planting was ahead of schedule. Favorable growing conditions occurred during September across most of the District. However, parts of western Wisconsin and Minnesota were in severe drought, and the progress of harvest of major District crops was behind the five-year average. Meanwhile, cattle, dairy and hog producers’ profit margins have been squeezed.

Unless I have been misled, bank's function to loan money. However, dairy farmers are not only being "squeezed" but also, most can't presently get a loan for anything.

Credit is a huge problem in agriculture and particular animal agriculture. Banks are not likely to start loaning to dairy farmers again until farm milk prices are up and , equally important, steady.

Tuesday, October 20, 2009

Conspiracy Theories

On October 1, 2009 Dairy Herd Management posted an editorial: entitled "Conspiracy Theories can get you into trouble."

Essentially, the editor Thomas J. Quaife, has come to the conclusion that there is simply too much milk and no other thoughts on low farm milk price are worthy of discussion.

Not everyone was happy with the editorial. This is an email written to Tom Quaife:

Date: Sunday, October 18, 2009, 8:16 PM

I was very disappointed to read your editorial in the October 2009 publication. I thought this publication was a publication representing the American Dairy Farmer. I was obviously wrong. I am appalled that an Agricultural magazine editor would right such an editorial taunting the dairy farmer for standing up for their right to a fair price for our product and demanding investigations into these unfair practices.

We have been told by politicians that farmer's must unite. Farmer's all over the country are leaving their farms to attend meetings to identify the problems and solutions to this volatile market and are working together across the regions. At the same time, agricultural media is placing wedges between the farmers. Who needs enemies when we have friends like this from our Agricultural media.

Obviously, you are not a dairy farmer trying to survive. Over the last 10 years our market volatility has been unbearable. The U.S. is the dumping ground for the world's surplus at the US farmer's expense. Dean's Foods points out they pay the highest regulated price. I believe it is the MINIMUM price to be paid. We have a federal minimum wage - why is it employer's pay more than the minimum wage. I don't know why the dairy farmer is the only one who only gets the minimum.

I agree with you that the retail end should also be evaluated, but we need to start somewhere. Big Food industry has way too much power in Washington!

May I ask who encouraged you to write this editorial? I'm sure it wasn't the dairy farmer!

If this is how Dairy Herd Management is going to write, I do not need to continue my subscription.


Deb Windecker

Dairy Farmer, NY

Quaife yields no ground and replies:

Yes, I could act like a politician and do the “politically correct” thing and go after the “big bad processors.”

But that would not be providing the truth to the dairy-farm audience that I serve.

The truth of the matter is, low milk prices are a matter of supply and demand, not coercion on the part of processors. Exports declined in the global recession, restaurant business dropped off, etc. And, it didn’t help that we increased milk production as much as we did when prices were high.

I appreciate the fact that you took the time to write to me – and apparently begin a letter-writing campaign. I just hope your energies can be directed toward some things that will really make a difference (e.g., fixing parts of the Federal Milk Marketing Order System or finding ways to control over-supply) rather than chasing straw dogs.


If farm milk prices are a matter of supply and demand, there should be a formula which, with the appropriate data, could be plugged into a computer and totally eliminate the need for the Chicago Mercantile Exchange. So far, I have not seen dedicated conventional thinkers propose such a formula.

Most any economics 101 text will have at least some discussion of "market power", which can be summarized as something the American dairy farmers do not have.

Monday, October 19, 2009

COOL Chill

The International Dairy Foods Association (IDFA) is opposing the recent bill adding dairy to Country of Origin Labeling (COOL):

Embedded is a link to a Dairy Today editorial quoting "Chris Galen, spokesperson for the National Milk Producers Federation" NMPF:

But dairy industry players are cool to the idea. “Given the ongoing controversy over, and challenge with, implementing country of origin for meat products, and the learning curve involved in that regulation, we believe now is not the time to apply a similar requirement to dairy products,” says Chris Galen, spokesperson for the National Milk Producers Federation. “In particular, Canada’s current dispute of the meat COOL regulation in the World Trade Organization is an indication of the challenges involved in this type of labeling.

“The present dairy COOL proposal would actually apply to a broader range of dairy products than the meat COOL regulation, complicating enforcement and labeling concerns,” he adds. “The extensive U.S. regulatory requirements that already exist, and that are applied to both domestic and imported dairy products, provide significant oversight over imports. From a marketing standpoint, many of the foreign products coming into this country, especially cheeses, are already labeled with their place of origin, and do so willingly.”

I'm going to guess that IDFA and NMPF get more than one seat at the table. "Some are more equal than others."is the famous quote from Orwell's "Animal Farm." In chapter 5 of "Animal Farm" we read, "Do not imagine, comrades, that leadership is a pleasure. On the contrary, it is a deep and heavy responsibility. No one believes more firmly than Comrade Napoleon that all animals are equal. He would be only too happy to let you make your decisions for yourselves. But sometimes you might make the wrong decisions, comrades, and then where should we be?"

Sunday, October 18, 2009

Money in the Middle?

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The Bureau of Labor Statistics publishes an immense amount of data. One item is the retail price of Cheddar cheese over time.

I noticed the Consumer Price Index, which compares prices with a base period of 1982-84 with later prices, had risen for dairy products but, since the Producer Price Index for September has not been released, I thought it would be interesting to look at the farm value going into a pound of Cheddar compared with retail price.

For 1984 farm value I used the roughly normal yield of 10 pounds per hundredweight. For 2009 I used California’s most recent analysis of 13.58 pounds per hundredweight.

Then I looked at how many times the farm value went into the retail value.

The result is the graph above.

No one can argue the fact farmers need more money. But, an important idea worth exploring, and I admit the data is very scarce, what happened to the money in the middle?

Economists like to talk about “efficient markets.” Well, was the money in the middle simply evaporated? Or, maybe those in the middle are not all that efficient and what does that mean if farmers are to get the money they deserve? The question is troubling.

Saturday, October 17, 2009

Make Allowance

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The point, in theory, of a make allowance is the underpinning of the support system for dairy. Since the government buys no raw milk, only products, the government wanted to be certain the milk would be made into dairy products which could be stored.

In recent years, the government used the NASS product survey plus a formula which included a deduction for the make allowance, to arrive at the farm milk price. The formula is found at:

If you study the pricing formulas, you will notice two important points. First, the make allowance is fixed (see above graph). Secondly, with a little further analysis, you will notice, Class I (fluid, drinking milk)benefits from the make allowance -why?

Probably, the biggest problem with the make allowance is; while many talk about "market" prices, processors are somewhat removed from "market forces." The make allowance guarantees costs plus profit. It is all similar to an heiress living on a fixed income.

NY Law

One can only imagine how much better a world this would be if the following law, passed in 1922, was observed.

§ 3. Declaration of policy and purposes. The agricultural industry is
basic to the life of our state. It vitally concerns and affects the
welfare, health, economic well-being and productive and industrial
capabilities of all our people. It is the policy and duty of the state
to promote, foster, and encourage the agricultural industry, with proper
standards of living for those engaged therein; to design and establish
long-range programs for its stabilization and profitable operation; to
increase through education, research, regulation, and scientific means,
the quantity, quality, and efficiency of its production; to improve its
marketing system; to encourage adequate and skilled assistance for
agricultural enterprises; to maintain at fair prices uncontrolled by
speculation the instrumentalities and products of agriculture; to remove
unnecessary or unfair costs and obstacles in the transporation, storage,
processing, distribution, marketing, and sale of agricultural products;
to prevent frauds in the traffic therein; to promote an expanded demand
for the state's agricultural products and the intelligent uses thereof
by consumers as pure and wholesome food; to protect the public health
and to eliminate the evils of under-nourishment; to encourage the
selection and consumption of food according to sound dietary and
nutritional principles; and to make our people conscious of the bond of
mutual self-interest between our urban and our rural populations.
Accordingly, all laws enacted concerning the agricultural industry and
its allied subjects, whether included in this chapter or not, are to be
deemed an exercise of the police power of the state and a discharge of
its obligations for the promotion of the general welfare through
state-wide laws and regulations, local initiative and government,
cooperative action between groups and localities, home-rule measures,
individual enterprise, civic consciousness, and appropriate coordination
with the federal government and as between educational research
institutions within the state.
Such laws and all governmental measures adopted pursuant thereto
should receive a liberal interpretation and application in furtherance
of the aforesaid policy and purposes.

Friday, October 16, 2009

Profiting From Dairy

For the life of me, I cannot figure how the processor and then a broker can make money from a government "dairy" program subsidy, while the farmer is crawling to the poorhouse. Actually, even the poorhouse is gone.


WASHINGTON, Oct. 13, 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 mozzarella cheese to Africa and Middle East.

The award totaled 22 metric tons of mozzarella cheese.

Delivery period: Oct. 13, 2009 - May 31, 2010

Bonus: $295.00 per metric ton

Remaining global DEIP balance: 1,848 metric tons

CCC's bonus was awarded to Global Food Connection, Inc.

For further information, call (202) 720-3224.

Foreign Agricultural Service news releases are available on the Internet at For additional information about Web access, contact FAS Public Affairs Division at (202) 720-7115.

Here's a link:

COOL Dairy


Bill will extend Country of Origin Labeling to dairy products

Wednesday, October 14, 2009

WASHINGTON, DC – Today, U.S. Senators Russ Feingold (D-WI), Al Franken (D-MN), and Sherrod Brown (D-OH) introduced the Dairy COOL Act, which would extend mandatory Country of Origin Labeling (COOL) to dairy products.

Last year, the U.S. Department of Agriculture’s current COOL law went into effect requiring Country of Origin labeling of meats, produce, and nuts. The Dairy COOL Act would extend COOL requirements to include dairy products-milk, cheese, yogurt, ice cream, and butter.

“This legislation will help American dairy farmers stand out in a crowded marketplace,” said Sen. Franken. “They need every tool at their disposal to weather the current dairy crisis. And this isn’t just about helping our farmers. When Minnesota families fill their shopping carts, they have the right to know what country their milk and cheese came from.”

“Without strong labeling requirements, American farmers and consumers are at a real disadvantage,” Sen. Feingold said. “Consumers looking for premium Wisconsin and U.S.-made dairy products should be able to quickly and easily identify them in stores. With the discovery last year of widespread use of melamine in Chinese dairy products, consumers deserve to know whether the milk used to produce the dairy products they buy meets the high safety standards used in the U.S. This truth in labeling legislation will help consumers looking for high-quality dairy products made in Wisconsin get exactly what they are looking for.”

“Ohioans and all Americans have a right to know where their food was produced,” Sen. Brown said. “This bill supports both families and farmers by requiring country of origin labeling on all dairy products. With increasing dairy imports, country of origin labeling provides critical information as households decide how to feed their families.”

Thursday, October 15, 2009

Thin Markets

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Dairy imports are heavily dependent upon relative currency value of the nation of the nation we are trading with. A strong U.S. dollar actually is a means of putting Americans out of work or off the farm.

All of the early formulators of capitalism never had a thought about currency, most trade was bartered trade from the very beginning of trade.

Now, however, currency values play an ever increasing role in trade. The big players hedge by trading currency futures. Most of the imports of dairy products here in the U.S. come from New Zealand.

Currency futures are traded at the Chicago Mercantile Exchange. For a look at the “thinnest” of futures, the Commodity Futures Trading Commission publishes the “Commitment of Traders” report. Above is a look at a recent report for the N.Z/U.S. dollar.

Talk about a thin market!

Wednesday, October 14, 2009

More Mozzarella

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Pardon me for going on, but, too many people continue to claim the problem with farm milk price is falling demand.

In the above graph, I have taken mozzarella production and divided by the days in the month to adjust for the difference in the number of days in each month. The period covered is the period when all experts claimed everybody had all but stopped eating.

As can be seen by the trend line, on the graph, production of mozzarella rose steadily. Mozzarella is produced to orders. Production of mozzarella for August 2009 was more than 5% more than August 2008. Information Resources, Inc (IRI) supermarket data (excepting Wal*Mart) shows sales of mozzarella June – August 2009 was up 8.4% from the same period in 2008.

Tuesday, October 13, 2009

Mozzarella Production

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A good indicator of dairy consumption is the production of mozzarella cheese. Mozzarella is not aged. Mozzarella is not made on speculation. The orders must be there for mozzarella to be made.

Take a look at mozzarella production for August 2000 - 09. As a matter of fact, more mozzarella was made in August 2009 than in any other August on record.

Monday, October 12, 2009

Commercial Disappearances

Several people have asked about commercial disappearances. According to an email from USDA:

Commercial disappearance is a residual. It is:

Beginning Stocks + Production + Imports = Total supply.

Total supply - Exports - ending stocks = commercial disappearance.

First off, MPCs and caseins are not counted in the import data. That skews the data. Next export data tends not to be very accurate because no tariffs are collected. So the government pays little attention to exports.

Trying to obtain more specific information on the actual products counted yielded the following:

We follow four major product platforms, cheese, nonfat dry milk butter
and whey. We compute commercial disappearance on a milk equivalent
basis (both fats and skim/solids. Production is total milk production
which is published in the NASS Milk Production report. Commercial
disappearance is for all milk regardless of use.

There are supply and use tables for cheese, NDM, and butter in the Dairy
at a Glance tables. Production there comes from the NASS Dairy Products
report. We don't do and S$U for whey because we do not have a stocks
report from NASS for whey, but you could safely assume stocks are zero
if you wanted to do one.

If I understand, and I think I do, cheese, butter and NFDM are the only products counted. Those products are counted because there is "Cold Storage" data to yield beginning and ending stocks. Remember too, storage data is not audited.

So, the milk going into yogurt is not counted. As the latest Cheese Reporter noted in the latest issue, “Sales of yogurt last year totaled a record 3.599 billion pounds, up 123 million pounds from 2007 and the 11th straight year that yogurt sales have set a new record.”

Additionally, the milk going into milk chocolate, and there is a lot of that, is not counted.

When a so-called excess of 2% production causes a crash in farm milk price, the data used to claim should be 100% accurate.

The “commercial disappearances” are not accurate. “Commercial disappearances” are a reasonably good guess given the resources available to USDA. But, no one should take the information as gospel.

Dairy Article


is an interesting article

Feds Bail Out Lenders Instead of Dairymen
Dairy Industry Goes Down the Tubes


Sunday, October 11, 2009

But, is it cheese

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Probably the biggest defense against a Cargill type cheese is to maintain the integrity of cheese. Products like Borden's do nothing to aid the image of dairy products. Take a look at the date.

DFA claims they use MPCs which are domestically produced. How can anyone tell? Faith, I guess. This is faith based marketing.

Saturday, October 10, 2009

Dean Direct

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Seems like it was Shakespeare who said something about "many a slip twixt the cup and the lip." Pretty smooth hand out but, time will tell how smoothly things go.

Furthermore, the main reason for a company like Dean Foods to have a full supply with DFA is the elimination of the need for premiums. Hopefully they will return.

Friday, October 9, 2009

MPC Imports Soar

Well now, just when you think it could not happen - it happens. With a weak U.S. dollar who would have thought MPCs would come pouring in?

As can be seen on the above graph, August 2009 have set a record MPC import level for the month of August as far back as you care to go.

We'll just have to wait to see how the experts interpret the data.

NE Case Filed

A class action antitrust case was filed yesterday on behalf of dairy farmers in the Northeast:

There are more but, you get the point.

Thursday, October 8, 2009

Butter Prices

Today block cheese on the CME went up again to $1.48 per pound. Grade A NFDM went up to $1.2650 per pound. Butter, on the other hand, has kind of dragged along, inching up slowly.

Butter determines farm butter fat price.

In Europe, according to Dairy Industry Newsletter "Cream prices have soared, with nothing available for spot sales across Europe, and supplies tied up in contracts."

Today, USDA announced a DEIP bonus for butter to Africa and Middle East. Yet Dairy Market News state on October 1, 2009:

Oceania butter prices are trending slightly higher with a firm market
tone. Milk and milkfat volumes are tending to be lower than expectations and
butter output is below projected early season levels. Local cream supplies are
tight. Butter producers are able to fill the current local demand and prepare
stocks for upcoming contracts.

The high side of Oceania butter is at $1.36 per pound. Butter is even higher in Europe and Dairy Market News states:

Prices have firmed for both butter and butteroil across European markets. Market activity is mainly direct towards local usage as export movement remains slow. Local production of butter continues to trend lower seasonally and supplemental product is being pulled out of the PSA program.

As usual - more questions than answers, but, butter prices should be higher.

Wednesday, October 7, 2009

News of the Day

Good news. Prices at the CME continued upward. Blocks are $1.46 per pound and NFDM grade “A” is $1.22 per pound. Whey prices continue to rise, which means the “other solids” price will increase.

In Fonterra’s latest internet whole milk powder auction, today, prices rose 5.7% The average selling price for whole milk powder was $3,022 a metric ton, $1.37 per pound, , up $164 per ton on last month. This latest auction follows a 24% rise in September and a 26% gain in August.

Tuesday, October 6, 2009

A Worthwhile Read

For the most part the general press has a steep uphill learning curve. Commonly the gist of dairy is missed or contorted beyond recognition. When an exception occurs it is gratifying. Witness the following:

Meanwhile, Dean Foods has acknowledged farmers pay a still undisclosed amount in a “competitive credit” intended to help it compete with other processors. Also, unlike other processors in the Northeast, it does not pay a fuel surcharge to farmers to help cover transportation costs to its processing facility, said Leon Berthiaume, St. Albans Cooperative Creamery, general manager.

New OCM Report

Organization for Competitive Markets (OCM) has released a new report. I have only skimmed the report but, think it is worth reading.

On page 61 of the fairly lengthy report:

The GAO’s consideration of the dairy industry also discloses superficiality and misunderstanding. The GAO Report does not deal with separate market order areas, the federal milk marketing order’s oligopsonistic consequences, the problem of imports of milk protein concentrates and casein supplies, or other fundamentals impacting dairy farming and dairy products offered to consumers.
The GAO Report concluded, “Overall, four studies found that concentration in dairy processing had little or no adverse impact on commodity or food prices.” Again, GAO did not consider all the evidence.

Monday, October 5, 2009


In spite of wide spread opposition the National Animal Identification System (NAIS) USDA and state governments continue to press on, or more correctly to put pressure on farmers.

NY Times Had an interesting article yesterday on E 0157 contamination in one person’s tragic case. It is available at:

Original documents are available at:

Food and Water Watch has an interesting NAIS document at:

But, most revealing of all is the USDA cost/benefit analysis:

And here we have the meat of the matter:

“The magnitude of beef export market demand increase that would
encourage beef producers (cow/calf, backgrounders, feeders, dairy,
auction markets, and packers) to adopt full animal ID and tracing is
shown in figure 1. Full animal ID and tracing with 30, 50, 70, and 90%
industry adoption rates could be completely paid for with increases in
beef export demand. A 23% increase in beef export demand would
completely pay for 70% adoption of full animal ID and tracing in the US
beef herd over a 10‐year period. No other benefits beyond these would
be necessary to make the investment in NAIS economically viable.”

Do we need to mention meat imports to further make the point?

Sunday, October 4, 2009

The NZ Dollar

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Recently I posted data on cheese and butter imports. Some asked me to cover the imports of MPCs. Actually, MPC imports have declined in recent months.

In spite of convictions by many that supply and demand explains everything. Adam Smith, the so-called father of capitalism, never gave currency exchange rates a second thought. Today, however, exchange rates are all important.

At the same time the New Zealand government ended subsidies to dairy farmers, the government devalued the Kiwi (NZ$). A low Kiwi is a form of subsidy.

MPC imports not only hurt U.S. dairy producers but also, the low Kiwi costs NZ consumers more for all imported items.

As the above table shows, there is a connection between MPCs and the relative value of the NZ dollar.

Saturday, October 3, 2009

Seeking Wisdom

A book I read a couple years ago is fairly well summarized at:

The book was written by James Surowiecki who is the staff writer at the New Yorker for the Financial Page.

It seems to me to go without saying that the pricing of farm milk could do with considerably more wisdom than has been observed.

The elements of a “wise crowd” according to James Surowiecki is:

•Diversity of opinion – Each person should have private information even if it's just an eccentric interpretation of the known facts.
•Independence - People's opinions aren't determined by the opinions of those around them.
•Decentralization -People are able to specialize and draw on local knowledge.
•Aggregation - Some mechanism exists for turning private judgments into a collective decision. (This could be an actual functioning market.)

The system used to determine farm milk price is the exact opposite of wise. The system with the supporting cheerleaders are prime examples of intellectual inbreeding.

We need to find a way price farm milk from an information rich system. Unfortunately, there is a moral dilemma in that those in power having a lot riding on continuing the status quo. At the other end of this imbalance of power are the vast majority of dairy farmers who quietly accept the check in the mail box.

Friday, October 2, 2009


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Today, October 2, 2009 USDA’s “Dairy Products” report was released for dairy product production in August 2009.

Many point to the cheese production or the butter production with knowing clucks. One item which seems to go unnoticed is yogurt production. So far, the cumulative increase in yogurt production this year is 6.8% above last year.

“Commercial Disappearance “ calculations not only do not account for imported dairy proteins, but also, ignore yogurt.

For certain yogurt is not made to be aged. Yogurt is pretty much made to order. So, if the numbers are to be believed, the public, it seems, is consuming a great deal more dairy products than is generally reported.

Dean Severs (some) Ties

Once upon a time the relationship between Dean Foods and DFA seemed to be a variation of "till death do us part." When Suiza bought Dean Foods and changed their name to Dean Foods, the Dean/DFA deals seemed perpetual.

Now, although there is no Dean press release, the bonds seem to be crumbling. According to sources, Dean will end the full supply agreement with DFA effective January 1, 2010 for the original Dean plants (legacy Dean). In the Southeast, the termination will take place sooner.

As one wise person once said, "woe be to him who thinks that every cause has but one effect."

Thursday, October 1, 2009

Make Money In Dairy

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Clearly, there is money to be made in the dairy business. If you had a million dollars to invest you could “earn” two hundred fifty thousand without having to lift a finger or deal in any way with manure.

“Announcement: For the past four years, KDM Trading, Inc. has traded a very small number of accounts (fewer than ten) on a “for profit” basis. These accounts are traded in such a way as to attempt to profit from milk price movement in both directions. Following are the annual rates of return for the accounts under management: 2005: -25.31%, 2006: +73.04%, 2007: +546.57%, 2008: +54.76%, 2009 (YTD): +25.58%. We are now opening this program to our customers and newsletter subscribers through a recently established CTA (Commodity Trading Advisor). Minimum investment is $50,000. Please contact Dan for further information if you are interested in participating in this program.”