(click on images to enlarge)
Despite endless talk about supply and demand, Washington, DC turned over 100% of milk pricing power to the buyers of milk with the elimination of parity in the early 80s.
Whether prices go up or down, since that time, some number is dredged up to justify the change.
As both the table and chart above demonstrate, the common belief is not received wisdom, it is a work of fiction.
Accuracy in reported numbers is desirable, but, the real problem lies with the gang at the CME and USDA's willing to give credence by way of the NASS survey and the dairy farm milk pricing formulas.
Meanwhile on the other side of the world - China's dairy industry recorded production growth of over 10% per year from 2003-2007. In 2008 they were affected by the "melamine event", but production still grew over 3% - they are still small but growing. They do have issues to overcome; in the late 80's they were a net exporter of soy, today they are the worlds largest importer - for many reasons, but growth in their animal ag industry has outpaced the ability to grow enough of their own soy - they are participants in the futures trading at the COBT, but the soy market is still largely controlled by US traders. Where will the future lead us?
ReplyDeleteFastest Food Inflation Since Riots Means Milk Up 39%
ReplyDeletehttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=aBYSp0.XfXZs
Dairy, Meat Prices Will Spur Food Inflation, Wells Fargo Says http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aubdC_KeCOvM
In recent weeks most economist that I hear are putting their money in Commodities. So I sure the people who take are dairy products to market will benefit some way or at least try.