Wednesday, December 23, 2009

Legal Plunder

(click on images to enlarge)

Today, December 23, 2009, two days before Christmas, block Cheddar falls $0.11 on CME trading. Whatever might be said of the traders, they have no shame.

On the last post, I noted, according to the USDA American cheese in storage was up 11% in November 2009 vs. November 2008. Maybe the numbers are merely coincidental. However, if you remember the numbers for 2008 were just guesses by USDA, so the 11% is meaningless. USDA should continue to make note of this fact through the end of the year.

Slightly more American cheese was made in October 2009 and the storage numbers did not go up October/November – more consumption.

Let me clarify though, American cheese denoted in the USDA data is not, repeat not, “processed” American cheese. USDA categorizes as American-type cheeses Cheddar, Colby, granular or stirred-curd – in other words Cheddar type cheeses.

Next, let me say, there appears, according to two data sources, Bureau of Economic Analysis (BEA) and Bureau of Labor Statistics (BLS), to be more consumption of dairy products. As the graphs above show, consumers spent more, total, on dairy in November 2009 versus November 2008. Additionally, the costs per dairy item, as shown by the Consumer Price Index (CPI), were lower. Meaning consumers bought more dairy products.

Those with the power to determine farm milk price are shameless winners. Economics, as practiced for three or so decades, is what is known as a “zero-sum game. “ Wikipedia states: “In game theory and economic theory, zero-sum describes a situation in which a participant's gain or loss is exactly balanced by the losses or gains of the other participant(s). If the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero.”

Wikipedia goes on to say: “Economic exchanges must benefit both parties enough above the zero-sum such that each party can overcome its transaction costs.”

Therefore we can conclude, we are not really dealing with economics but, legal plunder – theft with official blessings.


  1. This would be a good time to floor the price of milk!

    I do not think the Sec Ag has the guts.

    Steve Barton

  2. Yes, and the floor price should be based on economic parity - I would say no less than 60% of parity. While I'm not sure exactly what parity is right now I'm guessing this would put our base price at around $25.00 cwt.

  3. John--Who are the sellers?


  4. Rusty,

    I thought you knew. It is "market forces."

  5. Pardon my ignorance........."supply and demand"........."beginning stocks vs ending stocks".................