Friday, January 29, 2010

Mutual Benefit

There is no way to fathom the crash in NFDM prices. California prices plummeted this week to $1.05 per pound and the NASS price fell to $1.09 per pound. CME Grade A NFDM stayed at $1.19 per pound today.

Early next week Fonterra will hold another internet auction for whole milk powder and anhydrous milkfat. The January auction fell slightly which should have meant U.S NFDM prices should not have plunged off the cliff.

Almost 70% of the NFDM is made by two co-ops in California LOL and CDI.

The Capper - Volstead Act exempts co-ops from antitrust enforcement provided certain conditions are met:



Sec. 291. Authorization of associations; powers

Persons engaged in the production of agricultural products as
farmers, planters, ranchmen, dairymen, nut or fruit growers may act
together in associations, corporate or otherwise, with or without
capital stock, in collectively processing, preparing for market,
handling, and marketing in interstate and foreign commerce, such
products of persons so engaged. Such associations may have marketing
agencies in common; and such associations and their members may make the
necessary contracts and agreements to effect such purposes: Provided,
however, That such associations are operated for the mutual benefit of
the members thereof, as such producers, and conform to one or both of
the following requirements:
First. That no member of the association is allowed more than one
vote because of the amount of stock or membership capital he may own
therein, or,
Second. That the association does not pay dividends on stock or
membership capital in excess of 8 per centum per annum.
And in any case to the following:
Third. That the association shall not deal in the products of
nonmembers to an amount greater in value than such as are handled by it
for members.

To me, the key phase is "That such associations are operated for the mutual benefit of the members thereof."

Who makes certain of this - obviously, no one. So, an important question remain, what should the criteria be for evaluation of cooperatives?


  1. A book called "Other People's Money and How the Bankers use it" parallels the dairy industry. Take away Bankers and replace it with Processors.

    The book was written by Louis D. Brandeis and one of his principles of the book was that, "no contract is good that is not advantageous to BOTH parties to it."

    Too bad we cannot reincarnate him to argue on behalf of the farmer.

  2. I was recently at a meeting held by the largest "co-Op of Dairy PRODUCERS. I found it strangely interesting how they presented Income, Net Increase in value, Equity, and Operating Income all to be up. (some dramatically). Even had the courage to say infront of everyone it was due to(believe it or not) "low input costs" (in other words RAW MILK). Later they explained why this Capper - Volstead Act is so important. But you bring up the question that I had all along, who determines if it is in the benefit of the Farmer? Processing plants owned by dairy producer Co-Ops making great profits in the year that dairymen loose a lifetimes worth of equity, debt loads increase to by astounding rates, and many of these farms are sitting on the verge of foreclosure as soon as milk/cow prices increase higher than cost of production for a few months in a row. So again, how did processing plants profitability benefit any Dairy Farmer?

    just a thought.

    Jake Jones

  3. How are "the members thereof" benefited by CDI abd Dairy America selling off 33 million lbs of NFDM in one week and lowering the price to $1.05? Only benefit is to sellers and buyers as usual.The farmer "members" get paid off the resulting $1.05.