Down Hill

(click on image to enlarge)

Lets say you decided to sell the cows in early 2007 and invest the proceeds in a sure thing -Dean Foods stock.

Buy the Numbers

(click on image to enlarge)

USDA Economic Research Service supplies the numbers for "commercial disappearances." They also produce the "Livestock, Dairy and Poultry" "Outlook" available at:http://www.ers.usda.gov/Publications/LDP/2010/02Feb/ldpm188.pdf


The dairy table forecast is interesting because the data for supply and demand are right there for 2008 and 2009. I have highlighted the pertinent numbers above - study them carefully.

There has been no shortage of experts quoted in every farm publication proclaiming supply exceeded demand in 2009, hence the low 2009 farm gate prices.

The "official numbers" do not support the conclusion.

The Squeeze

(click on images to enlarge)

I suspect the problems of farm milk pricing are structural. That is the concentration of retailers has also increased the power over suppliers. What's a poor middleman to do other than to pass on the pain.

Above is information from the United Kingdom (Great Britain)which is actually similar to the situation in the U.S. One French economist from the 1850's said something along the line of "Woe be to him that thinks for every cause there is but one effect."

Notice that the average age, and this is world wide, of farmers is increasing. This trend cannot go on forever.

Moral Problems

In 1940 USDA Yearbook of Agriculture the introduction to an essay by M.L. Wilson states: “our economic problems are really moral problems.”

A book by George P. Brockway, “The End of Economic Man” states on page 76, “Since the essential economic concept of price is both a manifestation of personal will and dependent on the state, all economic questions are systematically questions of ethics and law.”

A recent paper titled, “Average Earnings and Long-Term Mortality: Evidence from Administrative Data” by Daniel Sullivan and Till von Wachter, of the Federal Reserve and Columbia University respectively, is available at: http://www.columbia.edu/~vw2112/papers/aer_pp_final.pdf


The paper begins:

“In this paper we exploit a unique database that merges longitudinal earnings data on Pennsylvanian workers with national death records to study the detailed nature of the correlation between earnings and mortality. We find that the estimates typically reported in the literature, which are based on single years of earnings data, are likely to understate substantially the strength of the association between income and mortality. In particular, relative to a single year of earnings, the average of earnings over a six-year period predicts a 70 percent greater impact of income on mortality. In addition, controlling for the mean level of earnings over a period, we find that greater earnings volatility is associated with higher mortality.”

Apply this concept to dairy farming (low earnings and volatility) and it is easy to clearly state, the pricing system is killing dairy farmers.

Equality and Economics

The milk pricing system is fundamentally flawed. Mainly, both the efforts and the risks are on the farm but, the rewards go to those who manipulate things for their own benefit.

A new study is out which suggests some long held beliefs about economics are not correct:

http://www.eurekalert.org/pub_releases/2010-02/ciot-csf022310.php

PASADENA, Calif.—The human brain is a big believer in equality—and a team of scientists from the California Institute of Technology (Caltech) and Trinity College in Dublin, Ireland, has become the first to gather the images to prove it.

Specifically, the team found that the reward centers in the human brain respond more strongly when a poor person receives a financial reward than when a rich person does. The surprising thing? This activity pattern holds true even if the brain being looked at is in the rich person's head, rather than the poor person's.

These conclusions, and the functional magnetic resonance imaging (fMRI) studies that led to them, are described in the February 25 issue of the journal Nature.

"This is the latest picture in our gallery of human nature," says Colin Camerer, the Robert Kirby Professor of Behavioral Economics at Caltech and one of the paper's coauthors. "It's an exciting area of research; we now have so many tools with which to study how the brain is reacting."

It's long been known that we humans don't like inequality, especially when it comes to money. Tell two people working the same job that their salaries are different, and there's going to be trouble, notes John O'Doherty, professor of psychology at Caltech, Thomas N. Mitchell Professor of Cognitive Neuroscience at the Trinity College Institute of Neuroscience, and the principal investigator on the Nature paper.

But what was unknown was just how hardwired that dislike really is. "In this study, we're starting to get an idea of where this inequality aversion comes from," he says. "It's not just the application of a social rule or convention; there's really something about the basic processing of rewards in the brain that reflects these considerations."

The brain processes "rewards"—things like food, money, and even pleasant music, which create positive responses in the body—in areas such as the ventromedial prefrontal cortex (VMPFC) and ventral striatum.

In a series of experiments, former Caltech postdoctoral scholar Elizabeth Tricomi (now an assistant professor of psychology at Rutgers University)—along with O'Doherty, Camerer, and Antonio Rangel, associate professor of economics at Caltech—watched how the VMPFC and ventral striatum reacted in 40 volunteers who were presented with a series of potential money-transfer scenarios while lying in an fMRI machine.

For instance, a participant might be told that he could be given $50 while another person could be given $20; in a second scenario, the student might have a potential gain of only $5 and the other person, $50. The fMRI images allowed the researchers to see how each volunteer's brain responded to each proposed money allocation.

But there was a twist. Before the imaging began, each participant in a pair was randomly assigned to one of two conditions: One participant was given what the researchers called "a large monetary endowment" ($50) at the beginning of the experiment; the other participant started from scratch, with no money in his or her pocket.

As it turned out, the way the volunteers—or, to be more precise, the reward centers in the volunteers' brains—reacted to the various scenarios depended strongly upon whether they started the experiment with a financial advantage over their peers.

"People who started out poor had a stronger brain reaction to things that gave them money, and essentially no reaction to money going to another person," Camerer says. "By itself, that wasn't too surprising."

What was surprising was the other side of the coin. "In the experiment, people who started out rich had a stronger reaction to other people getting money than to themselves getting money," Camerer explains. "In other words, their brains liked it when others got money more than they liked it when they themselves got money."

"We now know that these areas are not just self-interested," adds O'Doherty. "They don't exclusively respond to the rewards that one gets as an individual, but also respond to the prospect of other individuals obtaining a reward."

What was especially interesting about the finding, he says, is that the brain responds "very differently to rewards obtained by others under conditions of disadvantageous inequality versus advantageous inequality. It shows that the basic reward structures in the human brain are sensitive to even subtle differences in social context."

This, O'Doherty notes, is somewhat contrary to the prevailing views about human nature. "As a psychologist and cognitive neuroscientist who works on reward and motivation, I very much view the brain as a device designed to maximize one's own self interest," says O'Doherty. "The fact that these basic brain structures appear to be so readily modulated in response to rewards obtained by others highlights the idea that even the basic reward structures in the human brain are not purely self-oriented."

Camerer, too, found the results thought provoking. "We economists have a widespread view that most people are basically self-interested, and won't try to help other people," he says. "But if that were true, you wouldn't see these sort of reactions to other people getting money."

Still, he says, it's likely that the reactions of the "rich" participants were at least partly motivated by self-interest—or a reduction of their own discomfort. "We think that, for the people who start out rich, seeing another person get money reduces their guilt over having more than the others."

Having watched the brain react to inequality, O'Doherty says, the next step is to "try to understand how these changes in valuation actually translate into changes in behavior. For example, the person who finds out they're being paid less than someone else for doing the same job might end up working less hard and being less motivated as a consequence. It will be interesting to try to understand the brain mechanisms that underlie such changes."

Cold Storage Numbers

Yesterday the USDA released "Cold Storage" number including the annual report for 2009: http://usda.mannlib.cornell.edu/usda/current/ColdStorSu/ColdStorSu-02-22-2010.pdf

One thing I looked at was the relationship of monthly milk production to the amount of natural cheese in storage.

If those two data sets are perfectly correlated, each going up or down at the same time, the statistical correlation would be 1.0. For 2009 the two data sets have virtually no correlation at 0.01.

A Spade is a Spade

(click on image to enlarge)

There is a very old expression about calling a spade a spade, meaning digging tool. Within present day dairy language we have the term "risk management." Somehow or another, by participating in the milk futures market you too could be a winner.

Apparently, milk futures are not enough. If all goes as planned, there will be cheese futures mid-2010 - or so the Chicago Mercantile Exchange (CME) hopes.

Futures are gambling. According to: http://www.investopedia.com/terms/z/zero-sumgame.asp

What Does Zero-Sum Game Mean?
A situation in which one participant's gains result only from another participant's equivalent losses. The net change in total wealth among participants is zero; the wealth is just shifted from one to another.


Investopedia explains Zero-Sum Game
Options and future contracts are examples of zero-sum games (excluding costs). For every person who gains on a contract, there is a counter-party who loses. Gambling is also an example of a zero-sum game.

Cheese futures will require approval by the Commodities Futures Trading Commission (CFTC). We can hope that the CFTC will not approve the new gamble, because, I suspect, the dairy farm community will be left holding the bag.

In the meantime, it is best to call a spade a spade.

Price Theory

(click on image to enlarge)

The usual theory for determining sell price is: costs plus profit equals selling price. This, of course, it is argued, cannot be applied to farm milk price because, as it is said, costs vary so much.

Two other theories, not formally stated, are as much or as little as the traffic will bear.

Retail prices for ice cream seem to seem to be derrived from some chemical formula because they float as if driven by the wind.

One might think the price, since a great deal of cream is used in the product, that butter prices would have a strong correlation. Not so. The correlation to butter is a rediculous .10 - practically nothing.

Balanced Supply and Price

If, through what ever means, the supply of milk in the U.S. could be brought completely in line with demand, there would still be the problem of determining price. Who will decide what farm milk is worth?

Those, between the farm and consumer have taken an ever larger slice. If the farm is going to get more for a balanced supply/demand, the money will have to come from somewhere.

Sooner or later, the logistics of the supply chain will need to be examined. So far, no one has expressed an interest.

BLS Prices

Today the Bureau of Labor Statistics (BLS) release its CPI (Consumer Price Index). Dairy price to the public are up in January 2010 over December 2009.

Milk (whole) 4.22 %
Butter 4.12
Process Cheese 0.44
Cheddar 3.69
Ice Cream 5.88

The "All Milk" price to farmers is the same for both months and the manufacturing price is actually down 1.8%, December 09 vs January 2010.

Butter Up

Trading of butter on the CME was very active today. What is interesting is that one player bid at a lower level and then offered in the final trade. Obviously, there are some games being played.

OPEN

http://usda.gov/open

Here you go:

usda.gov/Open

The Open Gov Initiative is a new charge to transform how government interacts with the public to be more open, transparent & collaborative. We want to share our ideas and listen to yours - see what’s important to you, and what’s not.

There is a long list, which could be compiled, beginning with who trades dairy products on the CME

More Trade?

(click on image to enlarge)

We are programed to think in terms of supply/demand. Transactions, particularly globally, can be affected by many things outside of supply/demand.

For a significant part of 2007 and for the first ten months of 2008 we were exporting NFDM/SMP at record levels.

If you look at the above graph, you could pick, without knowing anything else, when dairy powder exports were going to disappear.

As long as the U.S. dollar remains the worlds reserve currency, world trade in dairy is very risky.

Globalism Defined

(click on image to enlarge)



"The upside of the current Great Recession is that it could drive a stake through the heart of the academic nostrum known as the efficient-market hypothesis."
Roger Lowenstein

http://www.usdec.org/files/PressReleases/2009_Year_End_Numbers_Release1.pdf

U.S. Dairy Export Council (USDEC) stated today, February 16, 2010:

The crash of global dairy markets in mid-2008 put U.S. exports on course for a decline in 2009, ending a streak of six straight years of expansion.

Dairy export sales totaled $2.32 billion last year, down 39 percent from 2008’s record level, according to analysis of government trade data conducted by the U.S. Dairy Export Council (USDEC). However, most of the downturn reflected lower world prices; overall export volume was off just 16 percent, at 2.178 billion lbs. of milk solids (totalsolids basis), says USDEC. Export volume represented 9.3 percent of U.S. milk production in 2009, down from 11.0 percent in 2008 and 9.8 percent in 2007.

Both USDEC and NMPF like to use the concept of “total solids” which diverts attention away from imported dairy “proteins.”

One of the dairy products we export is lactose. But wait, we import lactose too! The table above, to me, is quite revealing about world trade. Sure, we export more than we import but, the theory behind trade is “comparative advantage” – some countries do better at some things and should trade in those goods.

“Absolute advantage” can occur when one country has a lower exchange rate – think New Zealand. New Zealand, when they went “cold turkey’ on dairy farm subsidies in the 80’s also allowed their currency to float. Actually, it appears they encouraged their currency to fall relative to the U.S.

Meanings of words change over time but it is interesting to note, in Gibbons v. Ogden (1824), Chief Justice John Marshall ruled: "Commerce, undoubtedly is traffic, but it is something more—it is intercourse.”

Then What?

(click on image to enlarge)

An interesting paper which helps explain why so many dairy farmers a hanging on instead of getting a job:

http://www.clms.neu.edu/publication/documents/Labor_Underutilization_Problems_of_U.pdf

On page 13:

At the end of calendar year 2009, as the national economy was recovering from the recession of 2007-2009, workers in different segments of the income distribution clearly found themselves in radically different labor market conditions. A true labor market depression faced in the bottom two deciles of the income distribution, a deep labor market recession prevailed among those in the middle of the distribution, and close to a full employment environment prevailed at the top. There was no labor market recession for America’s affluent.

Once you get to "$150,000 or more" strata, you have no trouble finding a job - all things being equal - which they never are.

Words

http://www.burlingtonfreepress.com/article/20100214/NEWS02/100213020/U.S.-Agriculture-Secretary-Tom-Vilsack-Time-for-dairy-industry-to-pull-together

Secretary Vilsack on his trip to Vermont Saturday said, "lobbying for regional solutions isn’t the answer. We have to look nationally.”

The words sound good and certainly simplify any discussion of dairy policy to a quiet hush. However, the term "national" avoids facing a real public policy. Given the happenings of the past ten years,one might think that a regionally disperse dairy production sector would be in the public's interest.

A recent NYT?CBS poll:
http://documents.nytimes.com/new-york-times-cbs-news-poll#p=24 on page 24, ask three subtlety different question about military and homosexuality.

The answers to questions 82 through 85 varied greatly. Words matter.

If you are going to ask, "What kind of 'cookie cutter', 'one size fits all' dairy policy do favor, any genuine discussion is terminated.

Long Term Projections

(click on image to enlarge)

http://www.ers.usda.gov/Publications/OCE101/OCE101.pdf

USDA's milk projections can be found at the above link. I've compiled a graph and also pasted their reasoning. The thing which disturbs me the most with USDA's thinking is the robotic quality. There is no room, in their thinking, for human choice. Furthermore the contrived complication of dairy dairy pricing insures no one will ask what kind of farm community do we want to have?

Milk production is projected to continue rising over the projection period, although at a slower pace than in the past several years. An upward trend in output per cow continues, but the 4-year increase in milk cow numbers from 2004 to 2008 ended during 2009.
• After a relatively sharp drop in 2009-10, milk cow numbers are expected to resume a more typical path of year-to-year declines. However, projected annual reductions are more moderate compared with past years. As the transition from small, diversified farms to large, specialized dairy farms matures, cow numbers decline at lower rates and level off toward the end of the projection period.
• Milk output per cow is projected to increase through the projection period, reflecting continued technological and genetic developments and the transition from smaller, diversified farms to larger, specialized dairy operations in most regions.
• Domestic commercial use of dairy products increases somewhat faster than the growth in
U.S. population over most of the next decade. Cheese demand benefits from greater consumption of prepared foods and increased away-from-home eating. However, per capita consumption of fluid milk is expected to continue to decline slowly.
• U.S. dairy product exports decline from the levels reached in 2008 but remain high by historical standards. Exports on a skim-solids basis fall less than fat-basis exports because of commercial sales of dry-milk products, as the United States is projected to be a competitive exporter of non-fat dry milk through the projection period.
• Farm-level milk prices have fallen from the high levels of 2007 and 2008, due in part to lower exports of U.S. dairy products. Prices are projected to rebound somewhat in 2010 as production decreases in response to lower 2009 prices. Following continued production and price adjustments through 2012, milk prices rise steadily over the latter part of the projection period. However, prices increase less than the general inflation rate largely because of efficiency gains in production resulting from technological improvements and consolidation in the sector.

Promo Collection No Go

http://www.idfa.org/news--views/headline-news/details/4529/

No one can say IDFA does not represent their clients. And just how much good comes from the promotion money dairy farmers provide?

February 5, 2010
Opposition Prompts Government to Repeal Reporting Requirement

The U.S. Customs and Border Protection (CBP) repealed a recent change in the 2010 Harmonized Tariff Schedule that would have effectively laid the groundwork for implementation of the Dairy Import Assessment (DIA). IDFA previously advocated for the repeal or modification of the requirement, which was implemented January 1.

Prior to the suspension, numerous countries that offer important exports markets for the United States questioned the one sided reporting requirement and reiterated to the U.S. Trade Representative that the assessment is not compliant with U.S. trade obligations. The Customs mandate would have required milk solids reporting on over 250 different food products, including many foods that are not considered dairy products, such as cocoas, beverages, doughs and mixes. U.S. exports of the same products, however, would not have been subject to the additional reporting requirements.

Reporting milk solids data was proposed by the U.S. Department of Agriculture as the basis for collecting assessments, estimated at $6 million, to augment the National Dairy Promotion and Research program, the U.S. dairy producer check-off program. To date, this program solely promotes U.S. dairy products.

Congress authorized USDA to collect assessments on imported dairy products, as long as the domestically oriented check-off program was changed to promote imports as well as U.S. dairy products. It remains to be seen whether these stipulations can be met.

"The government's decision to repeal the reporting requirement was a good indication that they are concerned about the larger trade implications of the DIA," said Ruth Saunders, IDFA vice president of policy and legislative affairs.

For more information, contact Saunders, at (202) 220-3553 or rsaunders@idfa.org.

NFDM Case

NFDM Case Dismissed
In the United States District Court for the Eastern District of California, on February 8, 2010, Judge Anthony W. Ishii dismissed the nonfat dry milk prices misreporting case against DairyAmerica and California Dairies, Inc.
Americans are brought up and taught to believe that America has the best judicial system in the entire world. At best that is only a half truth. The best part of our legal system goes back to Anglo-Saxon England with concepts of "innocent until proven guilty." Much of the rest of the legal system is the legal equivalent of biological inbreeding. Prior cases are cited to determine present results.
The case was dismissed on the basis of, "filed rate doctrine." Filed rate doctrine is actually caselaw which goes back to the early 1900s in cases involving trolley car fare. The trolley car might be privately owned, but the fare was actually set by government.
Judge Ishii begins his decision with “This is a putative class action in diversity arising from the alleged misreporting of pricing data by Defendants Dairy America, Inc., (“Dairy America”) and California Dairies, Inc. (“California Dairies”) (collectively “Defendants”) which resulted in depressed prices paid to plaintiffs for raw milk during the period between January 1, 2002, through April 30, 2007. This case is the lead case of four cases that were consolidated by an order filed on May 29, 2009.” There are four farmers acting as plaintiffs.
Speaking of the filed rate doctrine the judge wrote, “The doctrine is closely related to principles of federal preemption in that it bars “challenges under state law and federal antitrust laws to rates set by federal agencies.”
“The duty and authority of the Secretary of the Department of Agriculture (hereinafter, the “Secretary”) to determine and enforce minimum prices for milk and milk products arises from the enforcement provisions of the Agricultural Adjustment Act, 7 U.S.C. § 601 et seq.” The Judge wrote.
Think about it. On the one hand we have one branch of government, USDA, claiming that farm milk prices are determined by the market. On the other hand, we have another branch of government, the judicial system saying, farm milk prices are determined by USDA.
We cannot have it both ways for very long.

Dean Foods Report

http://www.deanfoods.com/our-company/investor-relations.aspx

At the above site, Dean's 4th quarter financials can be found. Greg Engles said something to the effect, it has been a very good year (2009).

But,they are being squeezed the the retailers.

WASDE

http://www.usda.gov/oce/commodity/wasde/latest.pdf

USDA's World Agriculture Supply and Demand Estimates (WASDE) are out.

Corn is interesting:

U.S. feed grain ending stocks for 2009/10 are projected lower this month
with higher expected corn use and sorghum exports. Corn used for ethanol is projected 100 million bushels higher reflecting the latest ethanol production data from the Energy Information Agency. November’s record ethanol production was up 3 percent from the previous record in October as higher prices for ethanol and distillers grains boosted ethanol producer returns.
November-December corn use for ethanol was up 16 percent from the same period in 2008/09. Although returns have declined since November, recently lower corn prices continue to support profitability for ethanol producers. A 5-million-bushel reduction in expected corn use for sweeteners partly offsets the increase for ethanol. Corn exports for 2009/10 are projected 50 million bushels lower on increased competition from Argentina. Ending stocks are
projected 45 million bushels lower. The projected marketing-year average farm price for corn is narrowed 5 cents on both ends of the range to $3.45 to $3.95 per bushel.

The projections for milk are not encouraging. However, I suspect there will be some surprises in 2010. So, it is too early to, as they say, place bets.

Fluid Milk Index Data

(click on image to enlarge)

If you walked into a supermarket between 1982 and 1984 you could notice the price for that time period. The Bureau of Labor Statistics calculates indexes of prices based on that period.

The base period in stated as 100 and is equal to 100 % of the base price. In 2008 the retail milk price had more than doubled to 217.22.

So, if you take the Consumer Price Index (CPI) for fluid milk and the Producer Price Index (PPI) for farm milk going to the bottle, over a period of time there is an obvious growing share going to those above the farmer.

Both the processing and the containers are the same as they were in the 1982-84 period. The way the pie is sliced is different.

There is no "market" based price for farm milk going to fluid uses. The price is derived from the dairy products traded at the Chicago Mercantile Exchange.

Getting By

(click on image to enlarge)

There are more and more stories of dairy farmers cutting out grain to get buy with today's prices.

California Department of Food and Agriculture (CDFA) quarterly collects dairy farm costs of production data. The latest data looks like a dairy farm about to go under. How long can anyone put off repairs?

2009 a Banner Year

(click on image to enlarge)

As everyone knows 2009 was a very bad year for dairy farmers. The case was different for cheese processors and retailers.

The above graph shows record spreads in value from farm to processor and retailer. This may or may not be the same as profit but, there is plenty of space for concluding profits from cheese were at record levels.

More from USDA on NAIS

http://www.aphis.usda.gov/publications/animal_health/content/printable_version/faq_traceability.pdf

Here's a snip:

Q. What kind of comments did you receive during
the National Animal Identification System (NAIS)
listening tour and submitted online?
A. The U.S. Department of Agriculture (USDA)
received a wide variety of comments during the listening
tour. Some people were in favor of NAIS, but the
vast majority of participants were highly critical of the
program. Some of the concerns and criticisms raised
included confidentiality, liability, cost, privacy, and
religion. There were also concerns about NAIS being
the wrong priority for USDA, that the system benefits
only large-scale producers, and that NAIS is unnecessary
because existing animal identification systems
are sufficient.
During the feedback process, USDA also received
input from Tribal Nations and industry groups, as well
as representatives for small and organic farmers.
USDA seriously considered and reviewed all the
comments and feedback we received before deciding
how to address animal disease traceability.

Read more at the link above.

NAIS Defeated

http://www.nytimes.com/2010/02/05/business/05livestock.html?scp=1&sq=national%20ani

February 5, 2010
U.S.D.A. Plans to Drop Program to Trace Livestock
By WILLIAM NEUMAN

Faced with stiff resistance from ranchers and farmers, the Obama administration has decided to scrap a national program intended to help authorities quickly identify and track livestock in the event of an animal disease outbreak.

In abandoning the program, called the National Animal Identification System, officials said they would start over in trying to devise a livestock tracing program that could win widespread support from the industry.

The agriculture secretary, Tom Vilsack, will announce the changes on Friday, according to officials at the Agriculture Department, who spoke on condition of anonymity because the decision had not yet been made public.

The officials said that it would be left to the states to devise many aspects of a new system, including requirements for identifying livestock.

New federal rules will be developed but the officials said they would apply only to animals being moved in interstate commerce, such as cattle raised in one state being transported to a slaughterhouse in another state.

It could take two years or more to create new federal rules, the officials said, and it was not clear how far the government would go to restrict the movement of livestock between states if the animals did not meet basic traceability standards.

The system was created by the Bush administration in 2004 after the discovery in late 2003 of a cow infected with mad cow disease.

Participation of ranchers and farmers in the identification system was voluntary, but the goal was to give every animal, or in the case of pigs and poultry, groups of animals, a unique identification number that would be entered in a database. The movements of animals would be tracked, and if there was a disease outbreak or a sick animal was found, officials could quickly locate other animals that had been exposed.

But the system quickly drew the ire of many farmers and ranchers, particularly cattle producers. Some objected to the cost of identification equipment and the extra work in having to report their animals’ movements. Others said they believed the voluntary system would become mandatory, that it was intrusive and that the federal government would use it to pry into their lives and finances.

The old system received $142 million in federal financing, but gained the participation of only 40 percent of the nation’s livestock producers, according to a report by the Congressional Research Service.

When Mr. Vilsack took over the Agriculture Department last year, he began a series of public meetings on the identification program and was bombarded by strident opposition.

Agriculture officials said that most details of a new system would be worked out in the coming months through consultation with the livestock industry and the states.

“It was just overwhelming in the country that people didn’t like it, and I think they took that feedback to heart,” said Mary Kay Thatcher, public policy director of the American Farm Bureau Federation, which had opposed the identification system. “I think it’s good they’ve at least said we’re going to do something different.”

Carol Tucker Foreman, a food safety expert of the Consumer Federation of America, agreed that the old system was not working and needed to be changed.

But she worried that a new system that could have different rules in every state might not be effective.

“It’s very, very hard to have an effective state-by-state program,” she said.

Fonterra SMP Auction

In March, 7,500 tons of skim milk powder(SMP) will be offered for the first time on Fonterra's internet auction. The SMP volume is set to increase to 15,000 tons by July 2010.

As opposed to the CME,Fonterra will actually be trading product. We will have to see.

Dairy Products Report

Yesterday NASS published the "Dairy Products" report: http://usda.mannlib.cornell.edu/usda/current/DairProd/DairProd-02-02-2010.pdf

If you go down to page 3, the cumulative numbers for 2009 begin. Total cheese was up 1.7%. So, where did the milk come from to make the cheese. I suspect souped up milk with imported dairy proteins.

Another clue is the lack of butter and butterfat products. Butter was down 4.6% for the year. Ice cream was down 2.2% in 2009.

Powdered proteins can boost cheese production but, you need a source of fat.

Fonterra's Auction

Fonterra held another internet auction for whole milk powder (WMP)and anhydrous milkfat.

The WMP sale fell 1.6% to $1.47 per pound - not a huge drop.

WMP and NFDM are closely related in price.

Rumor has it that two West coast NFDM makers had an export deal (think Fonterra) which fell flat. So, the co-ops dumped the powder on the domestic market, driving the price down.

World wide milk powder prices are thought to run higher.

Another Northeast Case

(click on images to enlarge)

Another case has been filed against the usual suspects in the Northeast. Some may wonder why?

For starters, look at farm milk price. For October 2009, dairy farmers shipping to a cheese plant in Idaho, not in a federal order, were getting $13.67 per hundredweight. Farmers around Middlebury, Vermont got a blend price of $13.41 per hundredweight. Class I utilization in FMMO One was 48.9% and yet farmers received less than cheese milk price in Idaho.

The Northeast is the fluid milk market in the country. The defendents in the case clearly have depressed farm milk price.