Friday, March 5, 2010
(click on image to enlarge)
Looking over time at the relationship of volume and price for California's NFDM survey, there is none. The correlation in the above graph is -0.072. One (1) would be a perfect correlation and zero (0)no correlation.
There is a lot of NFDM in the California survey, which sets prices for California dairy farmers. California uses the CME prices for everything else but, not for NFDM. One might say, there is virtually no NFDM actually traded at the CME, although the price moves up and down. The total absence of any semblance of a market for NFDM at the CME would be obvious. There have been several years in a row where no NFDM is traded at the CME.
However, this is not to say the CME NFDM and the California NFDM have no relationship. The correlation between California NFDM and the CME NFDM price since the beginning of 2008 is 0.9603 - a near perfect correlation.
The real shame here is that governments, both state and federal go along. As President Wilson said, "If monopoly persists, monopoly will always sit at the helm of government. I do not expect monopoly to restrain itself. If there are men in this country big enough to own the government of the United States, they are going to own it." And there is your problem.