(click on image to enlarge)
If you go back to the post on Butter (May 21, 2010) a reader, Ed Maltby, perhaps, said:
As a member of the committee I can flatly deny that the CME is not part of the discussions of this committee. It is being discussed in some depth and the input is not coming just from NMPF and IDFA.
I suspect that all I am doing regarding the Dairy Industry Advisory Committee (DIAC)is calling a spade a spade.
Look at the minutes of the first meeting where the CME was "discussed in some depth":
The CME is mentioned a total of five times.
At line 482, "Price discovery is determined using CME futures settlement prices." This mentioned in relationship to the proposed "insurance" program. By the way, there are only two products in which a "thin" cash market is used to determine "futures" prices. One is natural gas and the other is dairy.
Then on line 515 Will Francis states correctly, well almost, that California uses the CME, rather than NASS to determine minimum farm prices. California uses a survey for NFDM because, it is obvious to anyone that almost no NFDM is traded on the CME.
On line 853 is the real smoke screen, which tells everyone the USDA is not serious about looking at the CME:
A question was asked about the affects(sic) of CME prices on producer prices. Larry Salathe, from the USDA Office of the Chief Economist responded that USDA uses prices from NASS surveys to determine minimum classified prices. Mr. Salathe stated that the Commodity Futures Trading Commission may have jurisdiction over CME spot market operations since the spot markets have effects on futures prices.
Shameful and shameless at the same time.
If you look at the above graph, (farm milk is divided by ten to give normal cheese yield) what should be obvious to anyone is the relationship of the CME to farm milk prices. There are two exceptions. The first is in 2004, when DFA ran up block price and then depooled the milk so the end result of the run-up never appeared in the farm milk check.
The second, came when the NFDM price was misreported and then after the correction rose dramatically.
The whole ball of wax constituting the problems with farm milk pricing are buried in the nearly anonymous games played at the CME.
Here's a question for the DIAC; should a corporation which has nothing, absolutely nothing to do with butter,be allowed to trade (sell) butter on the CME, which in turn sets the bf part of farm milk price.
I am not trashing the committee. I am simply saying they will never get to the bottom or reveal any new information about what all apologist for the powerful call the "market."
Time will tell but, for the moment, I say it is an outrage - plain and simple.