Friday, July 16, 2010

Dairy Market Failure

(click on image to enlarge)

This week the Bureau of Labor Statistics (BLS) released the Producer Price Index (PPI) and the Consumer Price Index (CPI) through June of this year.

The PPI shows farm milk and processor data. The CPI is the index of retail (consumer)prices.

An index takes a base period, in this case 1982 and compares each following period with the base. So the base is expressed as 100 or you could say 100%.

Naturally, there are glitches in any particular time period - exports for example. I took the average for June, of each segment to eliminate that problem.

The market system is supposed to be based upon costs plus profit equals selling price. This systemic failure is not a failure of information. There is a lot of information out there. The real problem is a failure to recognize the importance of power, or lack thereof.

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