(click on images to enlarge)
During this past week the trade data was released for July 2010. According to United States International Trade Commission (USITC) trade database, the U.S. exported NFDM in July 2010 for an average of $1.29 per pound.
The numbers collected by NASS and CDFA are all weighted by volume. That is, the price associated with the highest volume carries the most clout. So in July 2010, the average NASS price was $1.22 per pound - 7 cents less than the export price. The difference adds up on the export volume to $4.7 MILLION. Pretty bad.
But, but wait, if the NFDM sold by the U.S. (whoever that is)had sold at world price the difference would be an ADDITIONAL $ 8.3 MILLION.
The real outrage here is not in what I have shown but rather, what I have just described is "business as usual."
Clearly Dairy America is both lazy and incompetent to the detriment on all producers. Did you know that Dairy America makes up nearly 100% of the volume of NFDM reported in the CWAP index which prices California 's class 4a price? They have NO RISK in selling cheap powder. Whatever price they sell their powder for becomes THE NFDM price in the California class 4a fomula and therefore a low NFDM price is transfered 100% to California producers in the form of a lower class 4a milk price. This is a classic moral hazard, where the risk of an economic decision by a party is borne by someone else. No wonder they do such a poor job. They have no skin in the game.
ReplyDeleteanother reason why end product price formulas since Order Reform have proven to be a complete failure, pushing all price risk to the farmer. As long as there is a guaranteed margin (set-in-stone make allowance) and a guaranteed fail-safe buyer (the government), there is no incentive to market, in fact, the lower price serves a greater purpose to other interests while not harming the seller.
ReplyDeleteCalifornia NFDM for week ending 9/10 is $1.08. Producers contracted to these thieves are going to receive the usual screwing.
ReplyDelete