(click on image to enlarge)
If you go to: http://www.agweb.com/livestock/dairy/blog/Dairy_Talk_199/
you will find most of the column is about margin insurance and just how great that is. Are you on the bandwagon or not?
My big problem really lies with one little part which will not go away:
But a more rational view (yes, admittedly, prices can be bid up and down on emotion) is the CME is fairly and generally reflective of supply and demand.
As can be seen from the above graph, covering 30 years, the CME has nothing to do with supply and demand. USDA's "Commercial Disappearances" reflects production and sales. Note though, it does not include imported dairy proteins.
The CME needs to be understood from an economic organizational perspective. The CME is a "leveraged price signal" from the powerful. Presently, there is no competitive milk or dairy product price. No matter how the data is collected, everyone will march lock step with the CME.
Furthermore, if margin insurance is in place, probably the CME will drop.