Restaurants

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The good news is that full service restaurants are doing quite well - at least according to the Bloomberg Index.

However, the New York Times has an article should be read:
http://www.nytimes.com/2010/11/07/us/07fat.html?pagewanted=1&_r=1&hpw


The article has generated a great deal of backlash against dairy farmers on Twitter. Naturally, the article should be of concern. But, has the increase in per capita cheese consumption really benefited dairy farmers?

Funny, there seems to be no problem in France with cheese consumption and obesity.

Dollar

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Since we live in a global economy (like it or not), the relative value of the U.S. dollar is important to dairy farmers.

On the one hand, imports of most dairy products will be curbed. But, exports of grains, particularly soy and corn, will be driven by a low U.S. dollar. So, don't count on cheap grain anytime in the near future.

How Low?

By asking the question, how low, I do not intend to guess out future CME prices. The question I am asking is how low will the powerful stoop relative to human decency.

Today's CME prices indicate there is no honor among the thieves. Trading a few loads on the CME impacts supply/demand hardly at all. Anything traded on the CME could be traded off the CME. This can and does happen all the time. The only thing trading at the CME really affects is farm milk price.

December Class III is $13.56.

Blocks today are $1.48. For comparison world price (FOB Oceania) is is $1.86.

Butter fell $0.27 today to close on the CME at $1.88. World price for butter adjusted to 80% butterfat is $2.32. No One can make the case that there is too much butter.

Farm Milk Prices

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Note: I enlarged the section (11/06/10) to show the detail better. U.S. is the green line and NZ the red line.

Take a close look at the above graph. Where is New Zealand's farm milk price relative to the U.S.? The above graph by Fonterra does not show 2010 but, it is higher for NZ.

What's Happening

http://www.marketintelligencecenter.com/newsbites/1221395

"Kraft Foods (NYSE: KFT) opened at $31.81. So far today, the stock has hit a low of $31.59 and a high of $32.00. KFT is now trading at $31.67, down $0.17 (-0.53%). The stock hit its 52-Week high of $32.67 in October and set its 52-Week low of $26.31 last November. The company will report Q3 earnings tomorrow, with analysts expecting to see $0.46 per share, versus $0.55 during the same period last year. Technical indicators for the stock are neutral and S&P gives KFT a neutral 3 STARS (out of 5) hold ranking. If you are looking for a hedged play on KFT the stock seems like it could be a candidate for a January out-of-the-money bull-put credit spread below the 28 range."


Crashing prices on the CME might seem like a good plan, except...there will be a train wreck. This is not capitalism at work, this is power, raw power.

Election Predictions

At this point in time, one can safely bet, with the elections nearly over, we can go back to nothing happening in dairy policy. How many ways can "gridlock" be spelled.

Unfortunately,looking at today's CME, big trouble is on the way.

Reason

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The seventeenth century is known as the age of reason. Descartes (1596 - 1650) famously said, "I think therefore I am." Quite some time passed before thinking became something to be manipulated.

Obviously, there are large stocks of cheese. So, the fact that today Kraft indicated the price of cheese (actually farm milk) should fall. The argument put forth will be centered on stocks.

But, if the consumer sees no indication of cheese stocks, what really happened today, and for the past several days, is those in the middle will profit. As can be seen in the graph above, there is no correlation between retail Cheddar and cheese stocks. There is a similarity in the trend. Consumer prices and cheese stocks both trend up.

Descartes essay from which the famous quote comes is filled with the word, "doubt." The time has come to think and to doubt the usual excuses.