Miserable

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World attention has been directed to Wisconsin's Gov. Walkers "Budget Repair Bill." Most of the attention has focused on the Governor's effort to bust the public sector unions.

The fact is when unions were strong, middle class America was strong - all data supports that conclusion. In 1977 the ILGW (garment workers) had an ad which ended with, " So always look for the union label, it says we're able to make it in the U.S.A!" Pretty hard to find a lot of things made in the U.S.A.

Two other features of the bill have received less attention. One is the health care plan known as BadgerCare. Here is a news story which mentions BadgerCare and dairy farm milk price: http://www.wqow.com/Global/story.asp?S=14087832

According to statistics, 15% of those receiving BadgerCare are farmers. The reason is the driving down of farm prices at the same time jobs were being "outsourced."

Another part of the plan is to send more money to prisons. Wisconsin in 2008 spent 10% more than other states per inmate. The U.S.A which cannot make anything anymore, and cannot pay dairy farmers a fair price since parity was eliminated. The argument was the costs of government purchases were rising. Rising prison costs seems to not have been a problem. The U.S. has 5% of the worlds population and 25% of the worlds prisoners.

We have become a miserable nation since 1980. The idea of loving our neighbors seems to have vanished.

Low Fam Price Explained

A REVISED AND EXPANDED FOOD DOLLAR SERIES: A BETTER UNDERSTANDING OF OUR FOOD COSTS

A new ERS food dollar series measures annual expenditures on domestically produced food by individuals living in the United States and provides a detailed answer to the question “For what do our food dollars pay?” This new data product replaces the old marketing bill series, which was discontinued due to measurement problems and limited scope. The new food dollar series is composed of three primary series, shedding light on different aspects of evolving supply chain relationships. The marketing bill series, like the old marketing bill series, identifies the distribution of the food dollar between farm and marketing shares. The industry group series identifies the distribution of the food dollar among 10 distinct food supply chain industry groups. The primary factor series identifies the distribution of the food dollar in terms of US. worker salaries and benefits, rents to food industry property owners, taxes, and imports. To provide even more information about modern food supply chains, each of the three primary series is further disaggregated by commodity groupings (food/food and beverage), expenditure categories (total food expenditures, food at home, food away from home), and two dollar denominations (nominal, real). The input-output methodology behind the new food dollar series and comparisons with the old marketing bill series are presented. Several key findings of the new series are highlighted and discussed.

The data behind the report--Food Dollar Series Data Set

Released Thursday, February 24, 2011

See http://www.ers.usda.gov/Publications/ERR114/


Unless I read it all wrong, farmers are getting less of the consumers food dollar because consumers are eating more meals away from home. So, now we know.

India

http://online.wsj.com/article/SB10001424052748704150604576166063141208924.html#articleTabs%3Darticle

NEW DELHI – The Indian government's annual economic survey has warned that the country could become a milk importer by 2022 if local production doesn't keep pace with growing demand.

India is the world's largest producer of milk, and according to earlier estimates by the government, its output in the last fiscal year ended March 31 was 112.5 million metric tons. The government informed parliament last year that its target for the current fiscal year was 116.2 million tons.

The economic survey for fiscal 2011, released Friday, said India's milk production is rising by about 3.5 million tons a year, while demand is growing by an estimated 6.0 million tons.

In case the country is unable to raise its production to 180 million tons by 2021-22 to meet its local demand, "India may need to resort to imports from the world market," the survey said.

Last year, Rabobank said demand from India and China, which account for more than a third of the world's population, has been the engine for global dairy growth in recent years.

India's food inflation, which had shown signs of declining after remaining stubbornly high for most of 2010, accelerated to 11.49% in the week to Feb. 12 from 11.05% in the previous week, mainly driven by a rise in milk prices.

Demand for high protein sources like milk, egg, meat and fish has grown with higher income levels.

"Recent hikes in prices of milk and milk products have been a matter of concern," the economic survey said, adding that a gap between local demand and supply of milk has put "upward pressure on milk prices in the country."

There are,at present three comments which are interesting. The third,correctly recognizes India cannot feed high priced grains to produce milk. India also has been able to produce a great deal of milk because there have been no "opportunity costs" associated with milk production. Now, there are jobs in the cities and the labor is not going to be there to produce milk.

India has a GDP per capita of $3,290. A total of 37% live below poverty levels. Hard to figure how the U.S. can feed grain at the present rates, and then ship dairy products to India at a profit.

Dry Product Prices

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Today's NASS price for nonfat dry milk (NFDM) is $1.3938 per pound - pitiful. Today's CME price for NFDM is $1.8325 (Grade A). The most recent, February 15, 2011, GlobalDairy Trade internet auction price for skim milk powder which is virtually interchangeable with NFDM was $1.78 per pound. Is there an explanation which relates to "market" economics. Probably not.

The good news is that all prices are heading upwardly, even whey.

New Zealand Milk Checks

New Zealand dairy farmer are paid by kilograms of milk solids. The present forecasted price is $8/kg milk solids.

To convert to dollars per hundredweight:

1 kilogram = 2.2046 pounds. So, take the payout ($8) divided by 2.2046 ($3.63 per pound of milk solids). There are 8.4 pounds of solids per hundredweight of milk. Therefore, $3.63x8.4 equals $30.482 per hundredweight.

I see no reason to convert the New Zealand dollars to U.S. dollars, unless the milk check is being sent to the U.S. All costs are local and therefore all milk checks are local.

Virtually, all cows are milked seasonally in New Zealand. The season for this payout began in July 2010 and will end in June 2011. consequently, the payout is still subject to change.

New Zealand Payout

Most of the dairy areas of New Zealand have not been affect by the recent earthquake. Fonterra is projecting an increase in dairy farm payout. See: http://www.nzherald.co.nz/economy/news/article.cfm?c_id=34&objectid=10708096

Dairy giant Fonterra has boosted its forecast payout to farmers to record levels as international prices keep rising.

The farmers co-operative yesterday raised its forecast payout for this season by 60c to $7.90-$8 per kg of milksolids before retentions.

With milk production expected to be broadly in line with last season an $8 payout could be worth about $10.3 billion.

Chairman Sir Henry van der Heyden said the increased forecast milk price reflected strengthening international dairy prices during recent months.

More at link.

Fonterra's payout is approximately 40% more than the U.S All Milk Price for 2010. More power to them.

At exactly what point in time are U.S. dairy farmers supposed to reap the benefits of the global economy?

Projection?

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USDA recently released its "Agricultural Long Term Projections" which are available at: http://www.usda.gov/oce/commodity/ag_baseline.htm


The latest, released this month shows milk price projection through 2020. You can go back tho the report issued in February 2008 and see how they did projecting the "All Milk Price" for 2009. Or you can just look at the graphs above.

At the moment the Class III futures for 2011 are all above USDA's projected "All Milk Price."

My problem is not with USDA's attempts at a rational projection. The problem is, who knows what a relatively small number of players are going to do about farm milk price? Neither USDA nor the chosen few are really able to think in terms of complexities. That is too bad.