Commodities Drop Again

Big money is running, looking for safe places. The U.S. dollar seems to be that place, which results, since commodities are denominated in dollars, in falling oil, corn and other commodities.

Yesterday a new study came out: http://www.economist.com/node/18648350?story_id=18648350

The study seems to explain, to some extent, the fall globally, in crop yields. However,we seemed to have missed, so far, negative impacts. The article concludes:

That might be keenly felt if patterns of warming shift. One of the reasons that the climate effects Dr Lobell and his colleagues have dug out of the data are not worse is that, although the planet as a whole has warmed up during the past 30 years, growing seasons in the parts of America which produce 40% of the world’s maize and soyabeans have failed to follow suit. No one is quite sure why this might be and no one knows if it will last. That climate change has not yet done very much harm may be cheering, but the past offers no firm guarantees for the future.

Commodities fall

Commodities fell today. Oil fell, corn fell. It is too wet to plow and corn futures fell. So much for supply and demand and hooray for the Commodity Futures Modernization Act of 2000 which allow big money to hedge things like corn against speculating on the dollar.

Needless to say the dollar took off in an upward flight.

What all this will mean to dairy farmers is too soon to tell. But,all bets are off.

Dean Settlement Approved

http://www.burlingtonfreepress.com/article/20110505/NEWS01/110505016/Burlington-judge-grants-preliminary-approval-revised-Dean-Foods-settlement?odyssey=mod|newswell|text|FRONTPAGE|s

U.S. District Court Judge Christina Reiss granted preliminary approval Wednesday to a revised Dean Foods settlement in the class action lawsuit being brought on behalf of Northeast dairy farmers, clearing the way for the plaintiffs to begin notifying farmers of the $30 million payment Dean has agreed to make to settle the case.

Attorneys for the plaintiffs, which include two Vermont dairy farmers, have estimated that about 8,000 farmers will be entitled to a share of the settlement. They have characterized the case as the first step in breaking Dean’s grip on the milk market, restoring competitoin to the marketplace. Dean is the largest milk processor in the country.

The two other defendants in the lawsuit, Dairy Farmers of America, and its marketing arm, Dairy Marketing Services, have refused to settle, and have said the lawsuit is pitting dairy farmer against dairy farmer. Dairy Farmers of America is the largest dairy farmer cooperative in the nation and includes hundreds of Vermont dairy farmers.

About two dozen farmers belonging to the Dairy Farmers of America coop attended an April 15 hearing on the case in Reiss’s court to show their opposition to the lawsuit. The farmers have said a provision of the lawsuit that would require Dean to buy at least 10 percent of its milk from a source other than Dairy Farmers of America would ultimately lead to lower milk prices and could put some of them out of business.

But as Judge Reiss noted in her decision Wednesday, that provision of the lawsuit was dropped in its revised version, clearing the way, in her opinion, for the $30 million settlement to go forward. Reiss noted in her opinion that the requirement to buy milk from sources other than Dairy Farmers of America "has been the sole source of objections to the Dean Settlement."

"We’re pleased with the Court’s decision and believe this is a very good outcome for the farmers represented in this case," said Benjamin Brown of Cohen Milstein Sellers Toll, PLLC, the Washington D.C. law firm bringing the lawsuit. "We are continuing to move the case forward against the remaining defendats, DFA and DMS, and expect to complete factual discovery in the case in the next month."

Attorneys for Dairy Farmers of America were still reviewing Reiss’s decision Thursday morning.

Essentially, Dean settled for what might have been its costs to defend itself in the case. Not bad. And, as things stand, we have learned nothing and nothing has changed.

Most everyone had hoped for more - much more.

Decling World Yields

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http://greedgreengrains.blogspot.com/2011/05/declining-crop-yields.html


Declining crop yields

There are many reasons for high commodity prices. But recent data from FAO shows a pretty rapid slowdown in productivity growth. The price spike in 2008 occurred in a particularly bad year in which yields declined on a worldwide basis for three of the four largest food commodities. In 2009 all four of the majors saw yield declines, something that hasn't happened since 1974. 2010 couldn't have been much better and was probably worse, given how bad things were in the U.S, the world's largest producer and exporter (worldwide data for 2010 isn't available yet).

More at link.

Probably, there are several reasons but, obviously, Monsanto is not going to feed the world.

Corn & Money

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Yesterday USDA's "Crop Progress" report was released: http://usda.mannlib.cornell.edu/usda/current/CropProg/CropProg-05-02-2011.pdf

Above shows the how little corn has been planted. Yesterday, the decision was made to flood thousands of acres of cropland. One might think corn prices might have skyrocketed today - not so.

Weather may be important. Supply and demand may be important. But, the almighty (or not so almighty) dollar seems to reign.

Dairy farmers will certainly face a stiffer grain bill.

Cheese

Today, USDA released its "Dairy Products" report which covers March 2011. American type cheese production was up 0.3 % when compared with March 2010. USDA's "Commercial Disappearance" data came out recently which showed a 12% increase in sales of American type cheese. That is a huge change. Most of the increase came from exports.

Speaking with a cheese broker today, I learned there are hamburger price "war" currently. he felt that should bump up cheese consumption.

Altogether, the situation should provide a healthy price at the CME. But, do the traders really know what is happening in the real world?

New Checkoff Needed?

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While dairy farmers pay into the dairy checkoff, dairy farmers seem to be using less milk on the farm. The USDA data only goes to 2004. Lately according to sources, dairy farmers are cutting milk replacer to save money.

The data shows, however, dairy farmers have been cutting farm milk use at a faster pace than the consumer.