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On Cows and Markets

By  E. W. Lang

Block cheese lost 14 cents this week to close at $1.97 per lb. Barrels lost two cents to close at $2.00, and Butter gained two to close at $2.11. Class III Milk Futures lost 15 cents in the nearby, but gained eight to 18 cents per cwt. for each of the subsequent nine trading months.

Class III Milk Futures average $18.40 for the rest of this year, and $17.16 for 2020. Class IV Futures, meanwhile, average $16.70 for the rest of this year and $17.40 for next. For reference, class III is made in to cheese, and class IV milk is made in to butter and non-fat dry milk. The prices are inverse, one to the other, nearby to the out lying months. If you graphed the monthly prices they would be mirror images.

What does this mean to the American Dairy Farmer? Is there a hidden market indicator? Is there a revelation of end times on the dairy? Will there be prosperity around the corner?

I don't think so, and probably not, but I can twist information in to anything for anyone at any time, much like someone interpreting statistical research results, a traveling sales person selling elixir, or an evangelist delivering The Word.

I have seldom heard a market specialist offer counsel that doesn't include advice to buy a lot of stuff that includes a commission. Remember always, you can zero out all risk of negative price movement in milk or any traded commodity, but only at a price. The price of no price risk is the cost of options and other instruments that also zero out any possibility of ever keeping any profit over time. Options and forward contracting can even out the ups and downs of market prices, however they almost never end up generating additional wealth.

Agri-Mark, a dairy coop in Massachusetts is launching a quota program for producers shipping over 2,000,000 lbs. of milk each year. Each producer that exceeds their historical base will be assessed $5 per cwt. for whatever overage they have.

In Massachusetts it's illegal to snore with the windows open. They also led the country in socialized medicine when Mitt was Governor, and sent Ted to the U.S.Senate seven times. Maybe a milk quota will precipitate producer and coop viability. Or maybe Agri-Mark will need an auctioneer in a couple years.  

The University of Wisconsin has received $7.8 million in state funding to start a dairy academy. I was on the Lancaster, WI UW campus this weekend making pedigree announcements for a registered dairy sale staged by the Pioneer Dairy Club. It was most rewarding to see club members interested in breeding, marketing and milking dairy cattle. They also awarded a scholarship named for my Ayrshire friend, Jeff Dornick, who was herd superintendent there for some years.

Corn lost two cents this week, beans lost seven, but wheat gained 24 cents for some reason, probably clean living in Kansas. National corn and bean yield reports have been a little better than anticipated. My local yield estimates correlate, this based on recent conversations with a couple farmers at the gas station, who, in turn, had talked to several other farmers, both at church and at the elevator.