From the parlor pit1-28
There is very good news in the cme. However because of that asinine way we price our product we are lagging way behind in the nass price. This means that while we have had record upward price movement in the CME it has been a snails pace in our mailbox price. As of yesterday we can justify a $16.50 class 3 price class 4 is almost to $20 dollars yet we are at a base of about 15.50 right now for Jan. milk. Several CO-ops are bleeding the red ink right now as they presold product at much lower prices than what we are currently at. without locking in the milk price. this means there costs are much increased over what they were. THis will lead to lower milk checks in the Midwest as co-ops take more out of producers checks to make up for the shortfall. Watch your Co-OP very closely right now!
At 3 pm today the bi annual cattle inventory report come out. IF it is lower as analysts predict record beef prices are here to stay. That should also show that the wasde feed demand number is a joke! Be safe JR
Re: From the parlor pit1-28
Why arent the coops required to lock in price protection like the grain marketing coops are required to do by law? Poor delivery system? Seems like a very short sighted risk management plan on the part of the coop's board of directors if this is what has been allowed to happen. There is no business that can afford that kind of risk exposure.
Re: From the parlor pit1-28
M this is what happens when you have a free market (the cme) butt heads with a goverment price system (the nass) It is very hard to explain our price system but suffice it to say it is one big circle jerk.
THe CME must settle to the nass price for the month. So the nass price is survey based off of what plants sell their product for. How do the plants determine thier price? By the CME cash trade not the cme futures mkt. THe cme cash price doesn't account for private treeaty sales. it only accounts for total sales on the BOT. That means that a co-op who has presold powder at 1.20 doesn't announce that to the cme it is a privatre trade between tow entities. BUt another buyer can't find product so he bids up the price on the powder at the Cash pit to 1.60. THe futures trader sees this and says he is betting that powder shoots the moon. so he buys. The nass price doesn't account for any of this tho cause they ask the processor for the survey price. (are you totally confused?) So the co-op who is still stuck on the 1960's federal order pay price system says he doesn't care because he pays a blend price of the 4 classes of milk. Then the nass price for the month (which is the blend price of all the reporting weeks in the month of all classes) comes out way higher than the survey price that the co-op/proccesor quoted. so now the co-op who had no way of hedging this milk price increase because there is no "milk" price hedged or traded only class prices gets caught having to pay a higher price to it's patrons.
But don't worry they do not have to pay the federal minnimum order price as they can blend their losses out of the member owners price to make sure they cashflow. But the farmer is screwed!
Sorry about this answer and it is very condensed. JR