Commodities used in
Wednesday*** price
$/lb change $/lb change
*Barrel cheese is not used in
**Dry Whey (average of the
Western ‘mostly’) is used only in the Class 1 formula.
***
Cheese:
Collapse to support

Cheese
(comment continued)
For all intents and purposes Cheese has dropped to support
this week. Support for Block cheese
is $1.13 and for Barrel it is $1.10. Blocks
dropped 13.75 cents this week and a total of 49.5 cents in the past 4 weeks. Only
8 loads of block were sold this week and there was only one uncovered offer at
the end of each day. Even worse,
prices had already dropped 65.8 cents in the previous 28 weeks when the
Butter loses a penny in lackluster trading.
Only the relatively good news of inventories being below
last year’s level kept this market “sort of” steady.
The real news in the
Nonfat
Dry Milk –
Sales to
Whey
Products:
With NDM hovering at the 80 cent support price (and not
likely to move lower)
<<<<<<
>>>>>
Revaluing
Beginning about October 2007 this country launched itself
on very energetic speculative effort that ran the values of nearly all things to
record highs (some believed values would go up forever and not only said so but
invested using that as the base theory). This
“surge” of investment was aided by cheap and readily available credit and
generated an unbroken upward push for 9 months – until July 2008.
For those nine months
The chart above shows the magnitude of the drop off in
prices. These are all stunningly
large and quick slides downward. My
point is that the charts show an amazing similar pattern with the highs in every
product being reached in July 2008 – they all fell together.
In very quick order the speculative excesses have be driven out of the
market and except for the energy field it seems most products have found the
level where fundamental economics will again guide market movement.
Both corn and soybean meal have hit lows in Dec and now have moved
strongly upward again, but no one expects the corn price to reach $7.00 again
but the potential exists to get to $5.00 which is historically a very high price
indeed.
Early
2009 likely to be like early 2006 – and that is not good
The first six months of 2006 were a financial disaster for
producers and conditions now replicate that situation with one overwhelming difference.
Because of the ethanol policy of this country the price of corn (and thus
other feeds) are double what they were in 2006.
Our industry was extremely lucky to have the world wide
shortage of dairy product occur at the same time our feed costs were forced
upward by the ethanol policy. The
resulting high milk prices made it possible absorb the higher feed costs and
still turn a profit. The final
residual bit of strong market prices driven by world demand was squeezed out of
the markets this week. Prices are
now at support – like they were in early 2006.
Grain prices are much higher and Class 1, 2 and 3 prices have been
reduced. 2009 will be worse than
2006 was.
The closest I can come to an inspirational statement in
these conditions is one learned from a
Welcome
to 2009 – Change is Upon Us.
Until
next week, Bill
Van Dam