This one will only interest those who REALLY care, but here's another
story on the subject:
Dennis Jelle smells a ***.
The Mount Horeb farmer's milk checks have dropped so far, so
fast he is convinced there are forces at work besides supply and
Jelle's monthly milk checks dropped from $10,000 in early fall
to $8,500 last month. He expects to get $8,000 this month for the
milk made by his 55 cows.
Tax time is coming, and Jelle, 51, likely will have to borrow to
pay the $6,000 property tax bill for his 237-acre farm near
``Most dairy farmers are in a state of emergency,'' Jelle said.
``There's no money to buy anything.''
Like many Wisconsin farmers, Jelle blames the National Cheese
Exchange, a low-volume auction market in Green Bay that meets for
just half an hour on Friday mornings but has a big impact on milk
More specifically, he blames Kraft Foods Inc., the nation's
largest buyer of bulk cheese.
A University of Wisconsin study conducted for the state accused
Kraft of driving down prices by selling cheese on the exchange for
less than it could get on the spot market.
``Kraft is gouging the consumer because prices aren't dropping
in the store,'' Jelle said. ``There's no justification for the drop
because there aren't surpluses of milk and cheese.''
But federal investigators found no proof of the anti-trust
violations alleged in the March study, and Kraft spokesman Michael
Mudd said farmers are holding his company accountable for the
volatility of supply and demand.
``They've been brainwashed by a few people who want to point at
a big, bad company and blame us,'' Mudd said.
Nevertheless, Gov. Tommy Thompson has asked the U.S. Agriculture
Department to stop using the exchange as a factor in milk pricing.
Thompson contends the exchange handles too little cheese -- less
than 1 percent of the bulk cheese bought and sold in the United
States -- to serve as a reliable factor in calculating milk prices.
Milk prices paid to farmers have dropped from a high of $15.37
per hundredweight -- about 12 gallons -- in September to $11.61 per
hundredweight at the end of November.
UW-Madison agricultural economist Edward Jesse said the market
factors behind the price drop date back to last spring.
Milk prices then rose due to predictions of a poor growing
season for grain and subsequent low milk supplies. Cheese prices
were up due to market speculation and concern there would be a milk
Milk and cheese prices paid to farmers continued rising until
September, when predictions of a record U.S. corn harvest ``burst
the speculative bubble,'' Jesse said.
That, coupled with ample cheese supplies, cut cheese prices and
buying stopped. Then the cheese exchange's impact on milk prices
kicked in, he said.
The plunge is a shock to most dairy observers, Jesse said,
adding that milk prices should be much higher, about $13.20 per
``The cause is a matter of a flea on the tail of the dog wagging
the whole dog,'' Jesse said.
Wisconsin, Idaho and Minnesota dairy farmers were the first
affected by tumbling cheese and milk prices because much of their
milk is used in cheese and butter, said John Rourke of the
agriculture department's marketing service.
By February, the low prices will hit farmers elsewhere whose
milk is used mainly for drinking, Rourke said.
Despite economists' arguments of normal market forces, many
farmers see the cheese exchange as the short-term cause of their
troubles and the federal milk pricing formula as the long-range
They have protested at the exchange, and about 100 angry farmers
marched into the governor's office last month and demanded the
state push for federal changes in milk pricing.
Some closed their land to deer hunting -- a sport that is
practically a religion in Wisconsin -- and threatened to shut out
snowmobilers this winter to draw attention to their plight.
Kraft supports changing the way cheese is priced, Mudd said.
``We would much rather have less volatility. We want a balance
between a price that enables farmers to be profitable but also
stimulates consumer demand,'' Mudd said.
And Jesse and others believe dairy prices have probably bottomed
out and will improve by summer.