Farmers question milk price volatility

SALEM, Ohio – Ohio and New York farmers visited the Chicago Mercantile Exchange April 18 and demanded greater transparency into who is trading in the market and how it’s affecting dairy prices.
Five people from the dairy industry talked with nine executives about how trading on the Chicago Mercantile Exchange (CME) allegedly hurts dairy prices, according to New York dairy producer John Bunting, who was part of that meeting.
A small group also stood outside, some wearing cow costumes, protesting the CME, Bunting said.
Buyers, sellers. Although the CME told him there are as many as 12 buyers and sellers, Bunting said there are only a few major players who manipulate the market.
This is a threat to the system, he said.
The CME does not tell the public who is buying and selling, Bunting said; if it did, it would be obvious that these few buyers and sellers cause milk price volatility.
“The sham would be revealed,” he said.
“They artificially create volatility to drive large farms to future contracts set at a lower price.”
Investigation? Ohio Farmers Union President Joe Logan furthered this point in a letter to the Commodities Futures Trading Commission
, asking it to investigate the CME.
Dairy futures contracts are promoted as a way to limit farmers’ risk when milk prices are low, Logan explained. Many of these contracts are based on prices established on the CME, he said.
“Under these circumstances, it is understandable that an intentional manipulation could work to the advantage of one of several market players with heavy investments in dairy futures contracts,” Logan said in the letter.
The CME released a statement April 18 saying its market regulation department monitors its markets. It also said the CME “strongly believes in the integrity of all of its markets, including the spot dairy market.”
First step. “We’re heading for a cliff. It’s not a matter of if, it’s a matter of when [farmers can’t make it anymore],” Bunting said.
“The sooner we make corrections to policy – so capitalism stops and hard work pays off – the better off we are.”
He said the meeting with CME officials asking for transparency went well.
The tone was cordial, not adversarial, and he said he expects a positive result.
“This is the first step, so hopefully this will reveal to the whole world that there needs to be a new [dairy pricing] system.”
Setting the price. Although less than 1 percent of all dairy commodities traded nationwide occurs at the CME, these cheese sales set the raw milk price for farmers across the country.
“[These major companies] are making a ruse of trading the cheddar,” Bunting said. “The dollar value of what’s being traded has no impact on supply and demand.
“If [supply and demand] don’t impact each other, there are ulterior motives.”
Analyst opinion. Jerry Dryer, editor for Dairy and Food Market Analyst, said he’s heard these grumblings before, but no one has come up with an alternative.
“Day in and day out, [the CME] works fairly well,” he said.
Part of what makes it work is the autonomy, he said.
“Now [prices] are ticking down. If everyone knew who was selling and easing the market down, people would be screaming at them and giving them a black eye.”
(Reporter Kristy Hebert welcomes feedback by phone at 800-837-3419, ext. 23 or by e-mail at


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