Government eyes dairy cooperative in pricing probe
Complex cheese and milk-pricing formula is under study
By Tom Stundza -- Purchasing, 5/19/2008 6:47:00 AM
The Commodity Futures Trading Commission (CFTC) is investigating allegations that Dairy Farmers of America (DFA) has been manipulating the prices of milk and cheese, the Wall Street Journal reports. The nation’s biggest farmer-owned U.S. dairy cooperative controls a third of the U.S. milk supply.Dairy prices fluctuate in response to supply and demand, drought and, more recently, fast-rising feed and energy prices. Buyers at food-processing firms polled by Purchasing.com have been complaining about tight supplies and high prices for milk and cheese for some time, including this month. Since the start of 2004, consumer milk prices have risen about 32%, compared with a 15% increase for food prices in general, government data show.
According to the Journal, DFA, which is based in Kansas City, Mo., picks up raw milk from its more than 18,000 member dairy farms across the nation, processes it and sells it for bottling, or making cheese, butter and other products, at its own plants or at other dairy companies. In the price-manipulation inquiry, the CFTC is looking into whether DFA sought to drive up the price of milk through its trading of cheese contracts at the Chicago Mercantile Exchange (CME). Cheese prices at the CME affect milk futures and also are a key component of the complex formula used by the U.S. Department of Agriculture to set the minimum prices dairy farmers receive for their raw milk.
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