* Your biggest dairy co-op does not control
* enough of the market to be able to "set" a
* price.
HI,
This is true, but it's not that simple.
Even if the dairy co-op controlled 100% of the market, it probably could not
dictate price.
Supply and demand would still set the price.
Also, due to the perishable nature of farm commodities, especially milk, at
some point, in the face of oversupply, the sellers would be compelled to take
whatever was offered, no matter how low, to salvage the situation at hand in
the short run.
And anyway, it's not all about setting prices.
Probably the principal thing that coops really do for us is
"BALANCING" the
market to somewhat stablize prices, by attempting to temporiarly stablize
supply and demand.
They do this by daily attempting to "balance" the market in two
dimesions.
One dimension of balancing the market is TIME. An example might be the
situation where a coop could temporarly balance an oversupply by diverting
milk to a powder, cheese, or butter facility owned by the coop.
The coop would then carry the oversupply in inventory, on spectulation that it
could unload it during a favorable supply and demand situation. This is a
substantial additional cost to the coop and it's membership.
The other dimension of balancing the market is LOCATION. An example of this
can be observed in your own driveway.
Your milk truck driver may well finish pumping your milk, and then face a call
to the coop.
Is the load going to the regular place in Cleveland, Ohio?
Or is he rolling for Eire, PA, or to Pittsburg, or will it be Louisville,
Kentucky? This is "Balancing" the market.
I certainly do want to point out that it doesn't take a 100% coop membership
in the milk shed for the coop to be required to provide this balancing
service to the Milk Handlers and to the Nation.
To be in the "game" at all, the coop is required to participate in
"balancing"
the market. If the coop membership is only 50%, those 50% of the dairy
farmers pay 100% of the cost of balancing the market.
This is the origin of the very common statement in dairy country when
referring to the neighbors: "That dang Son of a Bitch! I've carried him
on
my back all my life."
--
Kindest regards,
========================
F. W. Owen
Owenlea Holsteins
9430 Spencer Road
Homerville, Ohio 44235
e-mail fwo@bright.net
home page http://www.bright.net/~fwo
voice & fax 330.625.2369
cell 330.635.2287
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