- WHITE PAPERS
MODESTO, Calif. -- According to a report published at DairyNetwork.com, Western United Dairymen (WUD) has called on USDA Secretary Ann Veneman to conduct an investigation into a substantial revision of July cheese inventories. The group is concerned that the original report, which under-reported the nation's cheese inventory, may have contributed to the sharp drop in cheese prices witnessed in late September and October.
In its letter to Veneman, WUD notes that the report by the National Agricultural Statistics Service's (NASS) Cold Storage report released Sept. 21, "revealed a substantial revision to July cheese inventories," according to Michael Marsh, CEO. "The revision in total Natural Cheese inventories represents a 5.2 percent increase."
WUD is the largest dairy producer trade association in California, representing approximately 1,100 of the state's 2,000 dairy farm families in California.
Alan Levitt, a dairy industry analyst told PizzaMarketplace.com on Oct. 25 that such an inventory revision was significant, and that it adds up to approximately 31 million pounds of cheese -- 800 40,000-pound "loads," the largest measure traded on the Chicago Mercantile Exchange.
"Today just five loads of cheese were traded, and during the whole month of October, so far only 72 loads have been traded," said Levitt. "So, all of sudden, when the market finds out there are 800 more loads of cheese than previously thought, that changes people's perceptions a lot."
Following the release of the revised report, cheese prices for blocks and barrels began dropping at the rate of about a dime a week before bottoming out on Oct. 24 at $1.16 per 40-pound block.
Marsh added that WUD understands that many market forces work to determine cheese prices, but that the group still desires an investigation to grasp the "magnitude to which the reporting error may have exacerbated the decline in cheese prices." The letter asks the USDA to look into the factors behind the upward revision in July cheese inventories:
"Was it due to a late report or corrected data?" asked Marsh. "Did it involve just one warehouse or several? Was the revision due to the correction of an intentionally false report? What has been done to avoid any further errors of this level? Have any fines or penalties been assessed?"
Ultimately, Marsh said, this type of investigation will "help the industry better understand the extent to which commodity prices are affected by cold storage reporting errors," he said.