So I was sitting in the car listening to the radio and all the chatter was about the current crisis in the diary industry which people seem to be suggesting is the result of corporate bastardry on behalf of groups like Fonterra. At the outset I have to state that I know nothing about primary production other than it looks hard and uncertain but then no more uncertain working in manufacturing in Australia. .
I know nothing about the current situation but I have always thought if you dont understand a problem directly try and look for something you are familiar with and work sideways. In doing so you might be able to lift the veil of your own confusion. So, I thought milk is a commodity maybe it is traded somewhere and that would give me some data upon which to start to make sense of what was happening. Part of everyone’s shtick was that the current situation could not be foreseen and I wondered how that could be. A bit of a look around found the chart below which is the CME Class 111 milk – it is undoubtedly not a match to what the local product is but it tells an interesting story.
To my untrained eye it looks as if this commodity has been stuffed since late 2014. However, the usual caveats apply when dealing with analogues so I though I might be able to find some sort of global index that would give me an idea of the really big picture and as always Google obliged with the Global Dairy Trade Chart Focus March 2015
It looks to me as if the entire global dairy industry has been struggling since 2014. Therefore the proposition that these events could not be foreseen is somewhat disingenuous and is more reflective of incompetence than anything else. Then I remembered that the last person to ask about what was happening to prices in their industry was executives within that industry. The influence of Dunning-Kruger runs deep with Australian management and how anyone in a decision making position could offer up the reasoning that the current collapse in prices blind sided everyone is beyond me.
This then raises the question of whether I have cleared up my own confusion and the answer is not really. If anyone knows anything let me know.