Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : Farming -- Ignore unavailable to you. Want to Upgrade?

To: Jon Koplik who wrote (30)	3/5/1999 8:14:00 PM
From: Jon Koplik	Respond to of 4443

WSJ article about (record) plunge in milk prices. March 5, 1999 U.S. Reports Largest-Ever Drop In Its Benchmark Price for Milk An INTERACTIVE JOURNAL News Roundup WASHINGTON -- The Agriculture Department announced Friday its milk price dropped $6 per hundred pounds, or 36.9%, in February, the largest decrease ever. The department said milk stood at $10.27 per hundred pounds in its monthly survey of prices for unregulated grade B milk in Minnesota and Wisconsin. They survey is used as the benchmark for what dairy farmers in different regions are paid. Farmers and dairy economists had expected the decline after months of near-record prices. Even so, economist Robert Wellington of Agri-Mark Dairy Cooperative in Lawrence, Mass., was astounded by amount of the drop. "This is twice the largest ever. It's just huge," he said. The decline in prices could save consumers a few pennies per gallon at the grocery, but it is a blow to dairy farmers' incomes. "It's horrendous," Mr. Wellington said. "Cows are still going to eat the same amount of food." The previous largest month-to-month decline was a $2.52 dip, said Chris Nubern, an economist with the National Milk Producers Federation. "Those are some very low prices for dairy farmers," Mr. Nubern said. "Ten dollar milk is not very profitable for dairy farmers. Everyone across the country is going to feel some of the price decline in some shape or form." Mr. Nubern said the dip is partly due to increased production prompted by record prices. "We're in a market where a lot of milk is being produced and that's driving prices down," he said. The National Agriculture Statistics Services, surveys approximately 162 milk processing plants in Minnesota and Wisconsin in order to compile the data on grade B milk, which is then extrapolated nationally. Even though grade B milk now accounts for less than 10% of milk production, the data are used to set the price dairy farmers get from processors for all of their milk supply. The Agriculture Department is trying to come up with the value for an "unregulated, freely determined price; Grade B represents the best reflection of supply and demand conditions," said Steven Levine, an agricultural economist for the department. Mr. Levine said it could take as long as four months to see a change at the retail level. "There are tremendous lags between changes in farm prices and changes in retail," he said. Prices "do go down eventually but not as much as they do at the farm level." "Retailers have to have a feeling that not only is the price down but it's going to stay down" in order to lower their prices, Mr. Levine said. The average retail price of a gallon of whole milk in January was $2.94, compared with $2.63 a year ago, said Annette Clausson, an Agricultre Department economist. Butter was $3 a pound in January compared with $2.35 a pound a year ago. "We're expecting that retail prices for milk and other dairy products will start coming down midsummer," Ms. Clausson said. Agriculture Department officials have said most dairy farmers have avoided the economic troubles that grain farmers and others have suffered, largely because of the higher prices. "A lot is going wrong all at once," Steven Elmore, an economist at seed company Pioneer Hi-Bred International Inc., observed last month. "The whole agriculture sector is a lot more stressed than last year," he said. --Keith Perine contributed to this article. Copyright © 1999 Dow Jones & Company, Inc. All Rights Reserved.

To: Jon Koplik who wrote (30)	3/8/1999 4:06:00 PM
From: John Stichnoth	Read Replies (1) \| Respond to of 4443

I've been wondering for a while how "Mad Cow" risk might be played. There seems to be increasing awareness that feed practices using byproducts of an animal's own species as feed, might increase the risk of this disease entering our food supply. While I think the risk is small, I can't eliminate it. And it can certainly be seen as a hot button. One thought is that demand might grow for alternate animal feeds. There might be some room for marketing chickens, for instance, that can advertise they weren't fed chicken feathers (which in itself isn't very appetizing). A company I've run across is Omega Protein, a 60% owned subsidiary of Zapata. OME catches menhaden, a real junk fish related to herring, and then processes it in its own plants into animal feed, fish oil and fertilizer. The 40% was IPO'd last year, partly on the image of Omega-3, a desireable fat apparently, that is present in the fish oil. It was just in 1997 that the processed fish products were approved for human consumption, improving the potential demand. OME is selling at about 5 5/8, has about $2 per share cash, a trailing PE of 5.6x, although 1999 earnings will likely be somewhat lower than 1998's. The company is much the gorilla in the "fish oil" market, but much of the demand is directly competitive with other oils, such as canola, etc. Float is 8.5 mm shares, 79k shares traded daily. Other statistics: ROA 13.88% ROE 18.84% P/Bk 0.87 P/S 1.03 Oh, also a kicker--Zapata might decide it wants to cash out of non-internet related investments and sell the company to a third party. (Maybe Warren Buffett would be interested). Any comments? I like your "personal" thread here. I'm surprised there aren't at least a few people interested in this sector. Strange. JS