JANESVILLE-The dairy market has its ups and downs, but Sen. Russ Feingold is concerned that some prices also are open to tampering.
That could mean unfair prices for farmers or consumers.
The spot cheddar cheese market on the Chicago Mercantile Exchange serves as the benchmark for cheese prices and, therefore, influences milk prices. Manipulation by buyers and sellers is possible because it's a "thin market," said Brian Gould, an associate professor of agriculture and applied economics at the UW-Madison.
A thin market involves few brokers trading a quantity not large enough to provide an accurate price for the rest of the industry.
The spot cheddar market has about 20 traders at any given time, Chicago Mercantile Exchange spokesperson Mary Haffenberg said, and the cheese they trade makes up less than 1 percent of cheese produced in the United States, according to a report by the Government Accountability Office.
Hypothetically, a company or group could buy or sell enough cheese to tilt prices in its favor, Gould said.
Feingold, a Democrat, wants to see more oversight of the market. Feingold's staff is working with Agriculture Committee chair Sen. Tom Harkin, D-Iowa, to explore solutions and to make sure the Farm Bill calls on the USDA to improve communication with agencies such as the Commodity Futures Trading Commission, which monitors the market.
"Wisconsin's hard-working farmers deserve to know that the price they receive for their milk is fair," Feingold said in a statement.
It's difficult to assess the likelihood of price manipulation, Gould said.
Haffenberg said the Chicago Mercantile Exchange watches for peculiar trading, and the trading commission has not filed a complaint of price manipulation, according to the GAO report.
The report states that the mercantile exchange provides better oversight than its predecessor, the National Cheese Exchange in Green Bay. But the possibility of tampering remains, and the report calls for regular scrutiny of all numbers that go into pricing.
Feingold's efforts are focused on oversight, at least for now.
But making the market more accurate for pricing would involve either attracting more buyers and sellers or introducing more types of cheese into the market, Gould said. Opening the market to more cheese, however, would further complicate an already complex system, he said.
"I don't think it will happen," he said, "because there's a push to be less complicated."
