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Suspected milk price manipulation investigated

- The Washington Times - Tuesday, May 20, 2008

ASSOCIATED PRESS

Federal commodity regulators are investigating whether the farmer-owned dairy cooperative that controls about a third of the nation's milk supply engaged in a price manipulation scheme, a spokeswoman for the group said yesterday.

Monica Coleman, a spokeswoman for the Dairy Farmers of America (DFA), said the Commodity Futures Trading Commission, or CFTC, is looking into the group's trading of cheese futures on the Chicago Mercantile Exchange.

The price of cheese futures can have an impact on milk prices. The Department of Agriculture sets a minimum price of milk that is based in part on a survey of cheese prices, which includes futures prices.

Ms. Coleman said the investigation isn't new. The group has cooperated with the CFTC on the matter since 2004. The Wall Street Journal reported yesterday that the CFTC is preparing to bring charges against DFA.

"We do not believe we have violated any laws, and we have and will continue to cooperate," said Rick Smith, president and chief executive officer of the DFA.

The price of milk jumped 13.5 percent in the past year, according to the Bureau of Labor Statistics, but Ms. Coleman said the "alleged activity is from 2004 and does not affect milk prices today."

A spokesman for the CFTC would neither confirm nor deny an investigation.

The DFA was formed in 1998 through the consolidation of four regional marketing cooperatives. The group markets 61.7 billion pounds of milk for more than 19,000 dairy farmer members.

A report last year by the Government Accountability Office, the investigative arm of Congress, found that cheese trading on the Chicago Mercantile Exchange is susceptible to manipulation because cheese futures are thinly traded.