This is not good news for most, but milk futures as reported by the Chicago Mercantile Exchange have risen 41% this year. Milk has risen in price more than crude oil, cattle, gold and silver. As of December 29th, it’s in the lead for price gains.
Most consumers may have already noticed an increase in milk prices, but there is a delay in prices reaching the consumer. Commodity prices tend to fluctuate significantly and many suppliers have contracts to supply milk at lower prices for a while. Many of us are used to seeing significant moves in gas prices, but they are dampened by the distribution channels, sometimes to the consumer’s advantage, but more often not.
There are two main factors that have caused the rise. The U.S. Department of Agriculture’s data from the first 10 months of 2011 shows dairy-product exports increasing 8.5%. The other is that cattle feed prices have increased significantly too, so it’s not as if dairy farmers are seeing a windfall. As you know Texas had a record drought this year. It would seem that price elasticity is quite low for milk, so we can expect high volatility going into 2012.
Bloomberg reported yesterday that the top six milk importers, China, Mexico, Canada, Philippines, Japan and Indonesia are likely to demand more milk from the U.S. in 2012, leading to further price increases. I wish there was a way to stock up now. Perhaps powdered milk … yuk!