Chart: The Top Commodity of 2011 is… Milk?

by Ryan Fitzwater, Senior Research Analyst

Chart: The Top Commodity of 2011 is… Milk?

by Ryan Fitzwater, Investment U Research

Thursday, December 29, 2011

Go and ask your friends and colleagues what the best-performing major commodity in 2011 was... unless they're commodity experts, I bet they won't guess milk.

That's right, milk. The delicious liquid that you pour into your crappy office coffee and drown your cereal in every morning was able to outperform cattle, gold and crude oil all thanks to increasing U.S. exports.

In 2011, U.S. dairy exports hit a new record, making milk the top-performing commodity for the year:

dairy export chart 2011

Milk futures in 2011 shot up 41 percent to $18.66 per 100 pounds on the Chicago Mercantile Exchange, crushing feeder cattle, which rose 21 percent and was the top performer of the 24 commodities listed on the Standards and Poor's GSCI Index.

Jerry Dryer, the chief economist for Rice Dairy LLC based in Chicago, stated that increasing milk demand and prices can be attributed to export growth in the United States.

Why is export demand on the rise?

Dryer attributes it to the growing number of women in the global workforce who are increasing demand for protein. He notes that this is similar to what happened in the United States in the 1970s when more women began entering the workforce.

The U.S. Department of Agriculture's data from the first 10 months of 2011 shows dairy-product exports increasing 8.5 percent to 1.437 million metric tons compared to the same period last year. And cheese exports rose 31 percent alone over the same period.

Dry whey, a milk by-product used in sports drinks, hog feed and baby formula, also helped boast the price of milk. Whey prices surged 69 percent this year alone due to growing demand.

Future Outlook

Dryer believes that improved domestic consumption and rising export demand will push average milk prices 5.1 percent higher in 2012. With more sales to the six biggest export buyers (China, Mexico, Canada, the Philippines, Japan and China) demand will continue to grow.

And Dryer notes that U.S. food service demand should pick up in the second half of 2012 as the economy continues to recover, pushing up milk prices even further.

Good investing,

Ryan Fitzwater

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