Milk an `Amazing Opportunity' as Corn
Rises: Chart of the Day
By Tony C. Dreibus - Oct 24, 2010
7:00 PM ET
futures are an “amazing buying opportunity” because
they are the cheapest in 15 months relative to the price
of corn, the main ingredient used in feed for dairy
cows, according to Hackett Financial Advisers Inc.
CHART OF THE DAY shows the ratio of milk to corn narrowed
on Oct. 20 to 2.6, the lowest since June 2009. Corn
rose 46 percent in the past three months after the U.S.
government said domestic output would decline more than
analysts forecast. Milk fell 1.3 percent.
will advance because U.S. dairy farmers will cull herds,
limiting output, rather than lose money on higher feed
costs, said Shawn Hackett, president of Hackett Financial
Advisers in Boynton Beach, Florida. Soybean oil rose
32 percent since he predicted a rally in the commodity
is a market that has been left for road kill and yet
should be one of the greatest bullish price beneficiaries
of the current bull market in grains,” Hackett said.
“Investors will make a lot more money, with a lot less
risk, owning milk at this time than owning the grain
the spot price, reflecting the contract closest to expiry,
the ratio of milk to corn is at its smallest in 14 years,
Hackett said. The 15-month calculation uses the most-
active contract by open interest, or contracts outstanding.
milk production dropped 5.6 percent in the past two
months after reaching 17 billion pounds (7.71 million
metric tons) in May, the highest since at least 2001,
Department of Agriculture data show. U.S. dairy farmers
planned to cull herds to bolster milk prices, the National
Milk Producers Federation said May 27. Output has been
rising every month since February, based on the seasonal