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Holy Cow! Milk is Leading the Commodity Pack

Jennifer Leigh Parker |Writer, CNBC.com
Wednesday, 28 Dec 2011 | 1:53 PM ET

Got Milk?

Photo By: Liz West

Michael Gurka managing director of Spectrum Asset Management recommends stocking up. He's bullish on milk futures for two reasons: they've made the most gains in actively traded commodities this year, and the grain feeding the dairy cows is looking pretty cheap.

“Nobody ever really talks about milk, but that was the biggest priced commodity of the year,” noted Gurka during an appearance on CNBC Wednesday.

In 2010, milk futures were $13.72 for 100 pounds. In March of this year, they hit a high of $19.65, the highest level since July 2008. Since reaching that mark, however, they are down 13 percent. Still, that yearly performance puts milk on track to be the top performing commodity for the year, in terms of price percentage gains.

Oil Price Trends For 2012
What we are up against is some pretty big resistance in the crude oil market, says Michael Gurka, Spectrum Asset Management, who adds that headline risks out of Iran are pushing prices higher.

Gurka thinks grain prices will push them right back up.

“I think that grains are going to be the biggest focus mid-year, because you’re going to see massive swings. Right now the grain markets are really cheap and beat up. A lot of people are shorting it,” says Gurka.

It may be difficult to digest the milk-rally during a thin trading week, and milk has one of the lowest levels of volume among agricultural commodities, according to the CME Group .

Commodities YTD

Last YTD % Change
Milk 17.05 24.27%
Feeder Cattle 150.275 21.24%
Gas Oil 921.25 19.95%
Brent Crude Oil 109.27 15.32%
Heating Oil 2.9085 14.40%
Live Cattle 123.2 13.71%
Gold 1595.5 12.25%
Crude Oil 101.34 10.90%
RBOB Gasoline 2.6888 10.64%
Lean Hogs 85.75 7.52%
Source: CNBC Analytics/Thomson Reuters

Others also say grain prices might not be so much cheap but rather normal for a depressed global economy, which may not bode well for the bovine trade.


"Price values are low. Corn futures have hovered around $6.00 [per bushel] for three months, hitting $5.80 in November. We're seeing a rally now because people perceive corn to be cheap," says Michael Walker, commodities broker for the Chicago Board of Trade.

"But be careful of saying grains are cheap. If we don't see recovery in equity markets in Europe, we won't see corn at $7." Corn was last $6.34 in midday trading Wednesday.

  Price   Change %Change
CETV
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