Ironically, Milk Futures Are Not Very Liquid

We don't have many posts* on the dairy business, every couple years or so I break out the "What's Mooving" headline but the business, at least the way (whey?) it's structured in the U.S. is tough to trade from a portfolio perspective. In addition it seems to foment (ferment?) some simply awful puns in folks who write about it.

The futures are currently in backwardation, not that anyone cares. Here's the Chicago Merc Class III futures page. Ten contracts traded electronically today.
(class III is the cheesemakers milk) 

From Attain Capital Management:

Milk – That’s One Illiquid Liquid

We just so happened to stumble upon the table below courtesy of the Food and Agriculture Organization of the United Nations showing a nice breakdown of the dollar value of the top 20  agriculture “crops” produced around the world in 2012 (the last year of data). Who knew milk is the most valuable “crop” produced in the world, or that the Agriculture bellwethers in the futures space – Wheat and Soybeans – are each less than half the value of the meats (cattle, pig, and chicken).  Or that tomatoes outsell potatoes.

Rank	Commodity	Billions	Production (MT)
1	Milk, whole fresh cow	$187.28	625,753,801
2	Rice, paddy	$185.58	719,738,273
3	Meat indigenous, cattle	$169.48	62,737,255
4	Meat indigenous, pig	$166.80	108,506,790
5	Meat indigenous, chicken	$132.09	92,730,419
6	Wheat	$79.29	670,875,110
7	Soybeans	$60.69	241,841,416
8	Tomatoes	$59.11	161,793,834
9	Sugar cane	$57.86	1,832,541,194
10	Eggs, hen, in shell	$54.99	66,372,549
11	Maize	$53.60	872,066,770
12	Potatoes	$48.77	364,808,768
13	Vegetables, fresh nes	$46.14	269,852,343
14	Grapes	$38.34	67,067,129
15	Milk, whole fresh buffalo	$38.30	97,417,135
16	Cotton lint	$37.10	25,955,096
17	Apples	$31.88	76,378,738
18	Bananas	$28.21	101,992,743
19	Cassava	$25.69	262,585,741
20	Mangoes, mangosteens, guavas	$25.25	42,139,837

But we kept coming back to Milk being worth the most “moo-la”, that was utterly interesting (ok, we’re done with the cow puns), and we went searching for some more data, finding an update on Milk production from the USDA:

“Milk production in the 23 major States during March totaled 16.7 billion pounds, up 1.1 percent from March 2013. Production per cow in the 23 major States averaged 1,959 pounds for March. The number of milk cows on farms in the 23 major States for March was 8.51 million head, 1,000 head more than February 2014. The average number of milk cows in the United States during the quarter was 9.22 million head.

Chart Courtesy: USDA

A single cow produces almost 2,000 pounds of milk by itself… Good to know, but hard to believe until we found out robots were involved via the New York Times.

“Something strange is happening at farms in upstate New York. The cows are milking themselves.

Desperate for reliable labor and buoyed by soaring prices, dairy operations across the state are charging into a brave new world of udder care: robotic milkers, which feed and milk cow after cow without the help of a single farmhand.

Robots allow the cows to set their own hours, lining up for automated milking five or six times a day — turning the predawn and late-afternoon sessions around which dairy farmers long built their lives into a thing of the past.

With transponders around their necks, the cows get individualized service. Lasers scan and map their underbellies, and a computer charts each animal’s “milking speed,” a critical factor in a 24-hour-a-day operation....

...MORE 
HT: Abnormal Returns

I was inordinately pleased when I first noticed the robotic milkers in 2012:
It's All Coming Together: The $210,000 Cow Miking Robot (can the dream of plowborgs be far behind?)

We got us our own little singularity, right here at Climateer Investing.
Robotics, agriculture and energy....

*Back in 2010 we had a post, "CME Group expands dairy complex with cheese futures" which I intro'd with:

Years ago I heard of a Chicago company that made a whey-based artificial cheese.
Apparently the operation was headed by a mad scientist type who had come up with the formula but had no marketing ability.

He was producing the stuff and not selling any, converting all the investors cash into this "analog" goop and storing it in Chicago area warehouses.

Then the Chernobyl reactor blew, the price of whey skyrocketed, I've no idea what the connection was, the company went broke and the receivers opened the warehouses to find tons of this 'cheeze', semi-molten in the summer heat.

That's what I thought of when I saw this story, tons of the stuff oozing out of bonded warehouses. No connection of course, just a visual....