The next big commodity boom - milk

The rising price of milk has seen UK shoppers paying 23% more for cream this year, whilst for Americans a gallon of the white stuff now costs more than a gallon of petrol. Eoin Gleeson picks two ways to profit.

The floods drenching the countryside in recent weeks have left many of Britain's cows struggling to keep their heads above water. But in truth, they have been living on borrowed time for a while. After years of surviving on the thinnest of profit margins, British farmers have lost their appetite for producing milk. Of the 28,000 dairy farmers in Britain in 1995, more than half have quit the business and 2,500 more are set to join them over the next two years.

But something is happening that might make farmers change their minds. Milk is rapidly becoming a valuable commodity. In the last six months, the price of skim-milk powder, the benchmark for world trade, has risen by more than 60%. UK shoppers have seen the price of cream tick up 23% in a year. The European Union recently scrapped export subsidies on milk products as rising prices rendered them unnecessary. Americans are finding that a gallon of milk is more expensive than a gallon of petrol. And it may not be long before a bottle of milk costs more than a bottle of wine, says Tom Bulford on Penny Sleuth.

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Eoin came to MoneyWeek in 2006 having graduated with a MLitt in economics from Trinity College, Dublin. He taught economic history for two years at Trinity, while researching a thesis on how herd behaviour destroys financial markets.