Milk Contracts

During January 2012, the number of milk contracts averaged 110,200 a day, a 32% increase from a year ago. Virtually all of the major restaurants, food companies, and dairy processors are using these milk futures contracts. Futures for Class III milk (used to make other products such as cheese), which does not meet the same standards as milk used for drinking, increased 30% for 2011, outperforming all of the commodities on the S&P GSCI Index. A large part of the reason for the increase is the demand for milk by the expanding middle class of China, India, and other developing countries. Still, the number of futures contracts is tiny compared to crude oil futures (1.5 million contracts per day) and corn futures (1.3 million contracts per day). The size of the U.S. dairy market is estimated to be worth $100 billion (source: CME Group).