Image by: www.bluewaikiki.com
By Steven Morrison II
Americans love milk. Practically every refrigerator in the United States features a big plastic jug of it. Our roadways are covered with shiny silver tanker trucks filled with the stuff. And there’s literally a variety for everybody, no matter your tolerance: skim, whole, 1%, 2%, acidophilus, lactose-free, etc.
They even sell milk that isn’t milk at all (soy milk, almond milk). And just in case you leave the house without any, they sell convenient 12 oz. bottles in every corner convenience store so you can gulp on the go.
Like I said, we love our milk. And milk-based products such as cheese and ice cream. But today we are simply focusing on milk and America’s love – no, lust -for milk and just how that love affair could soon sour as prices for the refrigeration-needed white stuff are possibly headed north.
Basically, if Congress doesn’t step in with a fix by Jan. 1, 2013, the government will have to start paying double the price for milk due to the expiration date on a particular law (how ironic). And that congressional oversight will force everybody to pay more.
It’s been given the name “Dairy Cliff” by some imagination-starved scribes (hey, at least it’s not “Dairy Gate”).
And some experts predict prices will even top $7 per gallon, leaving Tony The Tiger speechless for once. And when a commodity’s price doubles, that means there is money to be made in the markets.
If the milk meltdown (milkdown?) happens are you going to be ready to cash in?
The Monopoly Guy Has A Milk Mustache
Your portfolio should be a reflection of the expectation that dairy farmers will immediately see their profits rise, so any dairy farm or related industry stock out there will see a bump and a lot of activity. Get in, set target numbers, and get out.
That profit bump will be a short-term one, as Americans will no doubt curb their appetite as the reality of the added expense of milk kicks in. Also of note: It will take several weeks after Jan. 1 for the new pricing structure to be implemented – yes, government works slow – so it could be mid January before the cows come home.
Milk commodity prices are sure to also be affected, but it will take an active eye to suss out a formula for success there. Seems that, according to reports, the specs aren’t thinking that prices will be doubling and have remained on the sidelines.
However, if Congress can come through with a crisis averting package that includes something to patch this dairy price mess, prices for milk should return to normal after all of the market speculation from this potential crisis dies down.