Milk Class III: Prices To Remain Subdued

The price of the front-month milk contract has experienced a dramatic decline since our last commodity forecast in November 08. Since last writing about the contract, it has fallen by 31% to trade at US$10.71/cwt at one point today and is currently down by approximately 50% since its 2008 peak in June. Even though we had assigned downside risks to our downside target of 14.00 (written when the contract was trading at US$15.54/cwt), we were nonetheless surprised by the magnitude of the decline in prices.

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