The 10th Derivative Trade
So, Dean Foods today lowered numbers because the raw price of milk is up 66% this year or so. Why? Because the dairy herd is low. Why? Because farmers are sending more cows to slaughter than for milk. Why? Because the price of corn is too high and it is too expensive to feed live cows. Why? Because more corn is being used for ethanol and the price of corn has skyrocketed. So, who is a huge consumer of milk? Starbucks.
So if you would have read the Green Issue of Vanity Fair last year and shorted Starbucks you would have been smart. All that’s left is the 10th derivative trade.
posted by Danger at 12:17 PM
1 Comments:
Danger - before you short Starbucks check out the futures market on corn, farmers are increasing their sq acerage of corn for the next season for what will be a record year of corn production -- pushing prices back down to what should be more reasonable levels. The real wild card here seems to be the open wallet approach that the US Congress has taken to subsidising Ethanol production. If they continue the levels of subsidies then more and more corn (and more farm land in general) will be going towards ethanol regardless of where the actual consumer demand stands and this will then again push milk prices up again.
6:33 AM
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