Milk Souring as Record Profit Spurs Herd Expansions: Commodities

Record dairy profits and milder weather are leading to a surge in milk supplies from Auckland to California, turning last year’s best-performing commodity contract into one of the worst of 2012.

Output in the U.S., the world’s largest producer, will advance 1.8 percent to a record 199.7 billion pounds (90.6 million metric tons) in 2012, the Department of Agriculture estimates. Futures traded on the Chicago Mercantile Exchange already fell 29 percent from a four-year high in August and may drop another 8 percent to $14.25 per 100 pounds by July, the median of six analyst estimates compiled by Bloomberg shows.