(click on image to enlarge)
Both corn and oil prices were up today. The New York Federal Reserve published a study in November 2008 on commodity prices and "Personal Consumption Expenditures" (PCE) :
This article evaluates the importance of commodity price
increases for PCE inflation over the June 2006-June 2008
period. Our analysis of the role of commodities in the production
process of personal consumption goods and services
shows that crops accounted for about 1.0 percent of the cost
of inputs needed to produce a dollar of total PCE in 2006; oil
and gas accounted for 2.8 percent.
I assume the Federal Reserve might take a different view if they were feeding dairy ration and hauling manure.
Now imagine how good a tool "risk management" is if March Class III milk futures were committed in December 2010 (see graph above). Today Class III closed at $19.47 per hundredweight.