He buys bugs, fish, and a few other things. As a child, he will buy the item off you for more money than usual, making him a good means for quick cash. As an adult, he will buy them for less. I do not think he will buy milk, or potions off you. Just things like bugs, fish and perhaps small poes and such.
You can find him as a child in the Hyrule Market, and an as an adult, he can be found in Kakariko Village just up the stairs around the exit to Death Mountain.