Milk prices hit two-year high at $2.90/gallon

Fewer dairy farms
are one reason
for the increase.
Wednesday, October 22, 2003 | 12:00 a.m. CDT; updated 9:49 p.m. CDT, Wednesday, July 16, 2008

As cook for the Child Learning and Development Center, Kelly Thompson is all too familiar with rising milk prices.

“Buying 35 to 40 gallons per week for the day care allows me to notice a significant amount more that we do spend on milk,” she said. “But even just my having a 3-year-old and buying milk, personally, for my family is enough to notice the price raise.”

Thompson has good reason to notice the effect of milk prices on her total at the checkout line: The most recent government figures put the price of milk at a two-year high.

Dave Knudsen of the U.S. Department of Labor Statistics said the average price for a gallon of milk rose to $2.90 in September, the highest since $2.94 in September 2001. The September average compares to an August price of $2.67, he said.

A survey on Friday of skim, 1 percent, 2 percent and whole milk at Hy-Vee, Schnucks and Gerbes stores in Columbia found a wide range of prices that averaged to $2.90 a gallon.

Wayne Werkmeister of Hy-Vee said the cost of milk has risen for grocers every month for the past three months, which has caused rising retail prices.

Joe Horner, a beef and dairy economist at MU, said rising milk prices are a market reaction to the historically low milk prices that forced some dairy farmers out of business.

As the milk supply tightened, milk prices went up.

Horner cited other supply-and-demand factors that are contributing to milk prices. High beef prices have encouraged some farmers to sell dairy cows for meat, he said, which also contributed to declines in production. The summer drought also played a role, he said.

The price of cheese is also a factor. Cheese prices have increased more than 25 percent over the past two months, according to Robert Marshall, professor emeritus of food sciences at MU. “That is a tremendous increase that could have quite an effect on the price of fluid milk.”

James Miller, an agriculture economist at the U.S. Department of Agriculture, said there have not been adequate supplies of milk to keep up with the “strong recovery” in the demand for cheese. Miller said there are indications that cheese stocks are increasing, and the price of cheese may go down. If that occurs, he said, the price of milk may follow suit.

One thing to keep in mind, Miller said, is the dramatic difference in individual markets when it comes to milk prices. “It is virtually impossible to explain differences among markets,” he said, “even after the fact.”

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