Prices to Rise As U.S. Milks Farmers
April 23, 2004 05:12 PM EDT
WASHINGTON - Consumers are likely to see milk prices rise, probably to record levels, because the Agriculture Department is raising the minimum price paid to farmers to a record high, dairy experts say.
The department announced Friday it is raising the new minimum price for farmers to $1.69 per gallon, a 50-cent increase. The previous record was $1.40 per gallon in February 1999.
Larry Salathe, a senior economist for the department said the new minimum takes effect on May 1.
The price increase for farmers could send the price of a gallon up to $3.40 at the grocery store, assuming that all of it will be passed on to consumers, said Ed Jesse, a dairy economist at the University of Wisconsin-Madison.
"I don't think there's any question about it," he said.
Consumers can expect to see almost an immediate effect. They'll notice rising prices next month when the department's new farm price is in place, Jesse said.
Prices can vary from the national average based on the region where the milk is produced and the type of milk sold, such as skim or whole. The Pennsylvania Milk Marketing Board raised its milk prices by an average of 58 cents on Friday, taking into account the effect of the USDA action on the state. Prices will vary within the state.
In Mechanicsburg, Pa., shopper Debby Murphy had just bought milk for her husband and three kids, paying $3.06 for a gallon. It will cost her $3.70 in May. She was disappointed with the increase, but it won't deter her. "I'm going to buy it regardless," she said. "I'll probably try to make it last a little longer."
A gallon of fresh, whole, fortified milk sold for $3 in February 1999, the second-highest price on record, according to the federal Bureau of Labor Statistics.
The Agriculture Department's authority to set minimum milk prices dates back to the Depression. The policy is aimed at helping dairy farmers' maintain their income when prices hit bottom. By tamping down wild swings in the potentially volatile milk market, the department also tries to keep a steady milk supply for consumers.
Milk prices have swung sharply. The latest spike is bouncing off a 25-year low set last year when the nation had a surplus of dairy cows and farmers were flooding the market with milk.
With milk prices low and beef prices high, farmers began sending their cows to slaughter, reducing the number of dairy cows that give milk and setting the stage for milk prices to swing up. Compounding the reduction in herd size was a cut in the supply of a Monsanto growth hormone that prompts cows to give milk.
Farmers also were seeing added costs due to higher prices for soybeans, which are processed and fed to their animals.
Plus, the Agriculture Department's ban on imports of cattle from Canada, instituted after Canada reported a case of mad cow disease in May 2003, kept U.S. farmers from buying more cows from their historic Canadian suppliers.
High milk prices may linger through the summer, but may retreat in the fall - unless there is a dry, hot summer, Salathe said. Heat reduces cows' milk production, and dry weather makes the grass that they feed on less nutritious. If the summer is bad for milk production, prices won't ease until later, he said.
Americans may have to pay more for milk, but they've also been drinking less. A consumer drank an average of 22 gallons of milk for the year in 2001, including everything from whole milk to fat-free, down one-half gallon from 2000.
April 23, 2004 05:12 PM EDT
WASHINGTON - Consumers are likely to see milk prices rise, probably to record levels, because the Agriculture Department is raising the minimum price paid to farmers to a record high, dairy experts say.
The department announced Friday it is raising the new minimum price for farmers to $1.69 per gallon, a 50-cent increase. The previous record was $1.40 per gallon in February 1999.
Larry Salathe, a senior economist for the department said the new minimum takes effect on May 1.
The price increase for farmers could send the price of a gallon up to $3.40 at the grocery store, assuming that all of it will be passed on to consumers, said Ed Jesse, a dairy economist at the University of Wisconsin-Madison.
"I don't think there's any question about it," he said.
Consumers can expect to see almost an immediate effect. They'll notice rising prices next month when the department's new farm price is in place, Jesse said.
Prices can vary from the national average based on the region where the milk is produced and the type of milk sold, such as skim or whole. The Pennsylvania Milk Marketing Board raised its milk prices by an average of 58 cents on Friday, taking into account the effect of the USDA action on the state. Prices will vary within the state.
In Mechanicsburg, Pa., shopper Debby Murphy had just bought milk for her husband and three kids, paying $3.06 for a gallon. It will cost her $3.70 in May. She was disappointed with the increase, but it won't deter her. "I'm going to buy it regardless," she said. "I'll probably try to make it last a little longer."
A gallon of fresh, whole, fortified milk sold for $3 in February 1999, the second-highest price on record, according to the federal Bureau of Labor Statistics.
The Agriculture Department's authority to set minimum milk prices dates back to the Depression. The policy is aimed at helping dairy farmers' maintain their income when prices hit bottom. By tamping down wild swings in the potentially volatile milk market, the department also tries to keep a steady milk supply for consumers.
Milk prices have swung sharply. The latest spike is bouncing off a 25-year low set last year when the nation had a surplus of dairy cows and farmers were flooding the market with milk.
With milk prices low and beef prices high, farmers began sending their cows to slaughter, reducing the number of dairy cows that give milk and setting the stage for milk prices to swing up. Compounding the reduction in herd size was a cut in the supply of a Monsanto growth hormone that prompts cows to give milk.
Farmers also were seeing added costs due to higher prices for soybeans, which are processed and fed to their animals.
Plus, the Agriculture Department's ban on imports of cattle from Canada, instituted after Canada reported a case of mad cow disease in May 2003, kept U.S. farmers from buying more cows from their historic Canadian suppliers.
High milk prices may linger through the summer, but may retreat in the fall - unless there is a dry, hot summer, Salathe said. Heat reduces cows' milk production, and dry weather makes the grass that they feed on less nutritious. If the summer is bad for milk production, prices won't ease until later, he said.
Americans may have to pay more for milk, but they've also been drinking less. A consumer drank an average of 22 gallons of milk for the year in 2001, including everything from whole milk to fat-free, down one-half gallon from 2000.
