April 7, 2004

 

 

US Milk Prices To Reach Record High In Coming Months
 

Prices of milk and dairy products in the United States is set to hit record highs in the coming months after more than a year of low prices as dairy demand exceeds supply, industry experts said.

 

Higher prices will bring relief to dairy farmers who have been suffering through some of the lowest product prices in 25 years.

 

Chris Galen, a spokesman for the National Milk Producers Federation, said retailers should be seeing a cost increase for milk. Nationally, retailers are paying dairy farmers about $1.36 per gallon of milk, compared to about $1.19 this time last year.

 

For Larry Jaggers, a Hardin County dairy farmer, the price increase is more than a bonus. It's survival.

 

"For the past 18 months, our prices were the lowest they've been for 25 years," he said. "We've all been tightening to the limit."

 

But while the cost increase is good news for farmers, consumers may soon need to set aside a little extra milk money.

 

"Eventually, it gets back to supply and demand," Galen said. "We are going to see higher prices at least for a while."

 

Some retail chains could see prices rise to $3 per gallon of milk. Prices will vary because individual retailers set their own costs, Galen said.

 

He added that last year, when farmers were experiencing extremely low costs, the savings were "not really reflected at retail level."

 

"There is a disconnect between what the farmers get and what the consumer pays," he said. "Now with higher prices, we're hoping retailers would be more reluctant to pass along the cost increase."

 

Steve Eaton, co-manager of the Radcliff Wal-Mart, said he has heard there will be a price increase for milk. But nothing has taken place yet.

 

"We heard the cost may be going up 30 cents per gallon, but we're not sure when," he said.

 

Eaton also has no idea yet whether a cost increase would affect Wal-Mart's retail prices, but for now prices will remain consistent at either $1.29 or $1.89, depending on the brand.

 

While consumers could see a jump in prices of milk at the grocery, prices at restaurants, ice cream parlors and pizza joints could also spike.

 

Ed Lucas, general manager of two Papa John's Pizza locations in Hardin County, said on an average weeknight his stores use 10 to 12 cases of cheese. He said a significant jump in milk prices would eventually filter down to his dairy cost.

 

According to industry economists, the base price for about 12 gallons of milk used to produce cheese was $14.40 in March, and by April the price should reach $18.59.

 

But so far Lucas hasn't heard anything about his dairy prices going up. Even if there is a spike, it would have to be a large jump before any sort of cost was passed along to customers, he said.