May 6, 2004

US Milk Prices Set To Soar This Month
 

Milk prices in the United States will dramatically increase this month, raising the cost per (American) gallon by 50% compared to a year ago.

The California Department of Food and Agriculture (CDFA), for instance, has blamed the jump on BSE closing the Canadian border to live cattle, thereby reducing dairy cow exports. Many farmers had sold their cows for slaughter during record low milk prices in 2002 and 2003. Furthermore, feed has been expensive, scarce and of poor quality because of drought. 

The CDFA predicts prices will fall later, saying that the price rise will boost farming profits to a level where lenders are more comfortable investing in expansion plans, increasing US dairy supplies as a result.

Midwest Dairy Association spokeswoman Melissa Hooper attributes the price increase to a limited supply that is unable to meet demand. Less milk is being produced this year than in recent years because of several factors, she said.

The mad cow disease outbreak last December has limited dairy farmers' ability to buy cows from Canada. Milk production is down 0.9 percent, and 153,000 fewer cows are providing milk than in 2003, according the U.S. Department of Agriculture. Moreover, high beef prices have encouraged struggling dairy farmers to sell their cattle as beef.

Eddie Wells, deputy director of the National Agricultural Statistics Service, said Kansas milk producers have increased their production through advances in technology and better breeding of cows.

Dairy farmers have been in distress in recent years, he said, and now they are benefiting from the strong demand for milk and higher prices.

But Hooper, of the Midwest Dairy Association, said dairy farmers are not particularly striking gold because of the price increases. High feed costs and government price regulations have kept dairy farmers' profits from escalating.