August 12, 2004

 

 

US Milk Prices Decline
 

The milk prices US dairy farmers earn have sagged since spring. But the farmers say they can live with current price levels because they are still higher than what they have endured in the past two years.

 

The falling prices on the farm should also mean lower milk, cheese and ice cream prices at the supermarket for retail consumers in the weeks ahead, an industry spokesman said.

 

Jay Gordon, executive director of the Washington Dairy Federation, said the spring's price spikes were not expected to last. The higher prices helped to stimulate an increase in production, and that served to bring the price down somewhat, Gordon said.

 

Gordon said milk producers are hoping they can get some price stability somewhere near current levels after a rocky period which began with the economic downturn in the wake of the 2001 terror attacks.

 

The drop in demand touched off two years of rock-bottom prices to farmers that drove many operators out of business and curbed milk production, while setting the stage for this spring's rally in the price.

 

"It's pretty much supply-and-demand that's working out here," Gordon said.

 

According to the National Milk Producers Federation, the average price to farmers in this region shot up from a low of about $1.16 a gallon in February to a high of $1.99 in June, before settling back to about $1.42 last month.

 

By selective shopping, retail milk consumers may have been able to avoid much of the impact, since grocers frequently offer specials on milk to get customers into their stores. But regular-priced milk is at $4 a gallon in some supermarkets, which is close to a dollar more than the prevailing prices early in the year. Cheese and ice cream prices have also showed increases.

 

Chris Galen, spokesman for the national federation, said retail prices typically do not fall immediately when farm prices drop. But they are likely to follow suit in a month or two.

 

"We're going to see more or less typical prices for the rest of the year," Galen said.

 

After two years of starvation prices, local dairy farmers said "typical" would be fine with them.

 

Larry Stap, a Lynden area dairy farmer who is president of the Washington State Dairy Federation, said he hopes prices stay at today's levels. A well-run dairy should be able to show a profit at today's price levels, with money left over to pay down debts and invest in new equipment, he said.

 

Stap expressed some optimism that milk production will stay low enough to keep prices stable, partly because U.S. dairies can no longer increase their herds by importing animals from Canada. That practice was shut down indefinitely after a case of mad cow disease last December was traced to an animal from Canada.