June is National Dairy Month. This year, American consumers may feel they are the ones being milked.
Just in time for summer, when children are out of school and needing more energy for playful activities, families are paying more to keep cow juice on hand.
One Florida food-price expert said the U.S. Department of Agriculture predicted the increase.
“It was no surprise,” said Dr. John Van Sickle, a professor in the University of Florida’s Food and Resource Economics Department.
Over the past few weeks, milk prices have risen about $1 per gallon, going from less than $3 to more than $4 at many local retailers — an increase of 30 percent or more in a little more than a month.
The U.S. Bureau of Labor Statistics confirms the news. The national average price of a gallon of milk in May — the most recent month for which information is available — was $4.17, according to the bureau.
“Things were too cheap before. It’s like the old saying, ‘Pay me now or pay me later,'” said Gerald Fieser, whose dairy farm in DeLeon Springs is the last remaining milk producer in Volusia County. “Feed prices have gone up since we decided to take 40 percent of the corn crop and make ethanol. Feed prices shot up, and that coupled with the drought, caused milk prices to go up.”
Fieser said stores held off as long as they could.
“Retailers have learned the consumers do not like change. They’ve learned, and they’ve tried to keep prices down as long as they can. The prices the retailers are paying have gone up,” Fieser said.
From his vantage point, Fieser observed his business is rebounding.
“For the first time in six or seven years, we’re in the black,” he told The Beacon. “We’re getting back to where we can pay bills on time.”
Fieser said milk prices at the farm level have increased from approximately $9 per hundredweight to the current $21 to $22 per hundredweight. One hundredweight is 100 pounds of fluid milk; there are about 8.6 pounds in a gallon.
When the producer price was at the lower level, Fieser and other dairy farmers were barely breaking even, staying in business in the hope of a long-awaited turnaround in the wholesale and retail milk prices.
“We still need a few months of current prices,” he said.
The outlook for higher producer and retail prices is positive, Van Sickle told a group of dairy farmers in Gainesville in April.
“The USDA says you’re going to have a much better year this year than you did last year,” he said. “Milk is forecast for this year to be the highest we’ve seen over this period of time from 2000 forward.”
Van Sickle confirmed the feed prices dairy farmers must pay have also risen over the past several years. Corn and soybeans are key overhead expenses, and when they go up, producers have to pass along their cost to the consumers.
Corn, for example, has increased from $2 per bushel in 2006 to approximately $4.60 per bushel earlier this spring. Demand has surged, since the U.S. began using more of its corn for ethanol to stretch gasoline supplies and buy less foreign oil.
Likewise, soybeans cost more. In 2006, a bushel of soybeans sold for about $5.66. Today, a bushel goes for about $13.
Believe it or not, those current prices are good news. Prices for corn and soybeans were even higher in 2013 because of widespread drought in the Midwest and Far West.
Drought is still a problem, but the severity of the drought has eased in some farm states. Van Sickle hopes for more relief in the form of lower feed prices.
“It’s really going to depend on what happens with the weather,” he said.
Another factor is a growing global demand for American milk and its byproducts.
“Another reason is China,” Fieser said. “We all buy their stuff, and now their middle class is bigger than ours. They now want more milk-based baby formula, and there is a giant sucking sound with the demand for so much more of our milk.”
Last year, the total U.S. milk production was 201.2 billion pounds. Van Sickle estimates the total 2014 U.S. milk production will rise to 206.1 billion pounds. About one-sixth of the nation’s milk goes overseas.
“Trade is an important component of the market,” Van Sickle said.
As for the domestic demand, start with the Sunshine State. The Florida Department of Agriculture and Consumer Services reports the state’s dairy farms produced 233 million pounds of milk during May 2014. That is not enough.
“We’re a milk-deficit state. We bring milk in,” Van Sickle said.
“We’re one of the largest dairy states in the Southeast. I understand that just about all the milk from central Georgia south comes to Florida,” said Gary Newton, who works in the Dairy Bureau of the Department of Agriculture and Consumer Services.
Van Sickle said Florida’s dairy farmers have to spend more to produce milk than farmers in other locations.
“Milk is more expensive to produce in Florida than in other places, because of the heat and stress on the cattle,” he said.
So what can consumers expect? Will prices go back below $4 a gallon?
“I expect they will be like this for most of the year,” Van Sickle said.
Fieser agrees.
“I look for milk prices to stay in this range through the end of this year,” he said. “People think our food prices are high, but we’re still cheaper than just about everywhere else in the world.”
Source: Beacon News