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Archive for Saturday, March 31, 2007

Higher farming costs pump up milk prices

March 31, 2007

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Higher fuel and feed costs at dairy farms such as Ralph Albright's Aljarla Holstein farm in Falling Spring, Pa., and growing global demand for milk products mean prices will rise soon.

Higher fuel and feed costs at dairy farms such as Ralph Albright's Aljarla Holstein farm in Falling Spring, Pa., and growing global demand for milk products mean prices will rise soon.

— Celesta Powell buys four gallons of milk every week for her four children, and even with milk prices expected to rise, she says she has no plans to cut back.

"You can't look at cutting your kids back on milk," she said after loading several bottles of milk from Meyer Dairy store into her minivan recently. "What are you going to give them, soda?"

Dairy economists predict the retail price of milk could rise as much as 30 cents per gallon - a 9 percent jump - by fall. The reasons include rising fuel and feed costs for farmers and increasing demand for milk products around the globe.

The average retail price of whole milk could rise to $3.35 per gallon by October, up from $3.07 in January, said Ken Bailey, an agricultural economist at Penn State University who specializes in the dairy industry.

A U.S. Department of Agriculture forecast also predicts an increase in the price that processors pay to farmers for raw milk. That is typically an indicator that the retail price of milk also will rise.

Yet seesawing milk prices seem to have little effect on the buying habits of consumers like Powell, who has a growing 6-year-old.

When the average price of milk rose 19 percent in the spring of 2004, milk purchases declined less than 4 percent, said Stephanie Smith, a Denver-based nutritionist and spokeswoman with the National Dairy Council.

Habit and nutritional concerns appear to loom large, Smith said. USDA nutritional guidelines, for instance, recommend that most Americans drink 3 cups of skim or low-fat milk a day, or the equivalent amount of cheese.

Logan Bower, president of the Professional Dairy Managers of Pennsylvania, said costs for farmers have risen so much recently that he is unsure whether even the predicted price increases will help.

Costs have surged for fuel and petroleum-based products and for the corn used to feed dairy cows, a side effect of increases in the production of ethanol.

Bower said he now pays about $180 a ton to feed his 500 dairy cows, up from $115 a ton a year ago, an increase of more than 50 percent.

There is also a growing demand for products like skim milk powder, dry whey and whey protein concentrates, which are exported for feeding programs in areas including the Middle East, Asia and Cuba, Bailey said. Whey powder is used in animal livestock feed.

Federal legislators recently have drawn up bills seeking relief.

Sen. Bob Casey, D-Pa., earlier this week introduced an amendment that would pay Pennsylvania dairy farmers a subsidy for milk produced over the past six months.

Casey said the amendment would provide about $125 million in aid to help dairy farmers deal with higher energy, feed and other production costs.

But Phoebe Bitler, vice president of Pennsylvania Dairy Stakeholders - an industry group that includes farmers, producers and grocery stores - said the price of milk should not be so dependent on subsidies for farmers so consumers get an accurate gauge of costs.

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