Milk Money Is No Longer Chump Change
Golden Oaks Farm Dairy Operations Manager Nate Janssen - Golden Oaks Farm Dairy Operations Manager Nate Janssen. Behind him are cows in the farm's milking parlor. (Cheryl Corley, NPR)
Chugging a glass of milk these days is making wallets lighter. Milk prices are almost as high as gasoline prices, and in some places, even higher.
According to the U.S. Bureau of Labor Statistics, the retail price for a gallon of milk in April was, on average, $3.14. That's not too far off the record price of $3.57 from June 2004; experts predict that milk prices will soon reach or surpass the record.
What's causing the price increase is a typical supply-and-demand struggle. There's always a huge demand for milk and milk products in the United States. But now, demand has surged from Latin America, China and other Southeast Asian countries, which are consuming milk and using milk products, such as whey and lactose, in increasing amounts. Meanwhile, milk production in Australia has declined because of drought. And the level of milk produced by the European Union is lower because of changes in agricultural policies.
(Cheryl Corley, NPR)
The demand is growing faster than the supply.
In the United States, production actually is up, but it's at lower levels than last year — and gasoline may be partially to blame.
At Golden Oaks Farms in Illinois, 570 cows are milked three times a day. The facility ships out roughly 5,000 gallons of milk per day; much of it is used to make cheese. Golden Oaks Operations Manager Nate Janssen says the farm ends up earning about $1 per gallon — one-third of milk's per-gallon retail price.
Despite the increased demand for milk, some dairy farmers are reluctant to expand their herds. Janssen notes that it has become much more expensive for dairy farmers to feed livestock, because the corn that cows eat is also being sought by producers of the gasoline additive ethanol.
Higher milk prices may be benefiting some farmers. But Janssen notes that the cost of milk still lags behind other grocery food items. And, he says, as dairy operations work to meet milk demand, they face one of the same problems that consumers face: the high price of gasoline.
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ALEX COHEN, host:
Milk prices are at an all-time high. A gallon of milk now costs as much as a gallon of gas.
NPR's Cheryl Corley reports that even though there's more milk being produced now, it is still not enough to meet global demand.
CHERYL CORLEY: In some quarters, the hue and cry over milk prices is just as loud and rowdy as complaints about the high cost of gasoline.
(Soundbite of stock exchange floor)
CORLEY: Okay, to be fair, traders are always yelling and gesturing on the floor of the Chicago Mercantile Exchange. Broker Brian Rice(ph) works in the dairy pit and says the market price for milk has already hit an all-time high as the international demand for milk continues to grow.
Mr. BRIAN RICE (Broker): Asian countries, as their wealth increases, every extra $10 they earn goes toward food, for the most part. Dairy proteins are in really high demand. The U.S. has become the supplier of U.S. dairy products for the world.
CORLEY: So there are more shipments of dry milk and dairy products like whey going to China and India. If the question is, got milk, the answer might be, well, maybe, because demand is high and supply is tight. With that formula comes higher prices both abroad and at home.
The Bureau of Labor Statistics says the retail price for a gallon of milk in April, for instance, was on average $3.14.
Larry Salathe, an economist and dairy expert with the U.S. Department of Agriculture, says this isn't the first time milk prices have been so high.
Mr. LARRY SALATHE (United States Department of Agriculture): They hit a record in June of 2004 of $3.57 a gallon.
CORLEY: Salathe says people who drink milk can expect to pay close to that amount in the next few months. Other experts predict an even higher price of $4 a gallon or more.
In the parking lot of a Dominick's supermarket in Lake Zurich, Illinois, northwest of Chicago, shoppers aren't too pleased with the news. Lorin Darlington(ph), helping her two young sons get out of the family minivan, says the most common staple she buys at the grocery store is milk.
Ms. LORIN DARLINGTON: It's crazy. I have three gallons in my fridge right now. I have a skim and two one percents.
CORLEY: So you drink a lot of milk.
Ms. DARLINGTON: We do.
CORLEY: The retail price of a gallon of milk in the store today is $3.39. Shoppers could buy two gallons for about $4.30, a bargain good enough to grab Darlington's attention.
Ms. DARLINGTON: I try to buy it when it's on sale. Yeah, the price bothers me, but gas is, you know, high too. So it's hard to get around all that stuff.
CORLEY: There are a couple of other reasons why milk prices are high. Milk production in several foreign countries, primarily Australia and the European Union, has been on the decline. And even though there's been a slight increase in the amount of U.S. milk production, it's not as much as last year. That's reason enough to go to the source.
(Soundbite of mooing cow)
CORLEY: Here at Golden Oaks Farm in Wauconda, Illinois, the dairy cows are taken down to the milking parlor. They get milked three times a day.
Mr. NATE JANSSEN (Dairy Operations Manager, Golden Oaks Farm): We are currently milking about 570 cows.
CORLEY: Nate Janssen is Golden Oaks's operating manager. He watches as two-dozen cows, 12 on each side of the parlor, walk into the milking stalls. A worker wipes each cow's udders with a towel and disinfects it before attaching a device that uses vacuum pressure to draw out the milk.
Mr. JANSSEN: There's one unit coming off. She actually just gave 42 pounds just in this one milking. So she's a cow that's averaging about 120 pounds a day between the three milkings.
CORLEY: That's close to 15 gallons of milk. The dairy farm ends up with about a third of the retail price, about a dollar per gallon. Golden Oaks ships about 5,000 gallons of milk a day. And the dairy has a goal of producing nearly two million gallons of milk for the year; a large portion of it goes into cheese production.
One of the reasons why dairies are struggling to meet the high demand is because some farmers are reluctant to expand their herds. They claim it just costs too much to feed them. The culprit: ethanol.
Mr. JANSSEN: With the ethanol boom, the price of feed to farmers is much higher because there's not as much corn available to feed cows and there's actually not as much soybean available to feed cows.
CORLEY: So while higher milk prices may be benefiting some dairy farmers this year, Janssen says dairies still face challenges including high fuel cost. And that may sound all too familiar to shoppers as the price of a gallon of milk and a gallon of gas begin to reach parity.
Cheryl Corley, NPR News, Chicago. Transcript provided by NPR, Copyright National Public Radio.
