Milk prices continue to climb

Font Size:

By Thomas Geyer | Monday, April 16, 2007 6:09 PM CDT | () comments

(John Schultz/Quad-City Times) Dairy farmer Roger Blake hooks up the milking machine to one of the 130 dairy cows he owns. It takes him and a farmhand two and half hours to milk all the cows, doing 12 at a time. Each cow produces on average 8 gallons a day.

(John Schultz/Quad-City Times) Milking cows begins at 4:30 p.m. as farmer Roger Blake, left, and farmhand Robbie Stoutenberg lead 12 of the 130 head of cows into the milking room and begin hooking up the milking machine to the cows.

Milk drinkers are in for some curdling news.

Dairy prices have been rising over the past few months and are forecast to go even higher as the costs to producers continue to climb.

“Milk has gone up 6 to 7 cents every month for the past several months,” said Chris Friesleben, spokeswoman for Hy-Vee grocery stores. “There’s been a steady climb.”

The retail price of a gallon of whole milk in the Quad-Cities is about $3, depending upon the brand and the store. A gallon of 2 percent milk, with less fat, is about a dime or so cheaper.

Ron Schroder, director of marketing at Swiss Valley Farms, said that production costs, including corn for cattle feed, has risen dramatically in price as the demand for ethanol has grown. Along with corn, the price of soybeans and other feed grains also have climbed amid mounting demand for those products.

But there are other factors at play, he added. Strong demand for proteins such as nonfat dry milk and cheese in the growing Asian markets also has put upward pressure on prices.

“There has been strong U.S. demand for dairy products,” Schroder said. “The demand for cheese is really growing.”

But growth in dairy is faster outside the U.S., particularly in the growing economies of China and India, he added.

“As economies develop, they look for more sources of protein,” he said. “It’s a more expensive part of a diet, so as the level of wealth in China and India has increased, consumers are searching for more and more sources of protein.”

And it is basic economics: When demand is high, prices rise. But they will moderate after production is ramped up by farmers wanting to take advantage of the higher prices.

Schroder said that milk prices rise faster than other dairy items such as butter and cheese.

“There is more of a lag in pricing on cheese because cheese needs to age,” he said. “The cycle for milk is much shorter.”

While the higher prices may be chafing some consumers, the area’s dairy producers are looking forward to a profitable year.

“Last year was a bad year for dairy producers,” said Davenport dairy farmer Roger Blake. “It’ll take a couple of years of good sales to make up for last year alone.”

Prices to producers have been low for several years, he added.

But it is more than high grain prices that is cutting into the bottom line of dairy producers, he said.

“Part of it is due to grain prices,” Blake said, adding that oil has gone up, which means higher fuel costs for farmers.

The good thing about the higher prices is they will work their way back into the local economy, Blake said.

“It will be good for the farm implement businesses such as John Deere,” he said, adding that the same can be said for the higher corn and soybean prices. Farmers will put that money to good use locally.

Thomas Geyer can be contacted at (563) 383-2328 or tgeyer@qctimes.com.

WHAT IT COSTS

Average retail milk prices in other U.S. cities over first three months of 2007:

Whole milk

Chicago: $3.74

Cleveland: $3.29

Dallas: $3.25

Detroit: $2.93

Indianapolis: $2.89

Kansas City, Mo.: $3.34

Milwaukee: $3.65

Minneapolis: $3.70

St. Louis.: $3.05

2 percent milk

Chicago: $3.33

Cleveland: $3.14

Dallas: $3.16

Detroit: $2.93

Indianapolis: $2.89

Kansas City, Mo.: $3.18

Milwaukee: $3.43

Minneapolis: $3.30

St. Louis: $2.91

Source: USDA