Friday, June 29, 2007

Why Are Milk Prices High?

A sharp-eyed reader of sent this link to an *article* from late 2004 noting how the media forgets what it already knows. The CBS Marketplace story detailed how dairymen wanted to keep the price of milk high. The story also noted that the milk was at a historical "high price of $3.57 in June 2004". As a current comparison, the national average price for milk in May 2007 was $3.27. ALSO--read High Milk Prices, Part 2.

High Milk Prices Cow Dairy Food vs Fuel Food versus FuelGot Milk? ... And a calculator? ...And a Ph.D in Economics? Well you might just need all that plus more to answer such a simple question. We've found one media outlet who's gotten the story right (It's a relief to know that all is not lost!) The California Sacramento Bee ran a report this week which looked at the complexities involved in determining the price of ordinary milk in California.

The Bee spoke with experts about how the system works and what factors are driving milk costs higher. The answers might surprise you if all you've recently heard and read has been from the main stream media. (Of course, you really won't be surprised if you are a regular reader of Higher energy costs, tight supply, higher milk demand and retail marketing costs all account for higher milk costs.

The full article is worth reading but here are two key points:

"Q: What determines the price of milk?

A: Unlike any other food, the base price of milk in California is calculated each month from a formula. State officials plug in the market prices for the four globally traded dairy commodities -- butterfat, dry milk powder, whey powder (a byproduct of cheese-making) and cheddar cheese -- and churn out the price that bottlers must pay farmers for their milk.

Q: Is the demand for corn to feed ethanol refineries leading to higher dairy prices?

No -- or at least not yet.

Corn is a staple feed on large dairy farms, and it is about 35 percent more expensive this year than last, largely due to the demand from new ethanol plants. But feed costs are not part of the formula that determines the price of milk, so there's no direct way for dairy farmers to pass on their costs to bottlers and consumers."

You can read the full article HERE

It's a hearty "Well Done" from us here at Food and Fuel to reporter
Jim Downing and his editors for getting the story right.

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Source: Sacramento Bee
Food and Fuel
Good and Balanced Food and Fuel News!

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