Send to Friend

Retail Price Graph
This graph details the average price that consumers are paying for a gallon of milk, compared to what dairy producers receive that gallon. In addition to the national average, this file also looks at specific farm and retail prices in 30 key markets across the U.S.

Milk Pricing Talking Points - 2007

Farm level milk prices are headed higher in 2007, after being much lower than average in 2006. In response, many retailers are expected to hike their prices for milk, cheese and other dairy foods.
The reason farm prices are rising is that supply – milk production – is not expected to keep up with demand. This is due to constraints on production, as well as continued strong demand for dairy products, domestically and internationally.
A big factor behind slowing U.S. milk production is the record-high price of corn, the primary feed for dairy cattle. Corn prices, as well as the price of soybeans and hay, have skyrocketed because of the growth of the ethanol industry. But that makes it more expensive to feed cows, and thus milk production may sag because of higher feed costs.
High gas and diesel prices are also hurting farmers, which, coupled with the high feed costs, may result in more farmers cutting their production or leaving the dairy business altogether. Unlike most other business, dairy farmers cannot pass on increased production costs.
Farmers do not set the price of milk. Wholesale and retail prices are determined by market forces of supply and demand. There is often a huge variance in the retail price of milk from store to store, and from city to city, and this has to do with the differing markups that are used by supermarkets, mass merchandisers, C-stores and drug stores.
Dairy products remain a solid value for consumers. Penny for penny, no other food offers as much nutritional value for America’s families as milk. While food budgets are tight for many people, dairy products remain an important staple ingredient for their great taste and nutrition.
Retail prices increasingly are disconnected from the farm-level price, with the margin between what farmers receive, and what consumers pay, growing steadily over time. On average, farmers only receive about 30 cents of every dollar that consumers spend on dairy products. The other 70% is split among others in the supply chain. Therefore, what happens with farm prices may not always predict what happens with retail prices.
Over time, we’ve seen that retail prices jump quickly when farm prices rise, but when farm prices fall – as they did in 2005 and 2006 – retail prices decline more slowly, and sometimes not at all. For instance, in 2006, when farm prices dropped by more than 25 cents a gallon compared to 2005, retail milk prices moved down only slightly, less than 10 cents.

National Milk Producers Federation

Navigation

Milk Pricing