If you like falling prices, check out the dairy case at your
favorite grocer, says
a University of Georgia
economist.
Lower milk prices
coming
“Lower milk prices are coming in April,” said
agricultural economist with the
UGA College of
Agricultural and Environmental Sciences.
“The nation’s milk producers cranked up production late
last year when prices were
high and feed costs were low,” he explained. The higher
supplies are driving the
prices down.
Actually, wholesale milk prices are already dropping. But
don’t expect to see prices
dip in the dairy case for another month or two.
Why the two month delay?
In February, wholesale milk prices plummeted, Thomas
said. “Dairy farmers will
receive $1.30 per gallon for the milk Georgia shoppers buy,”
he said. “This was
a drop of 52 cents per gallon in one month.”
Because of a complex federal dairy pricing system, he
said, “it will be April
before consumers see lower supermarket milk prices.”
Prices lowest in eight
years
Wholesale milk prices are already the lowest since 1991,
Thomas said. But the huge
price drop hasn’t shown up in the prices shoppers see
because retailers don’t like to
change milk prices every month.
“They didn’t pass along all of the milk price increases
they had late in
1998,” he said. “And they probably won’t pass along all of
the decrease,
either.”
Eventually, milk prices will drop much lower, he said.
And the lower prices could last
for the rest of 1999. That’s great news for shoppers.
News not good for
dairies
Unfortunately, the news isn’t great for everybody. The
price drop will pinch dairy
farmers hard, Thomas said.
“Dairies expanded their production when milk prices were
high last year,” he
said. U.S. dairies produced 157.4 billion pounds of milk
last year and are projected to
produce 160.4 billion in 1999. In 1990, production was 146.3
billion pounds.
Much of the 1998 increase came late in the year when
farmers responded to high
wholesale milk prices. The key factor in the very high 1998
prices was demand, not
production.
“It was the extraordinary strength of the economy,”
Thomas said. “Not
only did consumers have the income, but they spent it, too.
That kept prices high at the
time.”
