By Cat Holmes
University of Georgia

Skyrocketing gas prices are no secret. But now Americans are
noticing higher tabs when they go to pay for milk, pizza and ice
cream, too.

That’s because milk prices have more than doubled since this
time
last year, said University of Georgia agricultural economist
Bill
Thomas. “The base price for milk was $9.41 last year and it’s
$19.66 now.”

The cause? A slew of factors that have combined to
create “almost
a perfect storm,” Thomas said.

What happened

For the past three years, dairy farmers have made some of the
lowest prices in history, said Bill Graves, a UGA Extension
Service dairy specialist. “For the past two years, they’ve made
1975 prices.”

The result was that many dairy farmers downsized or quit, and
the
ones who remained added cows.

Another factor is the case of bovine spongiform encephalopathy,
or mad cow disease, in a single U.S. dairy cow last December.
That cow came from Canada, so the United States stopped imports
of Canadian dairy cows. That action cut off a major supply of
replacement dairy cows, Thomas said.

To compound the problem, the high price of gas has raised
transportation costs, and feed prices have soared.

On top of everything else, the demand for milk started to pick
up
as the economy improved.

‘Perfect storm’

“All of a sudden, we have a higher demand for milk and a low
milk
supply,” Thomas said. “The net effect was to drive the prices
up.”

The rise in dairy prices is unmistakable at Peppino’s Pizzaria,
a
locally owned restaurant in Athens, Ga. Prominent signs on
either
side of the cash registers read: “Due to the price of cheese
going very crazy, we have to raise the price of [our pizza].”

In a recent PizzaMarketplace.com survey, 70 percent of the
markets surveyed said they’ve raised their pizza prices or were
planning to do so in the near future.

Where’s the money going?

“It’s sure not going into farmers’ pockets,” Graves said. “It’s
the retailers, not the producers, who set the prices. About 30
percent of what you pay goes to the farmer. The other 70 percent
goes to processors, distributors and retailers.”

Thomas notes that a gallon of milk at the Athens Navy Commissary
is $1 cheaper than at the grocery store where he normally
shops.

“The higher prices are helping dairy farmers recover, but
retailers are definitely making money off milk right now,”
Thomas
said.

Thomas predicts that base milk prices will start to decline in
the next couple of months.

“Fluid milk (prices) will continue to increase for the next
couple of months and then … start to come back down,” he said.
“Will the retail milk prices come back down? That’s the big
question. And right now, nobody has the answer.”

(Cat Holmes is a news editor for the University of Georgia
College of Agricultural and Environmental Sciences.)