Retail and farmgate milk prices headed up

URBANA, Ill. – Rising milk prices may give dairy producers as much as $19 per hundredweight later this spring.

University of Illinois Extension dairy specialist Mike Hutjens identified several reasons behind the increase.

One contributing factor is a reduction in both dairy cows and dairy farms in the United States after 18 months of low milk prices.

Canadian blockade. Hutjens said another factor was the closure of the Canadian border to live cattle imports due to the outbreak of mad cow disease.

That resulted in more than 100,000 Canadian dairy heifers that would normally be imported and produce milk in the United States being kept out.

There was also a 50 percent reduction in the availability of bovine somatotropin, a hormone that increases milk production by eight to 12 pounds per cow.

Feed costs skyrocket. Hutjens said dairy farmers are also not getting all of the higher prices as profits because soybean, corn, and alfalfa hay – all used to feed dairy cattle – are at sky-high price levels.

Energy costs are also high and fertilizer, equipment, and other input costs continue to increase for dairy producers.

“Consumers can anticipate higher milk, butter, cheese, ice cream, and other dairy prices in the near future,” he said. “However, milk prices are predicted to decline in late 2004.”

At the grocery store. The farm gate price of $19 per hundredweight results in a $1.60 per gallon price on store-bought milk for dairy producers.

Six months ago dairy producers received less than $1 per gallon, Hutjens said.

“About 40 percent of the consumer dollar was paid to the dairy farmer while processors, transportation and point of sales consumed 60 percent of the consumer’s dollar.”