The Atlanta-Journal Constitution
Published on: 06/20/07
Sticker shock at the gas pump is almost routine. But at the dairy case?
Get ready. Milk prices are nearing record highs set in June 2004, and there's no sign yet of leveling off.
At metro Atlanta's three largest grocery chains on Tuesday, the cost of a gallon of store brand whole milk ranged from $3.69 to $3.79. Retail prices have been edging up for weeks, following soaring prices paid to farmers.
Karel Burns, shopping with her three children recently at a Kroger near Marietta, has noticed the run-up.
"I'll go wherever it's on sale," says Burns, who buys up to four gallons each week.
Food prices are rising across the board, spurred by higher demand for corn, used to produce ethanol as well as livestock feed and many processed foods.
Milk costs are increasing even faster, for reasons that include a drought in Australia, tighter supplies from the European Union and higher demand for milk products, such as whey for food processing. Americans are drinking more milk, too, with the first consecutive years of increases since 1990.
Dean Foods Co., the largest milk processor in the United States and owner of the Mayfield Dairy Farms brand, recently scaled back its earnings estimates for 2007 because of high raw milk prices. The company told analysts this month that it expects those prices will reach record highs by the fall before moderating.
The federally set minimum price that processors must pay to U.S. farmers has increased 66 percent in the past year, according to the International Dairy Foods Association, a trade group for dairy processors.
Retail prices typically don't rise as steeply. Manufacturers and supermarkets may not pass along all of their increased costs, especially grocery stores that use low milk prices as a way to bring in shoppers, says Ephraim Leibtag, an economist for the U.S. Department of Agriculture.
Estimates vary on how much more consumers will pay by the end of the year. Leibtag predicts 15 cents to 30 cents more, but says that could increase if farm prices pass record levels.
Prices are also higher in the Southeast, with fewer dairies and thus greater transportation expenses for milk. Southerners paid an average of $3.69 a gallon in May, 43 cents higher than the national average.
To keep costs in line, Carrie Price of East Cobb switched the type of milk she buys. She plans to supplement with cheese to make sure her three daughters get enough calcium.
But the price of foods that contain milk, such as butter, ice cream, yogurt and cheese, also is going up. At $3.79, a gallon of milk costs 40 cents more at Publix than it did six weeks ago. Suppliers' prices have risen for each of the past three months, and Publix expects another increase in July, says spokeswoman Brenda Reid.
In early May, Publix switched to milk free of synthetic growth hormones, a type of milk that often costs more. The higher prices for milk aren't connected to the switch, Reid says. At Kroger, which stocks conventional milk, a gallon of store brand whole milk also costs $3.79.
Whole Foods Market, which also owns Harry's Farmers Market, is holding the line for now at $2.99 a gallon for milk, says spokeswoman Darrah Horgan.
Leibtag, the economist, says prices may vary significantly depending on where you shop.
"Some companies will continue to use milk as a loss leader," he says.
Burns is willing to change where she shops to get a better price, but doesn't intend on altering her family's diet.
"I'll still buy milk," she says. "It's a necessity."
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