Got money? Grocers say milk prices will soar

4/2/2004

Get ready for sticker shock -in the dairy aisle.

Grocers warn that milk prices are headed skyward after wholesale prices for butter and cheese continued to set records in recent days.

"Milk is going to go up and we think it's going to be by a pretty good amount," said Gary Huddleston, a spokesman for Kroger Co. in Columbus. Expectations are that stores could pay 30 to 40 cents more a gallon, said Mr. Huddleston, who indicated that increases to consumers will be under $1 a gallon.

"The price will start going up shortly," concurred John Zimmerman, spokesman for Meijer Inc., which has four metro Toledo stores.

"The cost to producers is going to go up and therefore the cost to the retailer will go up. We're trying to keep prices as low as possible, but we don't know how steep the wholesale price is going to be."

Northwest Ohio and southeast Michigan shoppers enjoy low milk prices - they averaged $2.32 a gallon yesterday at local grocery industry leaders Kroger and Meijer - because supermarkets use milk as a promotional item to draw shoppers into stores.

But that could change if prices go too high, Mr. Zimmerman said.

Nationally, a gallon of milk averaged $2.85 through the first 11 months of 2003 but rose to $3.03 in November, according to the most recent figures furnished by the U.S. Department of Agriculture.

Shoppers, already reeling from soaring gasoline costs, could see higher prices as soon as three to four weeks, the Kroger spokesman predicted.

The situation, according to dairy experts, is caused by a simple case of demand outstripping supply.

Wholesale cheese rose 1 1/2 cents a pound to $2.10 on the Chicago Mercantile Exchange yesterday. Wholesale butter last traded Wednesday at $2.01 a pound.

Those prices have doubled from the same time last year and are the highest ever, said Chris Galen, a spokesman for the National Milk Producers Federation.

"The problem is that demand is coming back strong as this economy is recovering and people are eating out while supply is very, very tight across the United States," said Cameron Thraen, a dairy specialist for the Ohio State University Extension Service.

It is a reversal from a year ago when dairy farmers were wrestling with the lowest prices in a generation, Mr. Galen said.

Contributing to the rebound is a decline in the nation's dairy herd to fewer than 9 million, which is the smallest in five years, he added.

Some dairy farmers culled their herds last year in response to rising beef prices and climbing feed costs.

Meanwhile, the mad-cow disease scare has halted the import of 50,000 dairy cows annually from Canada, he said.

The result is that milk production has been flat to down slightly.

This has occurred against a backdrop of rising demand attributed to factors ranging from a rebounding economy to the re-discovery of butter and cheese by followers of low-carbohydrate diets. "It's kind of like a perfect storm," said Mr. Thraen, the Ohio State Extension dairy specialist.

Contact Gary Pakulski at:

gpakulski@theblade.com

or 419-724-6082.