Some shoppers may not have noticed, but milk prices have been falling steadily the past 18 months, and locally the price of a gallon is less than half the U.S. average cost, possibly stemming from pricing bait by the large grocery chains.
In the Toledo area this week, a gallon of milk costs $1.09 at Walmart and Meijer, with Kroger a dime higher at $1.19. A half gallon is priced at 69 cents.
Nearly two years ago, a gallon of milk averaged $3.02 nationally but since then it has been dropping steadily, climbing back over $3 just once, in January, 2016. As of last month, the price nationally is $2.58 a gallon, according to the U.S. Department of Labor’s Consumer Price Index.
Local grocers said the exceedingly low prices are probably because of a pricing strategy the big three grocery chains are using to compete.
“The milk market is stable. It is lower than a year ago, but it’s really not moving one way or another,” said Jim Sautter, owner of Sautter’s Five-Star Markets.
“I think you have some stores that are lowballing milk. They’re using it as a loss leader,” he said.
Darlene Carmona, manager of Walt Churchill’s Super Markets, said, “Our milk prices are really down, but our competitors are running them at a really cheap price.”
A Meijer spokesman said the chain has not noticed lower prices in milk, and a Kroger spokesman could not be reached for comment.
Even without the benefit of low-cost pricing strategies, people are paying far less for milk in the past two years.
A spokesman for the U.S. Department of Agriculture’s Marketing Service said there is a surplus in dairy production that has hurt producers and benefited consumers.
In 2014, producers were getting $24 per 100 pounds of milk, a record high. Since then, prices dropped to $16.24 at the end of 2016.
“That was very close to cost of production,” said Chris Hurt, an agriculture economist at Purdue University.
Last year, the price of dairy and related products in the Consumer Price Index were down each month from the year before, on average by 2.3 percent, Mr. Hurt said.
Why are shoppers getting such great deals on milk? Mr. Hurt said the answer is in the cost of higher grain feed prices.
From 2007-13, grain used for cattle feed escalated in price and resulted in reduced profits in the dairy industry and in higher milk prices. Farmers cut back on their dairy herds, Mr. Hurt said.
Since then, grain supplies have increased and feed prices have decreased, enabling farmers to rebuild their herds and increase milk production, thereby driving down the cost of milk, he said.
“The commodity side of things, that’s what is driving the grocery store prices,” Mr. Hurt said. “It’s been going down for two years at the retail level.”
Consumers should enjoy the low milk prices while they can. Mr. Hurt said some experts think milk prices bottomed out last month. “I think the odds are now that we’re going to head higher on retail prices.”
Contact Jon Chavez at: email@example.com or 419-724-6128.
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