Price of dairy on the rise

The price of dairy has increased steadily and is at an historic high from 1940, according to the U.S. Bureau of Labor Statistics and the St. Louis Federal Reserve.

EagleHerald Staff Writer

Higher gas prices probably won’t last forever, but even if they dropped dramatically tomorrow, prices for dairy foods and other grocery items might not be slashed overnight.

Consumers will have to wait a while for prices at the grocery store to return to lower levels, experts said. “Last month’s milk is this fall’s cheese. It’s not going to come down immediately,” said Scott Reuss, regional crops and soils educator at the University of Wisconsin-Madison’s Division of Extension.

The price of class III milk, set by the U.S. Department of Agriculture, was $25.21 per hundredweight in May, up from $18.96 a year ago and $20.38 per hundredweight in January.

Prices probably won’t keep rising, Reuss said. “Milk prices at the farm level are about as high as they will go. I wouldn’t expect to see continuing rising prices.”

Dairy farmers say they need the higher USDA price now because their costs of feed, fertilizer, fuel and labor have increased. “Our profit margins have not increased,” said Phil Finger, co-owner of the Finger Family Farm in Oconto. “More money might be coming in, but more money definitely goes out,” he said.

But they don’t want consumers to give up their products.

With the higher price of a gallon of milk at the grocery store, “We hope it doesn’t affect people drinking milk,” Finger said.

If dairy and meat prices continue to rise, consumers might switch to lower-cost foods or use less dairy as an ingredient, by cutting back on the amount of cheese they use. “We’re already starting to see some shift,” Reuss said.

If gas prices declined soon, “it would change the cost structure less than most people would expect because the supplies are already purchased” at higher prices, Reuss said. A shortage of labor is pushing up wages, contributing to higher prices.

“The market is just tight. There are so many different factors involved. We certainly can’t just point to diesel prices and say that’s the reason a box of cereal is higher this year,” he said.

Most of the world’s dairy is produced in the United States, Canada, the European Union and New Zealand, and dairy production is down in each of them, Reuss said.

Fewer dairy farms and fewer cows means less supply, which also affects the price. “We’ve seen a consistent consolidation of agriculture because the potential profit per acre has continually decreased, such that farms growing normal crops or livestock, they need to have more of those to make a living because the price is lower,” Reuss said.

While business exits have reduced supply, so has the drought in the West. “The only reason farms are slaughtering their cows is there isn’t enough hay to feed them,” he said.

The same factors are affecting beef cattle and pushing up the price of meat. With costs high, the higher USDA prices farmers receive don’t necessarily mean higher profits. “We’re talking about a cost of production about 60% higher than any cost we have ever seen,” Reuss said.

Fuel increases affect everything in agriculture, Reuss said. “The amount of fuel utilized on a farm is pretty hefty,” he said.

Prices for feed, fertilizer and other supplies also are up from a year ago, he said.

The price of corn and other feed directly affects dairy farmers’ costs. Commodity prices are high worldwide, Reuss said. “We are closer to having a shortage of food than we should be, than we usually are,” he said. “The percentage of stocks we’ll be carrying over when the grain season is done for the year are going to be lower than normal. That leads to high prices.”

COVID-19 also brought restrictions and health-related costs, such as for vaccines.

“Our co-op did tell us we had to decrease by 10 percent for about three months. After that, the mile markets really opened up again and we were able to produce what we normally could,” Finger said.

“Even with cows, we believe in vaccinating. We vaccinate them as well as ourselves,” he said.

The Finger Farm also tests manure and use cover crops to prevent water erosion. “Half our acres are covered in cover corps. It’s another expense, but we’re trying to build soil health,” Finger said.

“If milk prices didn’t go up, we would be hurting extremely bad,” he said.