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Sunday, Oct 1, 2023

Hike in Mike Prices Causes Shock in Retail Market

The price of milk has gone up again, and the 42-cent per gallon jump is causing sticker shock ,and confusion , for some consumers.

Officials from the California Department of Food and Agriculture say the jump is due to declining production by some of the nation’s biggest dairy farms.

Critics charge that declining production anywhere outside the state is irrelevant, because Californians can’t purchase out-of-state milk.

At the beginning of the month, the average price for a gallon of milk was $1.27. Less than a week later, the price had jumped to $1.69 a gallon.

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What happened? The CDFA raised the wholesale milk price, or “farm price” price of milk, by 33 percent.

The milk “farm price” is what dairy farmers are paid for their product by processors and others along the milk production chain.

That increase is then passed on to consumers, who pay the difference at grocery stores , in this case, 42 cents.

The increase was determined using economic pricing formulas, which are affected by changes in the wholesale market price for butter and cheddar cheese traded on the Chicago Mercantile Exchange.

“In most areas of the U.S., minimum farm milk prices are regulated by the federal government, and under the federal system, the prices are calculated and adjusted each month,” said Myrlys Williams, spokeswoman for the CDFA.

“However, in California, (the adjustment) is made every other month. Because California’s pricing system requires a bi-monthly review of prices, the effect on the national milk shortages wasn’t reflected in California’s prices until Oct. 1.”

On Sept. 1, farm milk prices in most other states increased 19 cents per gallon, with the production decline attributed to bad weather in the southern and eastern parts of the country over the past two months.

California’s increase took place, as scheduled, on Oct. 1. But the 19 cents is still a ways off from the 42 cents Californians are paying.

National changes, such as bad weather, have an impact on the California farm milk price, but the CDFA does not regulate the retail prices for milk or other dairy products.

California shoppers already pay more for milk than other consumers in the country, a result of economic barriers that ban the sale of milk processed out of state.

California law requires milk being sold in the state to have nonfat, milk solid additives added to it, something not required by the federal government.

Because of this requirement, California-based milk processing companies cannot purchase out-of-state milk for sale in California without paying a tariff.

Although out-of-state dairies could add the required solids to milk being sold in California, critics of the state law say this process is expensive and inefficient, requiring different packaging and keeping the inventory separate.

“We can stop this upward price cycle by repealing the laws that protect California’s dairy industry from competition,” said Audrey Krause, executive director of Mad About Milk.

MAM has been after state officials for high prices that they believe are the result of a noncompetitive milk market.

“On an annual, per-person basis, Californian are drinking half-a-gallon less milk now than they were just a year ago,” she said. “With record high wholesale milk prices pushing up the retail cost, this isn’t surprising.”

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