How much does milk cost anyway?
April 29, 2011 1:56 PM   Subscribe

Why has the cost of milk gone up so rapidly, proportionally speaking? Five weeks ago, I could find milk for $2 a gallon; yesterday, the cheapest I found was $2.49 a gallon at Costco, and that was only if you bought two gallons at once. Everywhere else it's been higher - I even saw a store selling whole milk at $3.99 a gallon! This is just milk. Nothing premium or otherwise meant to raise the price point about it. Other dairy products have gone up in cost, too, but not so drastically (that I've noticed).

I checked the USDA's Cost of Food site, but they don't index individual items.

Gas increases can't explain it all, can they? I mean, the proportional cost increase has been so much greater than fuel. What else is going on?
posted by VelveteenBabbitt to Food & Drink (21 answers total) 4 users marked this as a favorite
It's not just gasoline. Commodities in general are rising, so not only does it cost more to truck the milk to the store, it costs more to feed the cows that give the milk.
posted by MegoSteve at 2:00 PM on April 29, 2011

One theory
posted by RobotHero at 2:01 PM on April 29, 2011 [1 favorite]

Milk prices always go up in the summer.
posted by jenlovesponies at 2:01 PM on April 29, 2011 [1 favorite]

well, it is the old supply and demand curve.

Diary prices were very low for the last couple of years due to the recession and all and the price diaries could get for their product (milk) was actually lower than it cost to produce the milk.

this has forced a lot of diaries out of business and those that have survived have culled out a lot of cows. Diary cows are not an elastic supplier-the cow can only produce so much and it takes a year or more to turn a calf into a milch cow so it is hard to ramp up production quickly. Since way less milk is being produced now, the demand has not gone down and may even be picking up with a strengethening economy, so there you go.

And yea prices are starting to go up everywhere to some extant. We are ending a brief brush with deflationary pressures and are now entering a time with inflationary pressures.
posted by bartonlong at 2:02 PM on April 29, 2011

The BLS trends individual prices for items here. Select 'milk' and you can see the general trend over time. Looks like the price crashed along with the financial crisis in 2008 but has steadily climbed back up over time.

However, the price swings you yourself are seeing are likely not indicative of a general trend as the graph there shows gradual growth over time rather than sharp spikes. Its hard to generalize from your own observations and thats where the datapoints from the BLS and others are really helpful.

Of course, this is just the average price and there could be a reason why your town specifically is experiencing price spikes on a temporary basis.
posted by jourman2 at 2:08 PM on April 29, 2011 [1 favorite]

Actually, milk prices are regulated in most states. Here's a link to the Pennsylvania Milk Marketing Board, which posts wholesale and retail prices every month. These are the prices at which milk must be sold. Other states may not be quite that strict--PA is a big dairy state--but most of them do have some kind of price regulation going on.

It's a pretty complex business. Here's a USDA Economic Research Service paper on the subject. It's from a while back, but it should discourage the adoption of any kind of simple answer.

To the extent that there is one, it's probably fuel costs. Not only does this mean that milk costs more to ship--it's already pretty expensive to begin with--but it also costs more to produce, as there are a lot of petrochemicals that go into dairy farming.
posted by valkyryn at 2:08 PM on April 29, 2011 [1 favorite]

Milk prices always go up in the summer.

These data suggest that's not always true.
posted by Blazecock Pileon at 2:09 PM on April 29, 2011

In addition to the insight thus far, there was a $30M settlement against one of the leading dairy processors lately. Those costs generally get passed on to consumers.
posted by Nanukthedog at 2:09 PM on April 29, 2011

I noticed too that milk had gone up about two months ago. This is the first time living on my own so I don't know if this is an expected increase for the summer, but it did strike me as drastic. The price of a gallon of milk from a certain brand went from about $3.20 to $3.78 instantly.

Again, since this is my first time really paying attention to food costs, I can't really conclusively say much in this regards, but I can't believe milk was this much before the recession.
posted by SollosQ at 2:09 PM on April 29, 2011

Milk in the US isn't traded on the markets, so other than the impact of oil & corn prices (which are big, granted) you can't blame Goldman for that one.

Its a combination of costs going up, and herds shrinking. Processing spreads are also way down, so its not gouging by the middleman. Also anecdotally the big chains are using milk as a tool in their pricing battles with one another.
posted by JPD at 2:10 PM on April 29, 2011

BTW - the USDA collects lots of data on milk prices - both at the Dairy and in the grocers fridge. Here
posted by JPD at 2:11 PM on April 29, 2011

One factor in milk prices is WIC. The bigger stores make money off of WIC but it doesn't pay for smaller gas stations & such to process WIC so they can offer lower prices on milk.
posted by Gringos Without Borders at 2:12 PM on April 29, 2011

Milk is a very local product - non-UHT milk has a pretty short shelf life and tends to come for fairly close by to wherever you live. So it could be a local increase in price due to any number of factors. Maybe a dairy near you got shut down, maybe there' an increased demand from a new local industrial milk consumer, it could just be that they're finally passing increase costs of feed & fuel to consumers. Unlike other consumer packaged goods, milk producers don't tend to finesse their unit size to mask price increases. e.g. they don't make a gallon of milk smaller unlike boxes of cereal which tend to get smaller and maintain a fixed price.
posted by GuyZero at 2:19 PM on April 29, 2011 [1 favorite]

I agree with Guyzero, there is most likely a local issue driving up the price in your geography. Milk has been over $3.50 a gallon for a year in area, and I live in Wisconsin. You'd think we'd have cheap abundant milk here, the invisible hand can be a bitch.
posted by cosmicbandito at 2:26 PM on April 29, 2011

Milk prices are a complex business. Wisconsin has a lot of dairy cows, but also produces a lot of cheese -- in fact, more than our dairy cows can supply. As a result we are a net importer of milk from other states.

Generally, there is higher worldwide demand for dairy products, partly as incomes rise and diets Westernize, and more recently as the global recession has eased. So milk prices are expected to rise overall.

But in general, it's a naturally somewhat variable commodity, like gasoline, and you tend to notice small changes because you're buying it so frequently. Other commodities, like wheat, are more often processed into other foods, and have prices that are much more seasonal or variable on an annual basis rather than spot weekly pricing. It's also highly sensitive to outside factors like the cost of gasoline and economic conditions overall.
posted by dhartung at 3:29 PM on April 29, 2011

I'm not sure how it may immediately be affecting the cost of milk but corn prices are really high right now.
posted by Foam Pants at 3:56 PM on April 29, 2011

I agree that it's local. Milk prices vary by county in my part of the country - sometimes by a dollar or more per gallon. It's actually worth it to me to buy my milk and cheese from specific stores in specific areas, though that's in part because I do a lot of traveling and have access to refrigerators in multiple locations.
posted by SMPA at 4:41 PM on April 29, 2011

I haven't bought milk in a while, but the last time I did, I thought it was $4 a gallon. Agree that it is very local. If there is a supply problem, prices will rise so that people consume less and it all evens out.
posted by gjc at 6:25 PM on April 29, 2011

Last week I bought two gallons of milk for 3.78 a piece. Today I bought two gallons of milk for 3.28 a piece. We go through about 4-5 gallons a week (3 toddlers and a adult who drinks 2 BIG glasses a day).

The price of milk and gas is killing me, but I blame it on fannie Mae.
posted by Sweetmag at 7:12 PM on April 29, 2011

I meant Goldman Sachs, not Fannie Mae.
posted by Sweetmag at 7:12 PM on April 29, 2011

graph of us whole milk price per gallon -- up a bit lately, but still way less than 2008

made using this tool from the us bureau of labor statistics, which sends human beings out to sample random grocery stores all over the country
posted by miyabo at 9:02 PM on April 29, 2011

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