Cost of farm-level milk dropping

Retail prices may follow

For some, it doesn't take as much to buy milk as it did a month ago.

The farm-level price for bottled milk dropped 28 cents from July "and a whopping 56 cents from June," according to a press release from the National Milk Producers Federation.

Jay Gordon, executive director of the Washington State Dairy Federation, estimated that farmers would get $1.26 per gallon for Class One based milk in August, based on projections by the Chicago Futures Exchange.

Gordon explained that 582 of the state's farms produce the milk and then send it to grocery store companies and the like for bottling, which usually costs an additional 50 to 60 cents to be pasteurized, bottled and cooled.

"This is really basic economics — supply and demand," he said. "After Sept. 11, demand dropped and it takes a while to tell Bossy to quit milking."

Supply was stable or slightly increasing after Sept. 11, but really started to shrink about a year ago, Gordon said. It caused dairies to go out of business, and the Canadian border closed, which meant fewer cows entering the U.S. and led to higher prices in the spring.

Now prices are coming down because farmers and dairy producers are making money and fairly even, Gordon said, although the industry is not entirely out of the woods yet.

"Everybody's a little nervous because if we get hot weather, supply will come down and ice cream demand goes up," he said.

The hope is that lower costs for farmers may translate into lower costs for consumers.

"If prices are coming down on our farms, we would hope that retailers would follow suit," Gordon said. "We would like to sell a little more and get the demand up a little more."

"We're hoping that retailers who quickly passed their higher input costs on to consumers this spring will be equally responsive as prices drop back down," said Jerry Kozak, president and CEO of the National Milk Producers, in a statement.

Kozak said that while both farm and retail-level dairy prices hit records this year, the surge at the farm level, at least, will be short lived.

"We are hoping that prices don't sink back down to the record low levels of 2003," he said. "Many farmers can't take another stint of the 25 year lows like we had last year."

Sue Cole, public affairs director for Brown & Cole Stores, said that milk prices went down Monday between 26 and 28 cents a gallon.

"Like our competitors, we will follow suit and pricing will be on match with our competition," she said.

Cole said that the store has not noticed any customers in any kind of significant numbers decreasing milk purchases during the period of higher prices.

Nor has Dode Peterson, manager of the Moses Lake Rite Aid, who said that the store has not heard from its suppliers or corporate office about whether or not milk prices will be dropping.

Based on futures market projections, Gordon is expecting more moderate prices.

"They won't be as high as last spring and they won't be as low as after Sept. 11," he said. "For the next six to eight months, it looks like consumers should get a little better value, but the prices should keep most of our farmers in business."

When milk prices went up around May, Gordon told the Columbia Basin Herald that a lot of dairy farmers had gone out of business following Sept. 11 due to low prices.

He said things were better during the spring.

"Prices were good, farmers could pay their bills, keep the bank happy and keep their wives happy," he said. "I haven't seen a lot of herd expansions, but I have seen some barns have new roofs, tractors get new tires and loans get paid down, so we've been able to maintain."

Although he called heifer numbers "a little tight," Gordon said that the state has also gained a few smaller producers of homestead cheese, which he finds encouraging.

"It's nice to go the other way for a change," Gordon said.