Published on 10/17/02

Milk prices stable for shoppers, down for farmers

By April Reese
and John Harrell
University of Georgia

Shoppers should continue to find good milk prices in grocery stores into next year. University of Georgia agricultural economist Bill Thomas says retail milk prices have changed little from 2001.

"Milk prices at the producer level are down a record amount for a one-year drop," said Thomas, a professor with the UGA College of Agricultural and Environmental Sciences. "But there is not a direct connection between producer prices and consumer prices."

Grocery shoppers did enjoy a drop in milk prices this year. "The average price of a gallon of milk was $2.89 in 2001 and dropped to $2.72 in 2002," Thomas said.

Cheese prices up

However, the prices of other dairy products, like cheese, have increased over the past year.

"Cheese is the fastest-growing dairy product," Thomas said. "It seems like everyone is eating cheese when they go out, on pizza, salads or tacos."

A pound of cheese last year cost shoppers $3.73, a price now up to $3.89, he said. Consumers should expect a slight increase, 1 percent to 2 percent, in dairy product prices for 2003.

Farmers' prices not so good

While consumer dairy products remain stable, dairy farmers have had a record low year, forcing many farmers to rely on government programs.

"Dairy farmers had a number of good years between 1996 and 2002, but demand slipped off in 2001, causing supply to be much greater," Thomas said. "Prices stay depressed because we have so much stocked up."

Help from the government in the form of Milk Income Loss Farm Acts and contracts provides much-needed aid to dairies.

"Government programs have stepped in to help our dairy farmers and will be welcomed by the industry," Thomas said. "Prices are still well below a profitable level."

Help on the way

A little help is on its way. After the stocks are used up, demand and supply will equal out, he said, providing a break for farmers.

"Next year, we expect prices to rise a little in favor of the farmer, but not up to the price they received in 2001," Thomas said. "Milk prices have been low, and now feed prices are rising, due to the drought, putting pressure on the farmer."

Most dairy farmers have signed up for government programs, such as the Milk Income Loss Contract Program, he said. This program offers direct payments to the farmers from the government as milk prices are low.

Once the price of milk rises, the payments will dry up. The Livestock Compensation Program is designed to help farmers in counties hurt by the drought. All counties in Georgia have been suggested for the program, but only 20 are now approved.

John Harrell is a news editor with the University of Georgia College of Agricultural and Environmental Sciences.