Tuesday, February 17, 2009

...And milk prices continue to fall

We remember the days when buying a gallon of milk was about as much (if not more) than a gallon of gasoline. Shudders, while flashing back to daydreams of filling car up with milk, eating bowl of cereal with crude oil. Thankfully milk prices have fallen, thanks to waning demand for the product. But wait -- you ask -- does no one drink milk anymore with cookies? Eat ice cream? Make pudding? It's not quite that dire...yet.

Demand has fallen for milk because of the limping economy (i.e., people are buying cheaper alternatives), and this in turn has deeply hurt dairy farmers, which are selling their dairy cows in droves to slaughterhouses to make up for the lack of money coming in from unsold milk.

As prices are falling, feed costs remain high, and farmers are getting back only about half of their costs. Obviously, that's not sustainable. As a result, nearly a fifth of America's 9.3 million dairy cows might be turned into steaks and hamburgers this year.

Things I don't want to think about the next time I my quarter-pounder at In 'N Out.

The situation is only projected to get worse:

In 2008, the average price of 100 pounds of milk traded at the Chicago Mercantile Exchange was $17.44. Now the price is just above $10, and most observers think it will go even lower. In December, the price of commodity cheese fell by 40% in just a couple of weeks.

So what's the best fix for the milk melodrama? You guessed it -- a bailout! This, in the form of stronger price supports and government purchases of surplus milk. Think bailout prayers will be answered? [TheBigMoney]


Skinny on South Beach said...

The gallons I buy are much more expensive than gas - $2.50 is a complete steal and they hardly ever dip that low. It becomes especially costly when the boyfriend drinks a gallon a week, but we've figured it in to our food budget and manage to cut costs elsewhere to make up for those small novelties.
I hope gas prices don't keep climbing up either, we've hit about $2.10 where I am and will probably keep climbing. I guess we'll all just have to start riding the bus again!

Canadian Saver said...

Very interesting.

In Canada we have marketing boards that protect the dairy producers (and other farm commodities). Great for the farmer, but expensive for the consumer. We pay about $6.50 for a gallon of milk here..

Anonymous said...

I must admit, I thought milk was one of those regulated/subsidized grocery items, that only really fluctuated upward last year because of oil/transp. costs and the price increase in feed (corn being used for ethanol or whatever instead of food). Most supermarkets here in Manhattan are $4.29/gallon, but the pharmacies that I ravish so often have it for $3.09 to $3.59.

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