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Dairy prices going up     Send a link to a friend

[APRIL 12, 2004]  URBANA -- Rising milk prices may give dairy producers as much as $19 per hundredweight later this spring, said a University of Illinois Extension dairy specialist.

"If you are a dairy farmer, now is a good time to get ready to pay off some of your debts," said Mike Hutjens. "Several reasons are behind the increase in milk price at the farm. One contributing factor is a reduction in both dairy cows and dairy farms in the United States after 18 months of devastatingly low milk prices.

"Another factor was the closure of the Canadian border to live cattle imports due to the outbreak of mad cow disease. That resulted in over 100,000 Canadian dairy heifers that would normally be imported and produce milk in the United States being kept out. There was also a 50 percent reduction in the availability of bovine somatotropin (BST), a hormone that increases milk production by eight to 12 pounds per cow."

About 12 gallons of milk are contained in 100 pounds of milk purchased at the farm. The farm gate price of $19 per hundredweight results in a $1.60 per gallon price on store-bought milk for dairy producers in return for their investment and labor, Hutjens said.

"While this appears as a bargain for consumers paying $2.50 to $3 per gallon in the store, six months ago dairy producers received less than $1 per gallon," Hutjens said. "That's right -- about 40 percent of the consumer dollar was paid to the dairy farmer, while processors, transportation and point of sales consumed 60 percent of the consumer's dollar."


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Hutjens noted that dairy farmers are also not getting all of the higher prices as profits because soybean, corn and alfalfa hay -- all used to feed dairy cattle -- are at sky-high price levels. Energy costs are also high, and fertilizer, equipment and other input costs continue to increase for dairy producers.

"Consumers can anticipate higher milk, butter, cheese, ice cream and other dairy prices in the near future," he said. "However, milk prices are predicted to decline in late 2004."

Aside from the previously noted ones, other factors may come into play in the dairy price scenario to lower or increase prices. These include possible higher milk production and less culling of cows by dairy producers in response to high prices, reduction in dairy product consumption by consumers, heat stress on dairy cows, and 2004 growing season influence on feed costs.

[University of Illinois news release]


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