WASHINGTON — A supply glut, sluggish domestic demand and a sharp contraction in dairy exports have continued to pressure milk prices downward.
As SN reported in January, farm-gate milk prices in California — where the price paid to farmers is regulated by the state's department of agriculture and linked to futures trades on the Chicago Mercantile Exchange — were set at their lowest rate in 30 years during February. The price collapse has spread and worsened since then, with dairy farmers nationwide complaining that production costs now exceed the prices they can demand for their milk.
Average retail prices have fallen more than 50 cents per gallon since the beginning of the year, and more than $1 per gallon since peaking in July 2008, according to the U.S. Consumer Price Index.
Farm-gate prices are expected to stabilize and remain at their current level this summer, and may begin rising slowly in the fourth quarter, according to U.S. Department of Agriculture projections.
“Cheese prices and milk prices should start to show some improvement in June… but there is disagreement as to how much prices will improve,” noted Bob Cropp, professor emeritus at the University of Wisconsin, Madison, in his May 2009 “Dairy Situation and Outlook” report. Cropp added that dairy futures have continued to fall, despite announcements from industry groups that more than 100,000 dairy cattle will be slaughtered this summer to reduce supply.