LITTLE ROCK, Ark. — Consumers will soon experience sticker shock when they buy milk, butter and cheese. Prices will rise dramatically because of lower milk supplies, says Jodie Pennington, dairy specialist with the University of Arkansas Cooperative Extension Service.
While higher milk prices will take a bigger bite out of consumers’ pocketbooks, “it will spell a little financial relief for dairy farmers who have been stressed for the last couple of years by low milk prices,” Pennington said.
Arkansas has about 250 herds and 30,000 dairy cows, compared to 700 herds and 50,000 cows 10 years ago. Many herds have been sold because of financial stress, Pennington noted. Most dairy production is centered in northwest and central Arkansas. Pennington said milk is about $2.80 in the store, but it will probably rise to more than $3.25 soon, and it could go even higher in May. Ice cream will probably rise to 50 to 75 percent higher than last year.
On the futures market, the price of milk, butter and cheese are selling for almost twice what they were a year ago. As inventories get tighter, processors want to insure they have enough milk and other milk products so they bid up the price of these products, according to Pennington.
The dairy specialist said consumers over the last couple of years have enjoyed bargain milk prices.
“When adjusted for inflation, milk prices have been the lowest in history. Last year, the amount of a person’s paycheck that was spent on milk was the lowest in history. It only took about 10 minutes of work to buy a gallon of milk, which is a great buy for the safe nutrition provided by milk.”
However, while consumers were enjoying good prices, some dairy farmers were forced out of business and other cash-strapped dairy farmers were forced to sell less-productive cows. Higher cattle prices recently caused farmers to cull still more cows, which further reduced production.
Another factor in higher milk prices has been the rising cost of feed, mainly soybeans. Soybean prices have risen dramatically, forcing farmers to pay about 20 to 30 percent more for feed than last year. Producers fed less feed and supplements, causing production to drop.
“In the long run, higher dairy prices will allow more producers to stay in business,” Pennington said. “Dairy producers need a good price just to break even again and make a little money. Prices will stabilize eventually at more reasonable prices.”
He said experts expect the trend of higher prices to last anywhere from two to six months.
“Dairy producers desperately need a period of higher milk prices to get back into better financial shape.
“Milk supplies will be tight, but there will be product out there. As schools close for the summer, there’ll be less demand for milk.”
He said the higher price trend will end as dairy producers gear up and start producing more milk to take advantage of the higher prices.
Pennington suggested that producers observed time-tested practices to take advantage of the prices. These practices include:
• Balancing the ration and feed grain to the level of production
• Monitoring somatic cell count and checking milk practices and equipment to make sure it doesn’t limit production
• Reducing summer heat stress on cows by making them as comfortable as possible
• Considering the profitability of milk cows that might normally be culled for low production, especially those cows that or late in lactation and not pregnant
Pennington suggested producers look closely at the economics of increasing milk production by milking more times per day, giving cows less of a dry period between lactations, using feed additives that are proven to increase production and feeding the best quality forages available.
Lamar James is an Extension communications specialist with the University of Arkansas.