By KEVIN WALKER
Michigan Correspondent

DETROIT, Mich. — Milk prices in Michigan and across the country have been going up all year, thanks to a variety of factors.

According to the Agricultural Marketing Service’s (AMS) monthly survey, retail whole milk prices in Detroit have risen from $2.97 per gallon in January to $3.63 in the first 10 days of July.

The AMS surveyed 30 cities across the country to find out the price of milk in each locale. The average price of a gallon of whole milk for all of these cities in July is $3.80. Currently the highest price being paid for a gallon of whole milk is $4.19, in New Orleans, La.

The current rise in milk prices may not come down as much as in past years, either, said Michigan Milk Producers Assoc. (MMPA) General Manager John Dilland. “Milk prices can’t drop to where they were a year ago,” he said. “The difference today is that international sales are much stronger than they were in 2004, the last time milk prices went up.”

Also according to the MMPA, the prices farmers are getting for milk has gone up about $8 per 100 pounds, or about 70 cents a gallon, from last fall.

The National Agricultural Statistics Service Michigan Field Office indicates a more modest rise in its April Michigan dairy summary: $16.90 per hundred pounds this past April, versus $12.40  in April 2006. In May of this year, the price was up to $17.80 for all milk.
According to Dilland, the cost of corn and soybean are part of the equation.

“Milk prices have to go up to meet production costs,” Dilland said.
Production costs, including feed and fuel, are part but not all of the equation. Demand is also driving up the cost of milk.

“Worldwide demand is a significant part, too,” he said. “Prices for butter are higher in Europe than in the U.S. right now. 9 percent of milk solids are exported.”

Dilland said only a few years ago 5 or 6 percent of milk solids were exported, and that the large increase in milk solids exports is a very significant factor in the increasing price of milk.

Also according to the MMPA, increasing production cost may make some farmers produce less, thus affecting the supply of milk.
Nevertheless, there are exciting things happening on the demand side of the milk story, according to MMPA’s Director of Member Relations and Public Affairs Sheila Burkhardt.

“Per capita cheese demand continues to steadily increase,” Burkhardt said. “Since 42 percent of the nation’s milk supply goes into cheese, it is really driving demand.”

According to Burkhardt, demand for fluid milk is also on the increase after a long decline. “A lot of this has to do with making a better product available in better packages in more stores and food service settings,” she said.

Burkhardt added that U.S. dairy exports, as measured by volume, are up 75 percent since 2003, and that U.S. dairy farmers exported 9.3 percent of their production in 2006, a record share. “As production and consumption realign themselves in the future, it will likely produce a drop in prices,” Burkhardt said.

This farm news was published in the July 25, 2007 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.