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Holy cow: Milk prices are on the rise

Tribune staff

At the rate milk prices are rising, some people may want to consider buying their own cow. A gallon of milk now costs $4 at most stores in this area, and $4.35 at some — and that’s without the threat of a “Milkpocalypse” out of Washington pushing prices even higher.

This week, a gallon of milk cost $3.98 at Walmart, $3.99 at Sweetbay, $4.05 at Publix and $4.35 at Winn-Dixie. For perspective, that’s up from $3.83 in January last year, $3.68 in January 2012, and $3.08 in January 2011.

As for why, grocery store executives point the finger directly toward the farm.

“We only raise the price of milk as the cost increases,” said Publix spokesman Brian West. “Unfortunately, we’ve experienced increases each of the last few months.”

For their part, milk producers point the finger of blame elsewhere.

“A little of this is driven by higher energy costs,” said Christopher Galen, a spokesman for National Milk Producers Federation. “But mostly it’s higher feed costs.” Corn and other grains are increasingly being diverted to ethanol production, and with higher demand in general, that’s “considerably” boosted the price of animal feed for cows, he said.

That, and with the U.S. economy improving, and the Asian economy improving even more, there’s simply higher demand for milk and other dairy products from the United States.

Adding to the mix, there’s a spectre of a “Milkpocalypse” related to the debate over a new Farm Bill in Washington. Essentially, there is a 1949 law that requires the federal government to support dairy prices by buying significant amounts of dairy products at certain rates. Normally, farm bills have been passed every five years or so that supercede that 1949 law. But Congress failed to pass a new agricultural bill by Dec. 31, partly due to a debate over the level of food stamp support that’s normally embedded in the bill.

Technically, that expiration required the government to start buying huge amounts of dairy products, and some analysts had raised the spectre of $8 per gallon milk. But so far, the Secretary of Agriculture has said he’s going to hold off enforcing the law as Congress appears close to making a decision — though the House of Representatives and the Senate remain at odds on some points.

In the meantime, typical market forces are acting on milk prices. Galen noted that last autumn brought a huge crop of grains for animal feed, and that will eventually help put downward pressure on milk prices. “But,” Galen said, “It may take the better part of a year before that works its way through the system.”

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