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Milk Is Getting Expensive

The cost of a gallon of whole milk is on the rise – yet another example of how Americans’ stagnant incomes are being squeezed by higher prices. According to the U.S. Bureau of Labor Statistics (BLS), a gallon of whole milk cost $3.73 in May – a nine percent increase…

The cost of a gallon of whole milk is on the rise – yet another example of how Americans’ stagnant incomes are being squeezed by higher prices.

According to the U.S. Bureau of Labor Statistics (BLS), a gallon of whole milk cost $3.73 in May – a nine percent increase from last September.  The price has gone up in each of the last eight months, too – partially due to increased demand for American milk in China and South America.

As recently as August 2009, milk was under $3.00 a gallon.

We wrote earlier this week about rising prices and their broader impact on the consumer economy … noting how the government’s definition of inflation doesn’t seem to mesh with the reality.  That’s troubling when you consider the Federal Reserve is the entity dictating America’s monetary policy (which is helping to fuel price increases).

All told, the government predicts food prices will rise by as much as 3.5 percent this year – well above last year’s 1.4 percent increase.

What does that mean for you and your family?  Simple: Your already difficult-to-maintain margins are about to get tighter.

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34 comments

idcydm July 9, 2014 at 9:50 am

What ain’t gettin expensive?

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CNSYD July 9, 2014 at 10:12 am

That damn free market again. Must be time for price controls again, right Sic Willie?

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idcydm July 9, 2014 at 10:52 am

Keystone, Keystone, Keystone.

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Smirks July 9, 2014 at 11:03 am

Keystone 2% Pipeline Struck by Oreo Delivery Truck, locals say most delicious pipeline spill yet.

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idcydm July 9, 2014 at 11:07 am

Don’t worry we’ll get to 6 or 7 dollars a gallon even with Keystone.

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Bible Thumper July 9, 2014 at 11:00 am

Subsidized ethanol using corn is not free market.

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Ho hum July 9, 2014 at 11:32 am

Can’t have a free market when the method of exchange is not free, but instead monopolized and manipulated.(meaning dollars)

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CNSYD July 9, 2014 at 1:19 pm

Well roll on down to your local 7-11 and plop down your yen or whatever and see how much milk you can buy. I guess that is what you mean by “monopolized and manipulated”.

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Ho hum July 9, 2014 at 3:00 pm

Don’t be a douche, I know it’s tough for you, but stop and think for a moment rather than posting meaningless smarmy red herrings.

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Barbarossa July 9, 2014 at 12:46 pm

How is it a free market when the Gov’t buy up so much of the Supply to give to the unproductive… uh, poor? Let’s face it, you don’t know sh!t about capitalism do you?

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CNSYD July 9, 2014 at 1:16 pm

China and South America are the “Gov’t” to which you refer, correct? Did you miss the word “demand” or is that not a “capitalist” word?

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truthmonger July 9, 2014 at 4:17 pm

You manipulate me with your economic strength, I use my physical strength to break your face. Seems fair.

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Whoremonger July 9, 2014 at 6:08 pm

Sounds like something a cop would say.

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Fat Greg Dulli July 9, 2014 at 10:41 am

The poor get it for free, the rich can afford to buy it by the tanker… the middle class is doomed. Maybe if gas weren’t $3+ a gallon for close to 6 years now we all might get a little breathing room.

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MommaT July 9, 2014 at 10:53 am

Damn good thing Tango still gets his from the teat.

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Bible Thumper July 9, 2014 at 10:58 am

Will, did you know that both beef and milk come from cattle (milk from cows) and that both are fed corn.
Corn is being used for subsidized ethanol.

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Smirks July 9, 2014 at 11:09 am

Corn prices are down to a 4-year low.

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idcydm July 9, 2014 at 11:16 am

Corn production up 29.17% in 2013.

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Bible Thumper July 9, 2014 at 11:38 am

Corn production up can also mean fewer acres in pasture.

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idcydm July 9, 2014 at 3:00 pm

Not really, less tofu planted.

AgMan July 9, 2014 at 9:09 pm

That shift occured some years ago. Not a current factor.

Bible Thumper July 9, 2014 at 10:48 pm

Ethanol production leveled at 13 billion gallons since 2010.
40% of corn production is used for ethanol. 45% is for feed and 15% is used for food and beverage.
http://www.forbes.com/sites/jamesconca/2014/04/20/its-final-corn-ethanol-is-of-no-use/

Fits – “According to the U.S. Bureau of Labor Statistics (BLS), a gallon of whole milk cost $3.73 in May – a nine percent increase from last September.  The price has gone up in each of the last eight months, too – partially due to increased demand for American milk in China and South America.
As recently as August 2009, milk was under $3.00 a gallon.”

So while demand for ethanol has not gone up, demand for milk ( and presumably beef ) has gone up. An uninterfered market would presume that corn production would be diverted to milk and beef from ethanol. That has not happened.

So, milk has risen in price at least 24% since 2009. Also price is determined by supply and demand, not just cost. The price of corn doubled from $3.50 to $7.00 (see second link) from the middle of 2010 to the middle of 2013. While production can be easily cut by slaughtering cows, production cannot be as quickly increased by enlarging the herds.( corn has dropped to $4.50). Milk went up not just because of cost, but because of limited supply and higher demand.
To increase production of corn requires a combination of three things. 1 Marginal land added to production.(even if good land, it has to be taken out of production of other crops and therefore have a higher opportunity cost) 2. More intensive cultivation of existing land. 3. Increase use of new technology. The first two would raise cost and the third might. Subsidized ethanol interferes with a normal market( no monopoly or price fixing) that naturally diverts resources to meet demand at the lowest price. Interference in the market leads to either higher prices or shortages.
http://www.nass.usda.gov/Charts_and_Maps/Agricultural_Prices/pricecn.asp

AgMan July 10, 2014 at 9:57 pm

You need to reread my comment for clarity. The shift of acreage from pasture, cotton, soybeans and other crops occured some years ago, not recently.

The shift to marginal land occured in the first decade of this century. The next shift will be a reduction in marginal lands away from corn; not to more. Cropping systems are not simply cyclical but are usually longer lasting. The current shift has largely occured. In my business career I have watched a cotton system progress to a grain system, back to cotton and once again to grain in SC and the Southeast.

I don’t need a lecture in either corn production or economics; I know very well the fluctuations of price of commodities (a business career in trading). I hold degrees in Agron. and Ag. Econ.; not to mention 44 years of production agriculture in SC.

Agman July 10, 2014 at 10:23 pm

For the record, corn yields increased approx 30% from 2012 to 2013. Subsequently, the price of corn dropped. The drop was not due to an acreage increase. As I stated earlier, the shift from pasture to corn occured in the first decade of this century. Additionally, the major shift in acres seems to now be back to the traditional shift: that of corn to soybean and soybean to corn.

Major changes in corn production amounts in the US are historically due to weather and yield changes, not cropping changes/shifts.

Bible Thumper July 10, 2014 at 11:35 pm

——I hold degrees in Agron. and Ag. Econ.; not to mention 44 years of production agriculture in SC.——–
I have learned over years not to make claims on the Internet that I am not willing to backup.

That is why I always reference research that anyone can find. I get tired of debating the Iraq war with someone who claims on the Internet to have been in the Battle of Fallujah. Anyone can and usually does make false claims on the Internet. My only knowledge Econ and Ag is (oops! I started to make a claim I was unwilling to prove).

The 5.7 billion ethanol subsidy ended in 2011, but there is an ethanol mandate that still props up the industry. The Industry has never seen fit to produce more than than the mandate even though it has been at 13 billion gallons for several years. This leads me to speculate that production would fall without the mandate. Of course, recent price increases have many causes, but those are tacked on top of a decade of rising prices. It is fairly basic Econ that 40% of the corn crop being used for ethanol would effect prices of many other agricultural products and that without that mandate the percentage of land devoted to corn (and prices would fall or wouldn’t increase as much ) would fall.

Bible Thumper July 9, 2014 at 11:35 am

The following is more about beef than milk. But it takes years for lower feeds feed prices to reach the grocery shelves.

“After years of high feed costs and drought, the domestic herd on Jan. 1 slid to 87.7 million head, the fewest to start a year since 1951 and the seventh straight decline, U.S. Department of Agriculture data show.
Supply probably will remain tight. It can take three years to expand the herd, and a prolonged drought in Texas, the top producer, parched pastures needed to raise young animals. The government says the U.S. will become a net beef importer in 2015.”

http://www.newsobserver.com/2014/06/23/3958954/beef-prices-hit-record-high.html

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CNSYD July 9, 2014 at 1:22 pm

Now you know Will knows all about agriculture. He sees those trucks backing up to Bi-Lo everyday. Beef and milk come from trucks, not cattle/cows.

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AgMan July 9, 2014 at 9:12 pm

Will knows nothing of Agriculture and very little of Economics. I give him the benefit of the doubt and suggest that it’s lack of exposure.

Otherwise, I would have to label him about two dozen floors short of the full elevator ride.

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Squishy123 July 9, 2014 at 11:55 am

But people still flock to Starbucks for their $5.00 coffee and bitch about a gallon of milk going up 30 cents.

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Thomas July 9, 2014 at 2:33 pm

What you are seeing is the Dollar’s d-e-v-a-l-u-a-t-i-o-n. When this administration and the Democrat majority in the Senate does not even monitor Federal Reserve quantitative easing policy let alone criticize the policy, they are condoning it. The more money that is printed and monetized, the more the USD is devalued. Remember, Fed policy for six years running is zero percent nominal interest rates for central banks. Not one word from Obama or not one investigation from the US Senate. Liz Warren shot her mouth on this last year, yet no action is being taken. The Executive Branch is responsible for monetary policy through the US Treasury. Since Geithner left, what is US policy? Anyone? Run out the clock to 2016?

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jrh July 9, 2014 at 3:29 pm

Well when you retire, try living on one check a month with no raises,cost of everything going out of sight. the poor and middle class are doomed by our own government,and talk about bilo ,a 2 liter pepsi went to 2.00 a piece,hamburger meat is nearly 4.00 a lb. milk is nearly 4.00 a gallon,cant even plant a garden and come out cheaper,seeds doubled in price, water bill went from 30 to 60 dollars a month,so the government has us trapped so we can’t survive on our own if we had to.How many working people are getting raises to keep up with inflation?Keep on we will be like Russia work for the government and they will keep us up!

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GrandTango July 9, 2014 at 7:57 pm

With gas prices so high under Obama, food is astronomical. Inflation is a MAJOR problem. But if the media does not acknowledge it, it goes un-noted.

Most times when you see the CPI reported, they exclude energy and food. And those are the ESSENTIALS, and what is so expensive, compared to the Bush years. Obama is a DISASTER…

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Joe July 10, 2014 at 7:10 am

The benefit from increases in consumer prices is the boon in revenue to the state and local governments. The more we pay at the register the more sales tax revenue flows to the various government entities. It’s like an automatic cost of living revenue increase to the government. We pay more for the products and services we need and they get more revenue without officially “increasing” taxes.. Sweet deal courtesy of smart guys/gals in Columbia

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Milk Prices and Politics… – Histórico eDairyNews February 6, 2023 at 11:38 am

[…] price of a gallon of whole milk dropped from $3.73 in May to $3.63 in June, data from the U.S. Bureau of Labor Statistics (BLS) reveals.   That’s the […]

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