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Inflation Dairy PricesInflation Dairy Prices

Dairy prices are one of the fastest growing areas of food inflation

As consumers are battered by the higher prices, grocers and dairymen say the dairy spike isn’t benefiting them and they are unsure when prices might come back down.

BY KYLE ARNOLD

TULSA — The dairy aisle has become home to one of the fastest growing areas of food price inflation.

Prices for milk, butter and cheese are cutting sharply into shoppers’ grocery budgets.

As consumers are battered by the higher prices, grocers and dairymen say the dairy spike isn’t benefiting them and they are unsure when prices might come back down.

“Milk has steadily risen for the last year,” said Doyle Kirk, vice president of grocery operations for the Tahlequah-based Reasor’s supermarket chain. “Milk changes prices at the beginning of the month, and it’s gone up about every month for the last six. And it goes up again the first of June.”

And that includes anything relating to dairy, from yogurt and ice cream to cheese pizza and Alfredo sauce.

Fueling the price spikes are the growing costs of feeding dairy cattle and the higher price for gasoline or diesel fuel.

Even as all food prices have jumped in recent months, the dairy increase is staggering in comparison.

A gallon of whole milk costs 39 cents more than a year ago, a 12 percent increase, according to the latest Consumer Price Index. Butter costs nearly $1 more per pound than in April 2010, up 35 percent. And cheddar cheese rose to its highest price ever in April: $5.20 a pound.

That compares to a 3 percent to 4 percent forecast inflation rate for all foods in 2011, according to the U.S. Department of Agriculture.

Dairy producers and experts say the price spikes are coming from all levels of the supply process. Commodity prices for crucial cattle feedstock, such as corn, have nearly doubled in the last year.

Fuel prices, which affect costs at nearly every stage of the industrial chain, are up sharply from a year ago, and worldwide demand for dairy products has simply increased as the economy recovers, said Ephraim Leibtag, a food economist with the U.S. Department of Agriculture.

The USDA recently increased its forecast dairy inflation rate to 5-to-6 percent for 2011, coinciding with increases in prices for meat products.

Dairyman David Jones, who runs the cow milking operation at Oklahoma State University in Stillwater, said the cost of corn-based feedstock is twice what it was last year.

“Yes, the price is good, but it’s barely offsetting the feed,” said Jones, an assistant professor at OSU. “In 2009, dairymen lost a huge amount of money in milk and they are just barely beginning to build back equity.”

Demand, along with prices, dropped sharply in 2009 and 2010.

Before that, milk prices rose to a record high of near $4 a gallon in late 2007 and 2008.

Terry Holden, a spokesman for Oklahoma City-based Braum’s Ice Cream and Dairy Stores, said the dairy business is highly competitive, and therefore profit margins are often razor-thin at every level.

“Milk in grocery stores has traditionally been a price leader item,” he said, referring to the grocery industry practice of selling some popular items for little or no profit. “And everybody that’s in the business that produces milk is affected by the increase in commodities.”

source: Dairy prices are one of the fastest growing areas of food inflation | NewsOK.com

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