Milk Money Is No Longer Chump Change

Golden Oaks Farm Dairy Operations Manager Nate Janssen. Behind him are cows in the farm's milking parlor.

Cheryl Corley, NPR

Chugging a glass of milk these days is making wallets lighter. Milk prices are almost as high as gasoline prices, and in some places, even higher.

According to the U.S. Bureau of Labor Statistics, the retail price for a gallon of milk in April was, on average, $3.14. That's not too far off the record price of $3.57 from June 2004; experts predict that milk prices will soon reach or surpass the record.

What's causing the price increase is a typical supply-and-demand struggle. There's always a huge demand for milk and milk products in the United States. But now, demand has surged from Latin America, China and other Southeast Asian countries, which are consuming milk and using milk products, such as whey and lactose, in increasing amounts. Meanwhile, milk production in Australia has declined because of drought. And the level of milk produced by the European Union is lower because of changes in agricultural policies.

The demand is growing faster than the supply.

In the United States, production actually is up, but it's at lower levels than last year — and gasoline may be partially to blame.

At Golden Oaks Farms in Illinois, 570 cows are milked three times a day. The facility ships out roughly 5,000 gallons of milk per day; much of it is used to make cheese. Golden Oaks Operations Manager Nate Janssen says the farm ends up earning about $1 per gallon — one-third of milk's per-gallon retail price.

Despite the increased demand for milk, some dairy farmers are reluctant to expand their herds. Janssen notes that it has become much more expensive for dairy farmers to feed livestock, because the corn that cows eat is also being sought by producers of the gasoline additive ethanol.

Higher milk prices may be benefiting some farmers. But Janssen notes that the cost of milk still lags behind other grocery food items. And, he says, as dairy operations work to meet milk demand, they face one of the same problems that consumers face: the high price of gasoline.