Why milk prices are up
SCOTT SIMON, HOST:
Milk prices are up. The average price for a gallon of milk is around 3.59. With all the problems with supply lines and rising car and home prices, it's the costs of basics like milk that can hit the hardest. That's why we called up Lee Mielke. That's M-I-E-L-K-E. He is the host of "Mielke Monday" on Dairy Radio Now, and he joins us from Lynden, Wash. Mr. Mielke, thanks so much for being with us.
LEE MIELKE: You bet, Scott.
SIMON: Why are milk prices up?
MIELKE: Well, they're on their way up, but they've been down for some time. And this industry is one that rises and falls regularly. Dairy farmers have a tough row to hoe sometimes. And while the benchmark Class III milk price did go up a $1.30 this week to 17.83 per hundredweight, that's still well below what most farms see as a break-even price of around 18.50 per hundredweight.
SIMON: Well, what makes the prices, I guess I should say, of milk change?
MIELKE: Well, it goes back to the law of supply and demand, of course. But we've got a different situation with the COVID of last year. We saw a real ruckus take place as demand was all over the board. And we saw restaurants closing. Prices plummeted. The government kicked in its food box program, which was one of several programs, and that benefited the dairy industry significantly. And so while the benchmark price up $1.30 is good from September, it's almost $4 below what it was a year ago.
You have to consider, also, that farmers have seen their costs skyrocket as well, particularly feed, plus energy - which is gas and electricity, propane - and labor costs. Dairy farmers have to hire labor, and we all know what the labor market is looking like right now. It's hard to get help.
MIELKE: And you have to increase your pay scale in order to attract good help.
SIMON: Are problems in the supply chain affecting either the price...
SIMON: ...Or availability of milk?
MIELKE: Yes, there is port congestion that is going on. The biggest exporter of dairy products is New Zealand and the European Union. The U.S. is not always real competitive with them, but we are right now. And the problem has come in getting exports to countries that need it. And so there is a certain amount of turning away from the U.S. as not being a reliable supplier because of the congestion that's going on at ports.
SIMON: Mr. Mielke, I am told that you have been covering the dairy industry since the 1980s. What do you think? Is milk a reliable way to gauge inflation?
MIELKE: Oh, I don't know that you would use milk as a way to gauge inflation. No, I am - I wouldn't think that to be the case. The retail price of milk often does not correlate with the farm wholesale prices either because retailers often use milk as a loss leader. And so you do not necessarily see a lot of fluctuation in the price per gallon of milk. You will see that more in cheese and in butter and ice cream, perhaps, but not so much in fluid milk.
I can remember years and years ago when we were having issues with dairy farmers remaining profitable and dairy farms going out of business and an interview with people saying, well, are you not concerned about the number of dairy farmers going out of business? And the one response that was most amazing to me was, well, not really, because I get all my milk at Safeway.
SIMON: Oh, my word. Yeah. Mr. Mielke, forgive me, is there any joke about your name that actually makes you laugh?
MIELKE: I do. And for years when I was on - I had my own radio program, syndicated radio program. I often said, I'm the Mielke, and my listeners are the Mielkers (ph).
SIMON: Oh (laughter). Lee Mielke is the host of "Mielke Monday" on Dairy Radio Now. Thank you so much for being with us.
MIELKE: You bet, Scott.
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