Got Enough for Milk? What Impacts Prices in the Milk Industry?
Consumers picking up a carton of milk in the dairy aisle will almost surely notice that the price has been edging up. And of course they’re going to wonder why. What they might find surprising is that the price of milk is influenced by hundreds of factors from as far away as Russia or China.
One More Glass: Rising Global Demand
The classic rules of economics apply as well to milk as they do to gold. When demand outstrips supply, prices go up. And right now there’s a rising demand for American milk around the world. Weather problems in major markets like Russia, Europe, and South America have adversely affected the grain harvests that feed dairy cattle. This, in turn, has led to a shortage of milk. Other countries like China are concerned about food safety in their own country and look to foreign markets to supply their thirsty populations.
According to the National Milk Producers Federation, China guzzled so much milk in 2013 that it absorbed the entire increase in milk production in the U.S., Europe, Australia and New Zealand combined.
Show Me the Whey
China’s growing thirst for milk goes far beyond the white stuff. With over a billion people, their dairy farms have been unable to keep up with the demand for other milk products like powdered milk and whey. This has been a positive for American dairy farmers because they’ve been able to sell their stores of powdered milk that are saved away following years when milk is plentiful.
Dry milk products, especially purified whey and casein, are now used in a variety of ways from baby formula to whey isolates that are used by athletes to build or maintain muscle.
High Cheese Prices
The demand for American cheese is also at an all-time high, reaching record prices this past January. Countries like South Korea, Mexico, and Japan are leading the way in cheese imports. And this spike in the cheese market also has an impact on the price of milk. According to dairy economist Mary Ledman, this means that in some markets the retail price could increase by 10 or 20%.
Droughts and excessively cold weather have both played a part in the rising demand for milk. Even though this past winter has been more severe than normal, it has been better than in many other parts of the world, particularly Europe and Russia. That means that these countries have come to rely on U.S. milk exports – yet another reason why milk prices are at an all-time high.
Higher prices are excellent news for our milk haulers and dairy farmers since they are paid based on the volume and quality of their milk. And since our milk haulers play a crucial role in the sampling and testing of raw milk, this is doubly good news for them too. It means they continue to do an exceptional job.