The prices dairies have been paying milk producers over the past three months for Class 1 fluid milk have taken the fastest rise in the history of the industry, Clint Warby, Utah Dairy Commission administrator, said Thursday.
It is uncertain whether this price increase will mean sharply higher milk prices in the grocery stores.He said Utah dairy farmers were paid $13.10 per 100 pounds of milk in September, the highest price on record. The previous record of $12.92 per 100 pounds of milk was set three to four years ago, industry experts said.
Class 1 milk includes whole milk, low-fat and skim milk, buttermilk and flavored milk such as chocolate milk.
Dairy experts blame increased milk prices on last year's drought in the Midwest, poor forages, fewer cows in areas of large production, reduced milk supplies due to strong consumer demand for dairy products, especially cheese and low-fat milk, and rising milk exports.
Warby said recent government programs to reduce milk production are now showing some effect, too.
"As a result, milk supplies are tight, even in Utah. Most Utah milk processors are asking their dairymen to increase production," Warby said.
Despite the higher prices being paid to dairy farmers, milk prices in Utah are among the lowest in the United States and, while milk prices are going up 10 to 15 cents a gallon, Warby says, "they are going up more elsewhere."
Joe Albright, U.S. Department of Agriculture milk market administrator in Phoenix, said Thursday the price of Class 1 milk is expected to go up another 50 cents and could be as high as $14.25 per 100 pounds by November.
"I have not seen a corresponding increase in the price of a gallon of milk at retail stores in Phoenix nor in surrounding areas, however, and it is uncertain whether the price of milk will go up much in the grocery stores."
Albright said one reason for the rise in price of Class 1 milk is high consumer demand and, he said, "if the price of a gallon of milk in the supermarket starts jumping up, consumer demand will probably go down and then, so will the price of Class 1 milk. It's a matter of supply and demand," he said.
Another reason for the decreased supply of milk nationally, Albright said, is that many big dairy farmers have contracted to sell milk products to Mexico through the first of this year.
Albright said production of milk next year is expected to be 1 percent to 3 percent more than this year's milk production.