WASHINGTON -- It's moo-ving and the sort of news that Utahns can really drink up: Milk in Salt Lake City is cheaper than almost anywhere else in the nation.
And congressional auditors researching reasons behind that appear to give local retailers -- not farmers, cooperatives or bottlers -- most of the credit.The U.S. General Accounting Office, a research arm of Congress, said Salt Lake City had the third-lowest price for milk with 1 percent fat among 31 major cities surveyed nationally.
That averaged $2.08 a gallon for a 26-month period between January 1996 and February 1998. The only cities where it was cheaper were Cincinnati ($1.60 a gallon) and Phoenix ($1.84). The highest price among the cities was $3.16 a gallon in San Diego.
Salt Lake City also had the fourth-lowest average price for 2 percent milk ($2.11 a gallon); sixth-lowest for nonfat milk, ($2.20 a gallon) and the ninth-lowest for whole milk ($2.45).
To try to figure out why prices fluctuate greatly nationwide, the GAO figured out what proportion of the cost of 2 percent milk goes to different groups in the production chain in each city studied.
In the Salt Lake area, it said farmers receive 44 percent, cooperatives receive 10 percent, wholesalers receive 43 percent and retailers receive only 4 percent.
That 4 percent received by local retailers is much lower than the national average of 17 percent -- and tied for the second-lowest such percentage nationally, the GAO said.
Houston was lower, where retailers actually averaged losing 1 percent on the sales of milk, using it as a "loss leader" to attract shoppers. In contrast in Denver, retailers there receive 31 percent of the overall cost of milk -- the highest such percentage in the nation.
The GAO noted that generally in cities where retailers keep small percentages of the cost of milk, "A retailer who wishes to promote a low-cost image for the store may sell gallons of 2 percent milk at or near cost while raising the price of other items in the store."
Retailers in other areas that make large profits on milk tend to do the opposite, it said. "Retailers wishing to increase the profitability of the dairy section might maintain relatively high prices for fluid milk but set lower prices for other items in the store."
The 44 percent of milk's cost received by Utah farmers is slightly above the national average of 42 percent. And the 10 percent kept by wholesalers is exactly the same as the national average.
But the 43 percent received by Utah wholesalers (or bottlers or major retail chains with their own bottling plants) was well above the national average of 31 percent.
The GAO said price differences among wholesalers nationally came from many factors, including different production and bottling costs, different sizes and types of containers and differing services for retailers.
"Some wholesalers provide a full range of services to retailers -- unloading the milk at the store dock, restocking the dairy case and removing outdated and/or leaking containers. In contrast, other wholesalers may not provide any services to retailers beyond their shipping docks," the GAO said.
The GAO also concluded that a complex "interaction of numerous supply and demand factors" at every level of the production chain brings different prices to different areas, which is why the price of milk nationally varies so much.