Like the
auto industry in Detroit, Americas dairy industry is also taking a huge hit thats sure to affect your grocery shopping budget.
The New York Times Andrew Martin reports:
"In a warehouse that [Roger Van Groningens] company runs here, 8 to 20 trucks pull up every day to unload milk powder. Bags of the stuff surplus that nobody will buy, at least not at a price the dairy industry regards as acceptable are unloaded and stacked into towering rows that nearly fill the warehouse.
The problems gotten so dire that the dairy industry had to ask for a bailout. According to Martin, the U.S. government has agreed to buy approximately $91 million worth of milk powder. And, unlike the auto industry, putting a stop to operations isnt as simple as flipping a switch.
"They are going to produce it because they have to milk the cows, Van Groningen said. Its like a river. It keeps coming.
So whats happened to the price of milk for the American public? In July, the national average for a gallon of milk reached record highs of $3.89. Now it sells for $3.67. Additionally, Martin writes that the cost of powdered milk has seen a drastic drop:
The price of powdered skim milk, used in infant formula, dairy products and processed foods, has fallen to roughly 80 cents a pound today from about $2.20 in mid-2007.
The interesting part is the biggest reason the price of milk has dropped has nothing to do with Americans. In recent years, the American dairy industry has benefited globally from a weak dollar amount and a
general lull in production from Australia and New Zealand, two of the biggest dairy exporters in the world.
But now, global demand has stagnated amid high prices and economic uncertainty just as the dollar has strengthened and milk production in New Zealand and, to a lesser extent, Australia, has bounced back. The continuing scandal involving melamine contamination of dairy products in China is expected to further diminish demand.
In some of these countries where dairy hasnt been a big part of their diet, this is where we are seeing people pull back, said Deborah Perkins, managing director of the food and agribusiness research group at Rabobank International.
Several dairy exporters say they remain bullish on their long-term prospects, given the barely tapped markets in the developing world. Until then, dairy farmers say, they are braced for a period of low milk prices even as feed and other costs remain relatively high.
For a dairy-based society like Americas, consumers could be looking at a little more change in their pockets every time they pick up a gallon of milk.
Were wondering if youve seen a change in the price of milk recently. Reports out of Florida say that a gallon is selling for much higher than the national average, but Texas prices are staying well under. How about where you live?
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