The statewide average price paid for Class I milk will dropped to $1.33 per gallon on August 1, reflecting a 58 cent drop from the top price of $1.91 per gallon paid in June, according to the California Department of Food and Agriculture (CDFA). This will put the minimum farm price at a level below where it was in April 2004 before the price spike that caused retailers to raise milk prices dramatically.
The price drop comes as Consumers Union issued a report saying the gap between the farm price for milk and the retail price "has widened significantly" since 1999. The survey of Bay Area grocery stores, entitled "Getting Milked?" says dairy farmers were getting paid $1.90 a gallon in Northern California while major retailers were charging from $4.79 to $5.49 a gallon for their highest-priced brands of whole milk.
Elisa Odabashian, a Consumers Union senior analyst, is quoted in the study as saying, "It’s unfair to blame the high cost of milk on dairy farmers, who have struggled to make ends meet in recent years. Our research has shown that retailers are always quick to jack up prices on milk when the farm price goes up but often are slow to pass on savings to consumers when the farm price drops."
Michael Marsh, CEO, Western United Dairymen, comments, "Farm-level milk prices have already dropped significantly-almost 60 cents per gallon between June and August-and hopefully that decline now will be reflected in retailers prices. The Consumers Union report points out that, unfortunately, these decreases aren’t always reflected so quickly at the grocery store level."
The August Class I price was announced July 10. " Such an early announcement should give retailers plenty of advance notice to make sure the price drop is reflected on the retail shelf," points out Marsh.
The August price reflects a trend being seen throughout the U.S. as the imbalance between the supply and demand of milk, which drove prices higher a few months ago, is leveling out.
The price hike in June generated a flood of media reports on the rising price of milk and other dairy products particularly ice cream. Television and newspaper reporters focused on customers complaining about the rise in retail dairy prices with little attention given to the long period of low prices endured by dairy producers.
"Now that the prices being paid to producers are being lowered, we are curious to see if the media will now turn its attention to see if retail prices are being lowered," says Marsh.
Producers may have received record-high prices for three months earlier this year but they are still suffering the effects of an extended period of low prices that ran from the end of 2001 through the spring of 2003.
Farmers do not set the retail price of milk. That is a message we keep repeating to reporters who called us about the retail price hikes earlier this year," explains Marsh.
"Retail prices are increasingly disconnected from farm-level prices with the margin between what producers receive, and what consumers pay, growing steadily over time."