Milk prices squirt

Reversal: Milk at $3.19 a gallon has imbibers frowning and farmers smiling.

April 28, 2004|By Bill Atkinson | Bill Atkinson,SUN STAFF

Marlin Hoff, a Carroll County dairy farmer, lost $800,000 over the past two years as milk prices plunged to their lowest levels in more than two decades.

"It makes you feel kind of bad when you get to the point that you think about retiring," said Hoff, 65, who owns Coldsprings Farm in New Windsor. "I lost a good piece of my equity."

But he and other dairy farmers are starting to smile again as milk prices have suddenly reversed, shooting up to record levels.

The average price for a gallon of milk in Baltimore stores hit $3.19 in March, up 26 percent from a low in February 2003, according to federal statistics. Nationally, prices have climbed about 13 cents in a year's time, and nearly pierced the $3 mark in December. In some areas of the country, a gallon of milk is expected to close in on $4.

"I don't know that anybody would have ever predicted prices getting this high," said Roger Cryan, an economist at the National Milk Producers Federation in Arlington, Va. "The high prices the last couple of months is really unprecedented."

And they are expected to creep even higher throughout much of the year because demand for milk is outstripping supply.

Some consumers, like Mary Alston, have taken note of the rising prices. She picked up a gallon of whole milk at the Giant at York Road Plaza for $2.89.

"It is just like gasoline. It is going up too high, but you are not going to stop buying it," said Alston, 76.

Stephen Smith, 54, who also was grocery shopping at Giant, said that if prices keep rising he will cut back his consumption. A milk lover, Smith drinks about two gallons a week.

"If it keeps going up I might get even more motivated to drink more water," said Smith, a retired electrical engineer. "I know it's rising. I have been looking at milk prices."

Consumers aren't the only ones feeling the pinch of rising milk prices.

Tom Washburn, who owns Moxley's ice cream stores in the Baltimore area, said he's paying 41 percent more this year for dairy products used to make his ice cream. He has passed some of the cost increase along to customers, raising the price of a scoop by 10 to 15 cents.

"It is one of those things you are forced to do," Washburn said. "You are not going to be in business if you don't deal with it."

Amber DuMont, a spokeswoman at the Maryland & Virginia Milk Producers Cooperative in Reston, Va., said rising milk prices will boost the price of butter, cheese, ice cream and yogurt.

"You will probably see these elevated [milk] prices for another six months," she said.

Several factors have contributed to milk prices going higher.

A year ago, dairy farmers received 95 cents a gallon at the processor, a 25-year low. As a result, there was little incentive for them to breed cows for milk production. Expecting another bad year, they sent more cows to slaughter to reap higher beef prices and some farmers went out of business.

Kenneth W. Bailey, associate professor of agricultural economics at Pennsylvania State University, said the roughly 9 million head of dairy cows in the United States has fallen by about 153,000 from a year ago.

"There is just a big shortage of milk right now," Bailey said. "The number of cows on farms have declined significantly, and the cows out there are producing less than they did a year ago."

Besides a declining cow population, milk production fell partly because the supply of growth hormone was slashed.

Cryan, the National Milk Producers Federation economist, said U.S. dairy farmers produced 1.7 billion gallons of milk in March, down 2.1 percent from a year ago. Last year production was flat, he said.

"It doesn't sound like a lot, but [2.1 percent] is a lot," Cryan said. "A 2 percent drop in milk production is a big difference in supply for the U.S."

Production slowed last year at dairy farms across Maryland because too much rain made feed wet and cows didn't eat as much as they normally would have, reducing milk production.

Janet Stiles, a dairy farmer in Boonsboro in Washington County who has about 85 cows, said milk production dropped last year about 15 percent. A typical cow on her farm produces about 20,000 pounds of milk a year. Last year, her Jerseys' milk production was down 300 pounds on average per cow.

"It was discouraging to me because I do push my cows pretty hard," Stiles said.

She says she is better off now that prices are rising.

"We are playing catch-up," Stiles said. "We are very happy to see this. We don't want to gouge the public. We buy all of those things too."

Hoff, who has been a farmer for 41 years and has about 700 dairy cows, said his prices for the milk he produced plunged 46 percent in 2002 and 2003. Last June, he received less than a dollar a gallon for milk.

"It has been a couple of very trying years for dairymen," Hoff said. Now, as prices rise, he could get as much as $1.80 a gallon for his milk, he said.

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