According to the United States Department of Agriculture’s (USDA) Economic Research Service, consumers can expect a five to six percent increase in dairy products such as milk, cheese, butter or ice cream over the course of 2011.
The spike is expected to occur as a result of a growing demand in foreign markets, mainly Southeast Asia, for U.S. dairy products.
“When demand in other countries is growing the demand is moving faster than the supply side of the supply and demand equation, driving up the price,” explained Michael Marsh, the chief executive officer of the Western United Dairyman in Modesto. “Western diets are growing in Southeast Asia because consumers want higher-value protein diets through dairy products.”
Traditionally, when export markets grow domestic supplies are reduced, according to the USDA.
Milk producers in the Valley can expect to see increased profits since nearly one-third of all milk produced in California is exported overseas, however, costs remain high because of an increase in feed and fuel costs.
“Between 2008 through 2010, we lost 250 dairies — about 15 percent of the total dairies in California — and we are continuing to lose dairies,” explained Marsh. “Some dairies are doing okay now, but it’s still tough out there and they are still recovering from the recession.”
Many dairymen in the Valley survived the economic hardships, but fell so far behind in payments and bills that they are just now beginning to break even.
“Milk prices are high, but the problem is the extremely high cost of feed. But it’s not anything like 2009; right now we are seeing small profits. It just seems like the ethanol mandates put the demand on corn and we have to pay the price. Right now we have to supplement our feed with corn silage,” said Justin Gioletti of Robert Gioletti and Sons Dairy in Turlock.
The federal government supports ethanol by subsidizing the price of corn, providing financial incentives for building ethanol distilleries, provides a $.45/gallon ethanol blender’s tax credit, imposing tariffs on ethanol imports and mandating particular amounts of consumption.
At Raley’s on Geer Road in Turlock, the current price of a single gallon of Bayview Milk is $2.89, and if the USDA is correct, that same gallon could cost $3.03 per gallon with a 5 percent increase.
To contact Jonathan McCorkell, e-mail jmccorkell@turlockjournal or call 634-9141 ext. 2015.