Milk hits $4. Here's why.
A complex formula exonerates the most commonly cited culprit – Ethanol.
By ASJYLYN LODER
Published July 16, 2007
This might sound familiar: Ethanol wants corn and so do cows. So corn gets more expensive. And feeding corn to dairy cows gets more expensive. So your gallon of milk gets more expensive.
Sounds logical. It's been on television, and in newspapers.
But it's just not true.
Dairy experts, government economists, and market analysts agree.
"The media has tied the rising price of corn to the rising price of milk," sighed Russ Giesy, an expert on dairy with the University of Florida Extension Service. "Oh well."
Giesy, when asked, is a tireless explainer of the complicated life of milk.
Yes, corn is being diverted for ethanol. Yes, that is driving up corn prices. And yes, that means your local dairyman is paying more to feed his cows. But that isn't driving the price at your dairy case, Giesy explains.
Nationally, milk prices averaged $3.55 a gallon in June, with prices expected to continue to rise. Locally, milk prices have risen above $4 on many store shelves.
So why is it costing more to buy milk for your family? The answer lies back 70 years, and on the other side of the world.
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Ah, milk. Healthful, simple, an icon of nurture and nourishment.
But leaving aside pasteurization, antibiotics and the machinery it takes to milk 6,000 cows every day, milk is a business - a tough one.
The Aprile Dairy, a family establishment in Riverview with 500 cows, provides a glimpse of the dairyman's dilemma.
The scene one recent morning: a dozen cows queue up in the milking parlor, pumps latched onto their udders, feeding milk into a 6,000-gallon tank in the next room.
About 100 feet away, a delivery truck is funneling more than 20 tons of feed into two silos. The yeasty mix of cotton seed hulls, soybean meal, hominy, orange pulp, molasses and corn runs into a feed mixer and is blended with water, sweet-smelling alfalfa and home-grown Bermuda hay. The latte-colored feed smells like bread, feels like loam.
Corn is a big part of the equation. And its cost is hurting the Apriles' bottom line, said Joseph Aprile, one of three brothers running the dairy. Feed costs typically account for around 40 percent of their operation. With corn prices on the rise, it now counts for closer to 50 percent.
"On top of the corn price, they're also tacking on fuel surcharges to bring in the feed," he said. That leaves dairymen pinched by the rising cost of fuel, and the very thing meant to bring it down: ethanol.
But, Aprile explains, his cost of production has little to do with the price you pay for milk.
So if the Aprile Dairy feels the pinch, why don't you? The answer is decades-old pricing mechanisms controlled by the federal government.
In the 1930s, dairies couldn't get a decent price for their milk. To win higher prices from the milk dealers, dairymen went on strike and even dumped milk. Congress stepped in, and set up price formulas to guarantee a decent price for dairymen and a stable supply for consumers.
The formulas have changed, but they still play a large role in the price a dairy gets for its milk.
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So what is driving up the price? Roger Hoskin, an agricultural economist with the Economic Research Service for the U.S. Department of Agriculture, offered this grim lesson in globalization.
"Blame everyone in an SUV who gets 11 miles to the gallon," Hoskin began.
Hoskin - colorful, blunt, and proud driver of a beat-up Hyundai - has a theory akin to the apocryphal butterfly setting off a typhoon. In this case, the big butterfly is American consumerism. Americans buy oil. A lot of oil, from places like the Middle East and Russia. They also buy clothes, toys and electronics from China, Thailand and Vietnam.
"The people we buy oil from - and iPods and poison pet food and everything else - are coming back and spending money in our country," Hoskin explained. "They come back and they want to buy the same stuff you buy and they outbid you for it."
So dry milk heads to China and other Asian countries. Russians buy cheese. Their competition for those items drives up the cost.
Add to that dwindling dairy exports from drought-stricken Australia and voila: supply constricts, demand increases and up goes the price of milk.
Florida has it worse than elsewhere, because cows don't like it hot, and produce less milk in summer. So milk comes into the state from as far north as Virginia. Gas prices are high, so it costs more to truck the product down here ... and prices go up even more.
Hoskin said he's not a huge fan of ethanol, "But I can't blame them for what they didn't do."
Times researchers John Martin and Angie Drobnic Holan contributed to this report. Asjylyn Loder can be reached at 813 225-3117 or firstname.lastname@example.org.