Californians Learn the Truth About High Milk Prices (6-28-07)

From time to time we’ve objected to the way the media oversimplifies discussion of food prices. So, it’s only fair we tip our hat to the Sacramento Bee and staff writer Jim Downing for investigating the rise in California’s milk prices and explaining it to their readers.

California is not only the nation’s most populous state, it’s also the nation’s largest dairy state. About one out of five gallons of U.S. milk comes from California, and the state is home to one-sixth of the nation’s dairy cows. Milk is big business in California, and big news.

The paper talked to four experts from the state’s dairy industry and determined the cause for higher milk prices is. . . higher demand! Specifically, higher worldwide demand caused by everything from more powdered milk sales in Asia to Americans’ love for cheese.

One thing that isn’t to blame for higher dairy prices is corn, the article explained. “(F)eed costs are not part of the formula that determines the price of milk,” Downing told readers. And the U.S. Department of Agriculture reports that dairy feed prices have declined since the beginning of the year.

California’s dairy producers are doing their best to keep up with demand. “Milk production in California rose 3.4 percent last year,” the story noted, “and now milk prices are so high that farmers are willing to pay premium prices for cows to expand their herds and cash in on the boom.”

The story also notes that retail milk prices in California tend to be below the national average.

If we have any quibble at all with the story, it’s that it doesn’t go into much detail about all the factors that go into milk production, such as transportation. Fuel costs in California are the highest in the nation and they affect every part of the production and distribution chain.

Explaining something as complex as milk marketing orders could fill an encyclopedia. Downing notes the California Department of Agriculture uses a five-page flow chart to help determine pricing. The Bee’s story is brief, but to the point. Most importantly it adds insight to the discussion about food prices, not just fuel to the fire. For that, the newspaper and its reporter deserve credit.

Click here to read the paper’s analysis on the factors affecting the price of milk.