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Dairy Prices Keep Declining; Retail Prices Expected to Follow

ROSEMONT, Ill. – For the second month in a row, the farm-level price for bottled milk dropped significantly as of Aug. 1, falling 28 cents from July and a whopping 56 cents from June, according to Dairy Management, Inc. here. At $1.48 per gallon, the wholesale bottled milk price for August is down 27 percent from the record high hit in June. And it's expected that the prices consumers see at the grocery should follow.

Jerry Kozak, president and c.e.o. of the National Milk Producers, said, "When it comes to milk prices, 'what goes up, must come down.' We're hoping that retailers who quickly passed their higher input costs on to consumers this spring will be equally responsive as prices drop back down."

Kozak said that while both farm- and retail-level dairy prices hit records this year, the surge at the farm level, at least, will be short-lived. "We are hoping that prices don't sink back down to the record low levels of 2003. Many farmers can't take another stint of 25-year lows, like we had last year.”

This past spring's price increases were largely the result of tight milk supplies. After two years of extremely low milk prices, many farmers chose to leave the dairy business or reduce their milk production. As the number of cows fell and milk supplies tightened, prices rose at both the farm gate and grocery shelf. Three months of high prices, however, have encouraged farmers to add cows and increase production. The number of cows being milked across the country has been rising since May, and, with a bumper corn crop forecast and lower dairy feed costs expected, production and prices are expected to moderate for the remainder of the year.

"Even as prices jumped above $3 per gallon in the stores, we know that consumers still found value in the nutritional package that milk represents. As retail prices come down, that same product will be an even greater value," said Kozak. He added that farmers typically receive only 30 cents for every dollar that consumers spend on dairy products, and that the farm share has been steadily shrinking over time.
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