Milk: Cheaper by the gallon

Sally Herships Mar 13, 2012

Kai Ryssdal: Turns out the ad slogan “Got Milk?” might actually be an understatement, because that dairy industry marketing hook has never rung more true for American dairies. Herds in this country are producing milk at record levels.

So consumers suffering ticker shock at the gas station can find solace at the supermarket. Marketplace’s Sally Herships has more on the falling price of milk.

Sally Herships: It’s a beautiful day in upstate New York. And Mike McMahon, a dairy farmer there, took a break to talk to me about the falling price of milk.

Mike McMahon: It’s an interesting thing about the dairy industry. You can sell every drop of milk you make. You might not make any money on it, but you can sell  all of it.

Last year, McMahon’s farm Easy Acres Dairy sold 16 million pounds of milk. All of it goes to Greek yogurt maker Chobani. This year, his 650 cows are still productive, but the farm could be less profitable.

The U.N. says the only food group to drop in price last month was dairy. Why?

Bill Brooks: One big factor has been the extremely mild winter.

That’s dairy economist Bill Brooks. He says consumers like warm winters because we save on heating costs. Turns out cows like warm weather too — for their own reasons. Cameron Thraen  is a dairy economist at Ohio State University.

Cameron Thraen: Cows respond well when they’re not out slogging around in bitterly cold winds or difficult times.

Like fighting off sickness. Thraen says last year was a strong year for milk sales so American farmers added to their dairy herds. Now we’ve got too much milk. But you can’t turn off a cow off. That creates a game of — yes — chicken between farmers and their buyers.

Thraen: The buying side, they will step out of the game for a bit. Because why buy today if I anticipate that prices will be even lower tomorrow?

Causing prices to drop even more. But for consumers, there’s a lag of a few months before those savings make their way onto grocery store shelves.

In New York, I’m Sally Herships for Marketplace.

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