Like paying more for dairy products? Yes, ethanol mandates (and subsidies) are excellent examples of government meddling leading to unintended consequences..
Dairy prices up and heading higher, forecasters say
May 30, 2007 02:14 PM
(CHAMPAIGN, Ill.) -- Liz Kooy loves sharp cheddar cheese and is willing to pay almost any price for it.
"Ten dollars a brick, I'd still buy it' and cut back on other purchases, the 36-year-old social worker laughed as she browsed the dairy aisle in a grocery store near downtown Chicago on Wednesday.
She might want to start looking for places to cut back.
Dairy market forecasters are warning that consumers can expect a sharp increase in dairy prices this summer. By June, the milk futures market predicts, the price paid to farmers will have increased 50 percent this year -- driven by higher costs of transporting milk to market and increased demand for corn to produce ethanol.
U.S. retail milk prices have increased about 3 percent, or roughly a dime a gallon, this year, according to the U.S. Department of Agriculture.
But University of Illinois dairy specialist Michael Hutjens forecasts further increases of up to 40 cents a gallon for milk over the next few months, and up to 60 cents for a pound of cheese.
That would drive the cost of a gallon of whole milk around the country to an average of $3.78, based on the USDA's monthly survey of milk prices in 30 metro areas.
Prices in the last survey, earlier this month, ranged from $2.76 a gallon in Dallas to $3.86 in Chicago and $4.09 in New Orleans, where the dairy industry has struggled to bounce back from Hurricane Katrina.
Hutjens and others said higher gasoline prices have increased the costs of moving milk from farm to market, and corn -- the primary feed for dairy cattle -- is being gobbled up by producers of the fuel-additive ethanol. The USDA projects that 3.2 billion bushels of this year's corn crop will be used to make ethanol, a 52 percent increase over 2006.
"There is no free lunch," Hutjens said. "That corn then has to come away from that dedicated resource."
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