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Illinois Dairy Producer: Retail Milk Price Reality—Milk Crisis Over

Dec 15, 2009

Mike Richter writes from Highland, Ill., where he operates Rich-Lane Farms Dairy.

 

After establishing a transportation company this year, I had the opportunity to survey retail prices in a large portion of the central U.S.

 

It started or was prompted by a Toledo, Ohio, store offering one-gallon jugs for $1.75, regardless of fat content or promoted as all varieties. Retail prices were obtained in 17 states and 27 cities or towns. Prices noted on the map below were for conventional milk in one-gallon plastic jugs. There were three brands offered in glass containers. Prices listed on the map are for 2% white milk.

 

In addition to chocolate, one market offered a variety of other flavors, such as orange, banana-strawberry and root beer in half-gallon containers. I tried the root beer-flavored milk and it was delicious. It was offered by a producer-handler. It was the first time I witnessed someone venturing into other flavors, although it has been talked about for years by processors and dairy marketer-promoters. One processor was marketing a milk-based coffee drink and it was also quite delightful in a pint container.

 

In this survey, there were three producer handlers. In every market that a producer-handler was involved in, two things stood out:

1)     Their shelf space was limited among the available brands.

2)     They all offered their product at a price lower than their competitors. Prices ranged from 99 cents for conventional milk in Chicago, Ill., to $6.49 for organic in Milwaukee, Wis. In a Houston, Texas, market, whole and 2% milk were offered as organic or private-selection organic at $5.49/gln. Prices for pint containers in the survey ranged from 88 cents to $1.79. In hundredweight prices: $81/cwt. to $166/cwt. In three markets, gallon containers were offered in a two-for-one price scenario. A 10-cent to 20-cent savings per gallon was realized in the two-for-one offering.

 

There were three other markets in which milk was priced with all varieties priced equally, in addition to the Toledo, Ohio, store. In Oklahoma, one store's whole milk was priced at $2.79/gln.; 2% and 1% at $2.99/gln. and skim at $3.39/gln. There were two other markets in which skim was priced higher than the 1%, 2% or whole categories. This trend of skim being priced higher than products containing fat has become more noticeable. In one store, it was labeled as Super Skim and in another Lite Line Skim. Other innovative descriptions included High Protein 2%, or Kid Builder 1%.

 

As a Holstein breeder enthusiast, with producers being paid on component values, what kind of cow do we breed for now if skim is more valuable? How should you feed, manage, etc.? What should you be paid if your milk buyer processor or consumer is demanding these products? More or less?

 

In only three markets was rbST- or rbGH-free milk noticeable, primarily on the organic offerings. In many stores, large signs indicating price were displayed more prominently with large visual signs drawing consumers to the dairy case.

 

The next most notable item was milk that was WIC-approved and usually with a small label next to the unit price. In Texas, one employee-owned grocery store chain manager explained to me that whole milk may not be available to WIC recipients due to concerns over obesity. He also indicated that it would not be a welcomed change if adopted.

Country-of-origin signs were used in one store along with locally produced. Shelf space was most fierce in Kansas City, Mo., with seven brands represented. Iowa City, Iowa, and Shreveport, La., each had six brands in competition for shelf space.

 

Along the way I was asked questions, such as "How many openings does a cow have to give milk?" to "What is the deal with beef grades such as prime, select, and choice?" to "What is the difference between Brand X milk for $2.99 vs. Brand Y milk for $1.99?" These three consumers were generally grateful for my answers to their questions.

 

As for the title of this article, I gathered these prices and information during the month of October 2009. It represented the reality of the retail market at that time. As of this week, Dec. 4, 2009, milk in Titusville, Pa., was selling for $4.14 for 2%. Dairymen are reporting base prices in the $13/cwt. range.

 

Retail prices are turning the curve faster than farm gate prices. Does this indicate the crisis is over?

 

Consumers have hundred of choices available when they shop. Food is such a value and plentiful, No one else along the chain would work or stand for the return on investment and human capital for the pleasure of being in this business. Dairymen and women need and deserve to get more of the retail dollar. Are you getting it? Dairymen and women are the only ones who own the cows and supply.


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