Increased consumer demand for milk products driving up prices

The popular catch phrase æGot Milk?' is taking on new meaning after a spike in demand for milk-related products, a Texas Cooperative Extension economist said.

"It all started around last year as exports for milk products have increased and overall consumer demand for milk products is on the rise," said Dr. David Anderson, Extension economist for livestock and food products marketing.

According to Anderson, some contributing factors to the current dairy market are:

- Higher feed costs for dairy cows as a result of growing ethanol production.

- - Drought in parts of the U.S. as well as Australia, causing a decline in milk production and increase in feed prices.

- - Declining production in Europe due to reduced subsidies.

- - Increased demand for dry milk powder exports and domestic use of products containing dairy additives as a source of protein.

- "Everything from corn to hay is causing dairy farmers to pay more for feed," Anderson said. "And there are so many new products that contain milk. For example, a lot of the protein drinks used by weight trainers and other fitness-minded individuals use milk products as a protein source."

- Nonfat dry milk prices on June 16 reached $1.91 per pound compared to $1.07 in December 2006 and 98 cents in early January 2006.

- Another factor is a movement to avoid the use of rBST, a man-made version of the naturally occurring hormone cows produce, Anderson said. Giving cows rBST increases milk production, he said.

- "There's no difference in the milk if it is used or if it's not used," Anderson said. "You've got groups against rBST and you've got milk processors buying milk from farmers that aren't using it. As a result, it's slowing down some of the overall milk production."

- "But higher prices aren't a production issue, its demand," he said.

- Even pizza chains are feeling the impact of higher dairy prices, Anderson said.

- "Their response may be to put less cheese on pizzas," he said. "But when cheese is cheap, they're more likely to put more on there."

- Export demand is on the increase as well, Anderson said. Milk powder and milk proteins "go into a variety of products" and the international demand for these is contributing to the increases in milk prices.

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