Shocked by the price of milk last week, Jose Batista joked that he should just buy a cow for his two children as he filled a shopping cart at a Food 4 Less in Hollywood.
Batista had better get the barn ready. Starting Saturday, the minimum retail price of milk, which has been climbing steadily this year, will take a big jump.
A gallon of whole milk will cost at least $2.90 -- 50% more than a year ago. And in major supermarkets, a gallon could command more than $4.
Dairy farm expert Michael Marsh blames what he calls the "pizza factor." The improving economy has apparently unleashed pent-up demand for pizza and other items dependent on cheese, and a surge in cheese buying by food processing companies and restaurants has sent the value of most dairy commodities soaring on the futures market. California's regulated milk prices are tied to the futures prices of those commodities, especially cheddar cheese and butter, traded in Chicago.
But there's more behind the fortification of milk prices. For starters, there's something of a dairy-cow deficit. Because droughts have made for poor grazing, many dairy farmers have balked at paying for extra feed and have instead sold some animals for slaughter, lured by record prices for beef, made popular recently by the high-protein diet craze.
What's more, the discovery last year of a case of mad cow disease in Canada closed off the U.S.' biggest source of replacement dairy cows, doubling the price of milk calves. And because of manufacturing glitches, there's a shortage of the genetically engineered growth hormone that enables cows to make more milk; that alone is expected to reduce the nation's total milk output by 2% to 3% this year.
Taken together, all these factors will trigger Saturday's milk-price hike. In Southern California, the minimum so-called farm-gate price for a gallon of whole milk a farmer sells to a processor will rise by 47 cents, jumping to $1.85 from April's $1.38, according to the California Department of Food and Agriculture.
In a one-of-a-kind system established in 1935, regulators at the agency set both the farm-gate and retail prices for milk, the latter after factoring in the estimated costs of processing and marketing. The system was created during the Depression to keep farmers solvent and ensure a steady, year-round supply of milk. (A federal system that operates in much of the rest of the country will push milk prices elsewhere to record levels too.)
