Consumers face milk price hike

The price of milk on the supermarket shelf is likely to go up, the result of price-setting by the state that follows national trends and international market forces.

It all begins with the price that processors pay for milk, which will hit an all-time high today. The increase will be felt by consumers in what they pay for milk, cheese and other dairy products.

"It compels us to raise prices and consequently you will see a rise in all dairy products," said Martin Adams, chief executive officer of the Sonoma Cheese Factory.

But it will help Sonoma County's dairy ranchers, who have struggled with increased costs and depressed prices.

"We are still trying to catch up," said Jon Bucher, a second-generation Healdsburg dairy rancher. "Dairy farmers are not out of the woods."

Albertsons raised the price of its Bay View brand of milk to $3.15 a gallon Friday, and most of the other major stores will raise prices today, said Dave Hylen, a spokesman for the California Grocers Association.

The price paid for milk by processors is set monthly by the state Department of Food and Agriculture. It follows the Chicago Mercantile Exchange price, and is based on the price of butter, cheese, whey and powdered milk.

Today, it will be set at $1.98 a gallon, a 26-cent jump over the June 1 price and 92 cents higher than a year ago.

"Right now we are in a situation where demand is high for those products internationally and prices are high," said Steve Lyle, spokesman for the state Food and Agriculture Department.

The full impact of the increase may not be passed on to local consumers, at least right away.

"We will wait and see," said Kurt Olson, co-owner of Screamin' Mimi ice cream in Sebastopol. "Over the course of the summer, we try and plan for these things. Historically it goes up and down and we learn to shoot for the middle, just so we don't have to change prices all the time."

The prices are being driven by a demand for powdered milk and whey in Asia and Europe, the result of a shortage caused by a drought in New Zealand and Australia.

"We try not to guess what will happen month to month," Lyle said. "It is economics, it can be uncertain. But national and international analysts expect prices to stay high for the rest of the year."

Sonoma County's dairy industry produced $67 million worth of milk in 2006, down from $90 million in 2005, largely because of depressed prices, according to the county Agriculture Commission.

Prices peaked at $1.58 a gallon in January 2005, were 20 cents a gallon less for the remainder of 2005 and hit a low of $1.03 a gallon last August.

Meanwhile, dairy farmers were hit with increases in the price of fuel and all types of feed, because of the demand for corn for ethanol.

"Our profitability is so much a function of what it costs to feed the cows," said Bucher, who has 800 head on his Healdsburg ranch. "Fifty to 60 percent of our income goes to feeding cows, and when milk prices were so low, it was 70 percent."

With feed costs outstripping milk prices, he said, "We are still trying to financially get into the black."

You can reach Staff Writer Bob Norberg at 521-5206

or bob.norberg@

pressdemocrat.com