Milk prices may rise too much

RE: T.V. NEWS THAT MILK WILL COST $5.00 PER GALLON, ALL OTHER DAIRY GOODS WILL RISE BY APPROXIMATELY 70%--BECAUSE THE PRICE OF CORN IS HIGHER DUE TO ETHANOL PRODUCTION.

Thirty minutes of research by famed Las Vegas personality L.E.Fant reveals that such steep increases are very likely unjustified and consumers should fight back by writing their T.V. stations, the dairies, their elected representatives and whoever else may choose to listen.

FACTS:
A cow produces approximately 60lbs of milk per day when lactating (approximately 6.6 gallons).

The dairy farmer now gets around $20 per 100 lbs of milk/11 gallons (similar to the 2004 price when milk was probably less than $2.00 per gallon at the store).

A cow apparently consumes approx one bushel or 60lbs of feed per day.

If the cow is fed 100% corn (unlikely) then at the current settlement prices and future prices through 2007 it is reasonable to anticipate a price per bushel of $3.85. (This is up from approximately $2.50 in 2006).

The difference is $1.35 per day per cow for feed cost (blamed on ethanol production). This equates to very close to 20 cents per gallon based on 6.6 gallons per day per cow and 100% corn feeding.

As mentioned above, this figure is likely high as other feed ingredients (such as soy meal which is around one half the cost of corn) are usually incorporated into the cow’s diet, it is unlikely the dairy cow consumes 100% corn. If so, the additional cost for corn is likely one half of that above, or 10 cents not 20 cents per gallon of milk.

The above example does not take into consideration any further change in the amount the processors will pay to the dairy farmer as the stated reason for an anticipated near doubling of the price to consumers of dairy products is merely the increase in the price of corn. Clearly the above reasoning cannot and does not substantiate such huge increase to the consumer.

However, farmers are being paid approximately $20 per cwt against $13 per cwt last year for their milk. This means he gets approximately $1.81 against $1.18 last year, or 63 cents more for each gallon. Add the additional feed cost of 10-20 cents and we get, at worst, an 83 cents per gallon cost increase per gallon.

Apparently a major factor in current milk price increases is simply world wide increased demand. Dry milk powder has nearly doubled in price due to supply/demand pressure. As Milk is used to make the dry milk product one may easily see a reason other than ethanol production for milk prices to increase in the near future. L.E. Fant hopes that increased sizes of cow herds throughout the world will increase supply and thereby reduce milk prices as milk is a necessary ingredient in many families diet.

While L.E. Fant concludes there is basis for an increase in milk prices to the consumer in the near term, he believes that increase should be seventy cents or so-not the nearly three Dollars stated by a local news organization.

I guess this is the place where time begins?

(Royal Observatory, Greenwich, England)