If You Want to Understand the Price of Milk, Think of It Like Gasoline

NPR’s The Salt exposes the mysteries of dairynomics

By Amanda Arnold

Published on August 9, 2016

Calcium-rich, helpful in forming both thick mustaches and strong bones, and tasty enough to be the namesake ingredient in cake, milk was our parents' and doctors' favorite daily prescribed drink. But today the price of milk spikes and plummets wildly, and the reason why isn't just a matter of decreased demand for a tall glass of the cold stuff. In an article on NPR's The Salt, the site's food and agriculture correspondent helps decode the mysteries of milk's fluctuating prices by comparing it to a liquid that pairs far less well with cookies: oil. The kind that powers cars.

Just like oil, the global demand for “crude” milk is less to consume it as a drink and more about refining it into products like cheese, yogurt, milk powder, cream, or powdered whey. Each of those products requires a lot of milk to make a little refined dairy, and what’s more, they’re traded in a global marketplace. So when a milk-producing country is facing issues, political or economic, or they simply change the amount they supply, they shake up the entire milk world, and American dairy farmers suffer.

For example, the European Union recently got rid of a required milk quota for its dairy farmers, and Russia isn’t buying as much European cheese as it used to, thanks to 2014 economic sanctions—two unrelated factors with undeniable effects on the milk trade.

"It's a global phenomenon," Jerry Cessa, the milk expert at the USDA's Economic Research Service, is quoted in the article.

On top of the global dairy industrial complex, people just don't drink it in the United States like they used to. Just as is the case with orange juice, Big Dairy (and Big Juice companies) used to convince Americans to drink milk (and juice) to support their businesses or industries, convincing us that we needed it for our health—and in reality, we don't. That, and in a time where you can drink milk made out of anything (truly), why slurp it from a cow?

As for what this means for the dairy industry, it's unclear; milk producers are affected differently, depending on a multitude of variables, so there's no one clear solution to stabilize the business. The USDA has created a program in which dairy farmers can enroll to protect themselves from losing too much money, known as the Dairy Margin Protection Program, but there are no released numbers on enrollment rates. And, in the past few weeks, milk prices have even gone up, according to the article. The price of milk has been low as of late, but for all dairy industry specialists know, the milk crisis could be easing.

Really, the main takeaway is this: Don’t ever confuse milk and oil, but perhaps use the latter to help understand the former.

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