Retail-milk prices will rise as much as 15 percent by the first quarter of 2013 after the worst U.S. drought since 1956 sent livestock-feed costs to a record, according to Dairy Management Inc., an industry group.
“Since the drought started, the milk price has gone up quite a bit,” Dairy Management Chief Executive Officer Tom Gallagher said yesterday during an interview in Chicago. “Prices are going to go up worldwide.”
The drought led to the biggest U.S. drop in corn production in 17 years, sending the price of the main feed ingredient for dairies to an all-time high on Aug. 10 of $8.49 a bushel. Prices are up 47 percent since mid-June, forcing some California dairies into bankruptcy, while others cut their herds and output to limit losses. Milk futures in Chicago touched $21.26 per 100 pounds on Oct. 3, a 13-month high.
“When you get to $25 milk, if that happens, the effect on the retail price is enormous,” Gallagher said. Consumers paid on average $3.469 a gallon in September, U.S. Bureau of Labor Statistics data show.
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