Monday, June 27, 2011

Interesting Anecdote Related to Food Prices

I was talking to some people in the dairy business yesterday. Dairy farmers operate on the margin between the cost of feed grains and the bulk price of raw milk. Grain is running about $14 per hundred in our part of the country. Milk is around $20 per hundred in this area. There is a rumor that the price of milk will go to $25 a hundred, which it has to at some point in order for the producers to stay in business. The other option is that feed could drop back a few bucks to around $10. If milk does go up, don't expect the processors to eat the increase. They will pass all of it, most likely, along to the consumer. In easy numbers, if milk is selling in the store for $4.00 a gallon at the moment, it would not be unreasonable to see it go to $5.00.

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