WASHINGTON -- Retailers can expect to see continued high dairy prices begin to take their toll on consumers, according to an industry official.
The complete repercussions of rising production costs have yet to be felt at the retail level, said E. Linwood Tipton, chief executive officer at the International Dairy Foods Association. "I'm not sure that all of the price increases have gone through the system. I think the full impact at retail has yet to occur."
Earlier this month, in a CNN report focusing on rising prices of dairy products, Tipton confirmed that prices for items such as milk had been steadily increasing. He told SN it is a trend that is likely to continue.
"There've been some pretty large increases," he said. "The actual increase in prices being paid dairy farmers for milk since June, has gone up about $3.50 per hundredweight, or the equivalent of about 31 cents a gallon for milk, 36 cents a pound for cheese. "That's the actual ingredient cost, and as you know as product moves through processors and retail outlets there's normally a markup that is applied. Actual retail prices have probably increased to not quite double."
Tipton said prices will continue to be abnormally high through the end of this year and into next spring, when they should start to return to normal.
He did note that dairy products have not been featured as much lately. "There's certainly been a reduction in that sort of activity."
Tipton said the source of the increases can be found in the soaring costs of feeding dairy cows, due to weather-related shortage of feed grains. "These increases in [dairy product] prices are pretty commensurate in actual cost of feeds. Because of that, dairy farmers are feeding the animals lesser amounts, so the milk production per cow is going down -- that's one way they can conserve costs."
Tipton said that while milk production was down 2.5% in June, consumption of both cheese and milk has been increasing.
"Partially as a result of the [milk mustache] ad campaign, milk consumption went up one%, and it had been going down for a number of years before that, so that was a pleasant sight."
There are no plans that he is aware of to prevail upon processors or retailers to reduce their markups on dairy products.