You asked why milk prices have recently increased.

The recent increase in milk prices is due to an increase in the price the federal government sets for dairy farmers to be paid. That increase is due to a variety of factors.

Federal law governs the price paid to dairy farmers for milk. Generally, U. S. Department of Agriculture (USDA) marketing orders set the price for milk and milk products by region. One order prescribes the price paid to farmers in New England and the Mid-Atlantic states. The order is broken down into class 1 (fluid) milk and various other classes of milk products.

In March 2003, the price under the order for fluid milk was $ 13. 06 per hundredweight (i. e. , 100 pounds or 11. 6 gallons), according to USDA. In March and April of 2004, the price begain rising to about $ 16 per hundredweight, according to a May 3, 2004 Hartford Courant article. Several factors have contributed to decreased production and corresponding increased prices, including farm closures, herd sell-offs, and rising grain prices. The discovery of Mad cow disease in Canada also curbed competition (decreasing production), according to the Courant article.

Notably, the federal order price had been at record lows for a couple of years (New England farmers typically need $ 15 per hundredweight to break even), forcing Connecticut and other New England dairy farmers to sell off herds or out of the business entirely (as alluded to above). Some argue that retailers have artificially inflated milk prices, which could exacerbate the current spike for consumers (e. g. , a bill raised during the 2003 Session, SB 852, An Act Concerning the Fair Pricing of Milk, responded to complaints of artificially high prices by defining milk prices as unconscionably excessive and subject to penalties if (1) the price charged by a processor to a retailer exceeded 140% of the price actually paid to the producer by the processor for the same fluid milk or (2) the price charged by a retailer to a consumer exceeded 140% of the price actually paid to the processor by the retailer for the same fluid milk; it was amended and eventually died). For background on this and other milk pricing issues, and past as well as proposed solutions, see OLR reports 2003-R-0765 and 2004-R-0204. Copies of both reports and the Hartford Courant article are attached.

JH: ro