Milk Prices on the Rise

What is the Impact on Consumers?

Milk Prices on the Rise
May 20, 2017

Good news – the average price of gas has been falling below the average price of milk. Bad news – that has more to do with rising milk prices than falling gas prices. The average price of a gallon of milk was $3.67 in March 2014, reaching its highest level since September 2011.

It would be bad enough if the only effect were on milk, but dairy price increases ripple through the food chain. Cheese prices are obviously affected, as are all of the processed foods containing either cheese or milk. Butter, ice cream, sour cream and other dairy products may follow suit. Combine this multiplier effect with rising beef prices, and the food budget has taken a hit disproportionate to overall inflation.

The longer-term outlook for milk is a little better than that for beef. Many analysts expect prices to drop through the second half of 2014, because they expect producers worldwide will be increasing their output. It is no sure thing; any number of events, such as another unexpected rise in demand, can swing prices back up very quickly.

In the meantime, how do you keep the extra costs of dairy products from putting a hole in your budget?

  • Take Advantage of Sales and Coupons – Comparison shop all your grocery stores, as well as Wal-Mart, Target, and similar retail stores for the best sale prices, and know who has the best regular price when nothing is on sale.

    Check for double coupon days, stores that price match, and any other deals and promotions. Every little bit helps.

  • Stock Up When Possible – It really is not practical to stock up on milk or sour cream, but you certainly can stock up on ice cream, butter, and cheese products. Know how much you would normally use in a period of time, and make sure you check the expiration dates on more perishable materials such as butter and cheese.

    It can help to plan out meals for a few weeks in advance so you are sure what you will need, and not buy more than you can use.

  • Consume Less – There are several simple ways to cut back on dairy products until prices stabilize. Try eating your cereal with less milk. Make your instant oatmeal and hot chocolate with water instead of milk. Put a little less butter on your toast. Skip ice cream and find a simpler, healthier treat, like fresh fruit. Reduce your overall use of cheese – which will also benefit your cholesterol levels.

    However, must nutritionists suggest that you do not skimp on milk for your kids. It is important for their health, and well worth the extra investment.

  • Try Store Brands – All major grocery stores have store brand ice cream, cheese, and other dairy products that are significantly cheaper. The stores also put them on sale more often in an effort to get you to switch. Store brands have to meet the same standards as name-brand consumer dairy products, and who knows… you may even prefer the taste.

While these tips can help you through a period of higher prices, they are also pretty reasonable advice in good times. When the indulgences are worth it to you, go ahead – but when they are not, why spend any more money than you have to?

With any luck, the analysts are right, dairy prices will fall later in 2014 as milk supplies return to normal, and other dairy products follow suit. Wouldn't it be a nice surprise to see prices falling for both milk and gas? That would make a drive to the grocery store twice as nice!

To see how the price of milk affects you from an investing standpoint, see "Milk Prices Soaring."
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