All About Milk. Prices

Many people are not aware that the price dairy farmers receive for their milk is effectively set by the U.S. government. In a practice established in the 1930s to help dampen dramatic price fluctuations, the U.S. Department of Agriculture each month sets a “floor” price below which it will buy dairy farmers’ milk in preference to dairy processors. The actual market price dairy farmers receive from processors usually floats somewhere above the “floor” price.

The “farmgate” price that dairies receive may vary widely over time and is based on a complex calculation that takes into account many factors, including the availability and price of dairy cows, the cost of feed, crop yield forecasts and transportation costs. Unfortunately, prices paid to farmers frequently have not kept pace with the cost of milk production, making it more difficult to sustain a dairy operation.

The retail price of milk (what consumers pay at the store) is set by grocery stores and other retailers selling milk products, rather than by dairy farmers or dairy processors. On average, dairy farmers receive only 29% of what consumers pay for dairy products at the retail level. The balance goes to processors and retailers.