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Dairy products milk consumers' wallets Steep price increases blamed on higher costs of grain and fuel, rising demand for exports

Customers scanning the dairy case at local supermarkets these days may notice a gallon of milk now can cost more than a gallon of gasoline.

At a Tops Market in Amherst this week, for example, whole milk cost $3.19 per gallon -- 10 cents more than the region's $3.09 average price for unleaded regular gas.

"Every week that I go shopping, I notice prices are going up," said Gloria Ettipio, a retiree from the Town of Tonawanda who was shopping at a local Tops earlier this week. "Not by a dime -- by 50 cents."

Experts cite two reasons for the sharp increase in milk and milk product prices: skyrocketing grain and fuel prices in the United States and rising demand for milk products worldwide. And milk distributors are forecasting more increases in the coming weeks.

That means trouble for people like Ettipio who live on fixed incomes -- and higher prices all over the grocery store, since the cost of milk affects the price of yogurt, cheese, ice cream and even chocolate.

After more than a minute of deliberation, Ettipio bought a half-gallon of skim milk for $2.14.

"I'll get this, and then next week, if it goes on sale, I'll get the larger one," she said.

From March to June, the price of a gallon of whole milk increased to $2.67 from $2.24, a jump of 20 percent, according to the most recent retail milk price survey by the state Department of Agriculture and Markets, which includes prices from five local supermarket chains.

Prices have continued to increase this month. A trip this week to several area supermarkets showed whole milk prices ranging from $2.69 a gallon all the way up to $3.49.

While such prices might be just an inconvenience to many people, families using food stamps may have to use extra cash to cover price increases, said Bill Graham, assistant commissioner for administration in the Erie County Department of Social Services.

"There's not any sort of increase that is going to happen in the food stamp program," he said. "Just like if you're working, that doesn't mean your salary goes up as prices go up."

That's just what dairy farmers are saying, too.

"The price in the retail market is not reflecting the price the farmers are getting," said Rep. Randy Kuhl, R-Hammondsport, who serves on the House Agriculture Committee. "That's been a sore point with farmers for years."

Milk prices are rising in large part because of skyrocketing prices for corn to feed the cows and fuel to run farm equipment and transport the milk.

"The cost structure is very high," said John Lincoln, a dairy farmer from Bloomfield, in Ontario County, who serves as president of the New York Farm Bureau.

This year's increases follow a huge drop in milk prices last year that left many local dairy farms deep in debt and put some out of business.

"I still need two more months like this to pay off the debt from what I lost last year," said Dale Stein of Le Roy, president of the Genesee County Farm Bureau.

Dairy-industry experts focus on those high prices for feed and fuel as a key reason why consumers are feeling the pinch at the dairy case.

Corn prices at the Chicago Board of Trade more than doubled from late 2005 to early this year. Mark Stephenson, senior extension associate at the Cornell University Program on Dairy Marketing and Policy, attributed the increase to rising demand for corn for use in ethanol, a gasoline substitute.

"This came on tremendously fast," Stephenson said. "In addition, you have increased costs for energy, for fertilizer, for hauling milk. Farm expenses have gone way up."

So has demand for dairy products. Droughts in Australia and New Zealand have prompted a 75 percent increase in the export of U.S. milk products in the last three years.

Some dairy experts downplay the impact of the milk price increases, saying they pale in comparison with the ramifications of the long-term increase at the gas pump.

"You can cut down on milk and still get to work every day," said Connie Tipton, president and chief executive of the International Dairy Foods Association, in a recent column in Cheese Market News.

Then again, higher milk prices are making some summertime rituals more expensive.

Brittany Morgan of Williamsville, a youth leader at Kenmore Alliance Church, takes youth group participants like Kenmore's Christina Dirschedl, 10, out for ice cream about every other week. But ice cream for Morgan and Christina cost more than $7 Thursday at Anderson's Frozen Custard on Sheridan Drive.

"The youth group, they reimburse me if I need it," Morgan said. "If the price keeps going up and they stop reimbursing me and it gets too expensive, then I'll have to stop."

Holly Anderson, Anderson's owner, said vendor price increases caused Anderson's to raise prices twice this year -- on March 1 and again on April 1, with a small custard cone increasing to $1.79 from $1.69 and one scoop of ice cream increasing to $1.99 from $1.89 in the past year.

Prices aren't likely to head downward anytime soon.

While corn prices have fallen recently, they never will return to their low levels of a few years ago which means milk prices won't plummet, either, said Stephenson, the Cornell extension associate.

Because of the ethanol boom, "there's a whole new demand for corn that simply didn't exist before," he said.

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