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PRICE OF MILK EXPECTED TO HIT $3 A GALLON NEXT MONTH

The price of a gallon of milk could hit $3 by September following back-to-back record increases in the price that farmers are paid for milk supplies.

Meanwhile, the start of a new school year is expected to keep milk supplies tight and a spokesman for the New York State Dairy Foods Association said prices might not drop until December or January.

"Milk production is somewhat flat around the country and when schools get back in session, it will only compound the problem," said Bruce Krupke, the association's executive vice president.

In June, the basic formula price increased by 19 cents per gallon, the largest one-month increase federal regulators ever approved.

Krupke said the July increase of 14 cents will probably cause the price of milk in Western New York to jump by 25 to 30 cents per gallon.

Milk prices are set two months in advance.

"It could easily go up beyond three bucks a gallon in early September, the highest price in more than two years," Krupke said.

The increases are being blamed on several factors, including a warm summer that boosted demand for ice cream; a decision by some dairy processors to hold more product in inventory, and the government's efforts to end dairy price supports.

David Bordonaro, director of category management at Tops Markets, confirmed that his suppliers are indicating that milk prices will likely continue their upward march over the next few months.

"My concern is that people who are drinking milk now might turn to other options like fortified orange juices with calcium. In fact, we're already seeing an increase in consumption of this type of product," he said.

Bordonaro said Tops tries to maintain the lowest milk costs while remaining competitive.

Ann McCarthy, a spokeswoman for Wegmans, said the supermarket chain is expecting another increase in milk prices in September. She said Wegmans has consistently priced its milk below the state-imposed maximum.

Wegmans and Tops are currently selling whole milk for $2.74 per gallon.

David C. Arms Sr., a dairy economist based in Reading, Pa., said that by early September, the average price of a gallon of milk will have increased by about 45 cents over a two-month period, or about 16 percent. He noted that the new era of government regulation in the industry has enabled supply and demand forces to play a greater influence in pricing.

"Farmers have been hurting. Many of them haven't even been able to recover their costs. But they've weathered the worst slump and their returns are going to improve dramatically," Arms said.

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