High Milk Prices Likely To Continue

Milk shortages that have pushed supermarket prices past $3 a gallon will continue through next year, the Agriculture Department said Wednesday.

Although dairy farmers who have weathered high feed costs and low returns finally have reason to celebrate, some worry whether shoppers’ newfound enthusiasm for dairy products might dampen.

Even before Wednesday’s production report, the department was forecasting food prices to increase 3 percent to 4 percent next year. That’s on top of an expected increase of as much as 3 percent in 1996.

Some private economists have forecast higher rates as shortages of animal feed work their way through prices for meat and other goods.

High costs for corn, soybeans, hay and other feed have put a damper on milk production all year. Now production has fallen back so much that the prices farmers get for their milk will more than offset costs.

As a result, department economists on Wednesday raised the forecast for farm-level prices in the marketing year that begins Oct. 1 to nearly $15 per hundred pounds of milk - about $1.29 a gallon.

This follows a decade of prices in the $12.50 to $13 range.

By July, the store price for a gallon of whole milk averaged $2.65 and low fat, $2.44, up from $2.48 and $2.28 a year earlier, the Labor Department said. But prices of $3 have shown up around the nation.

Other dairy products also have shot up in price. Butter, for example, now costs nearly $2.30 a pound, compared with $1.62 a year earlier.