The year 2007 has been a roller coaster for dairy industry.

For dairy producers, the price of milk has increased from $12 per cwt ($1.14 per gallon) in January to over $22 per cwt ($1.80 per gallon) in July. While this has been critical to return and profit margin, other factors have also occurred:

• Price of hay and forage has jumped from $90 a ton to$160 a ton due to the Easter freeze (loss of first crop and winter wheat as a forage source).
• Corn prices have remained high with corn prices reaching $4.20 a bushel in January.
• Fuzzy cottonseed has increased from $135 to $265 a ton as acreage was shifted to corn production for ethanol.
• Fuel and fertilizer prices have increased.

The bottom line is the break even price for IL milk producers has increased from $13 to $16 per cwt reducing profits and margins.

For consumers, the price of milk has increased 60 cents to over one dollar a gallon. Part of this cost increase is due to higher farm gate milk prices which represents about 60 cents a gallon. Consumers may be experiencing a new base milk price of $3.50 per gallon or higher compared to $2.80 a gallon. In Tennessee, a gallon of milk was $5.60 a gallon. 

Looking ahead to 2008, several factors could impact the price of milk for both producers and consumers.

• Restricted use of rBST will reduce milk yield 2 to 4% leading to higher milk prices for both producers and consumers. However, farmers using rBST will experience significant losses of over $1 per cow per day.
• The number of milk cows in the U.S. is up 2 to 4 percent which could reduce milk prices.
• World milk prices will depend on the value of the U.S. dollar and  increased milk quotes on Canada and European Union. Continued increases in demand in China and Pacific Rim countries will be a factor.
• Price of ethanol as it impacts corn demand and use.
• Weather conditions during the growing season.

Both producers and consumers have an interest in the U.S. dairy industry.