Q:

What influences the price of milk in the United States?

A:

Quick Answer

As of 2015, the most important influence on the price of milk in the United States is the international market. Exports from the US comprise over 15 percent of local production, and if those export levels go down, so do the prices that milk producers can demand.

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Full Answer

In July 2014, for example, US dairy exports declined by 9 percent by weight. The largest item for export, nonfat dry milk/skim milk powder, declined by 17 percent. Because the majority of the nonfat milk powder manufactured in the US is exported, the domestic price is significantly influenced by the price overseas: between April and September 2014, that commodity price dropped from $2.10 to $1.80 per pound.

The primary dairy product keeping prices high for all producers is butter. When exports hit record levels in early 2014, for example, manufacturers could not keep up with demand, so the prices of butterfat and butter shot up. However, as 2014 progressed, inventories caught up with demand, and the price of butter fell, as did the price of milk. In this soft environment, smaller family dairy farms are at constant risk of failure due to a change in pricing. Volatility in the market remains an ongoing risk for all but the largest dairy producers.

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