State regulatory agencies such as the California Department of Food and Agriculture affect the cost of milk. The CDFA regulates milk prices in California and must balance the financial needs of farmers who produce the milk, consumers who regularly consume milk and the manufacturers who help bring it to consumers.
If prices rise for cheese, butter, whey or powdered milk on Chicago's Mercantile Exchange, milk prices are typically raised. Production costs may also vary, as the prices for labor, feed, utilities and veterinary care for the cows vary. Manufacturing factors can also vary, including costs of packaging, utilities, labor and various administrative activities. Overall, entities such as the CDFA must monitor the supply and demand of milk for the region and adjust prices accordingly.
As of 2015, milk is regulated into five separate classes. These include fluid milk, cultured products, frozen products, butter and dried milk powders, and cheese and whey protein powders. Because fluid milk and cultured products such as sour cream and yogurt have high quality expectations and lower shelf life, prices for these products are typically higher than for other classes such as frozen, powdered, butter or cheese products.Learn more about Economics