Monday, May 14, 2007

Windfall Milk Profits

Someone alert Governor Doyle there may be another source windfall profits to be taxed. “Milk prices at U.S. stores averaged $3.32 a gallon in April, up 2.9 percent from a year earlier, USDA data show.” Who knew world demand for milk is growing faster than world demand for oil.

Got Milk? Milk prices worldwide are rising at the fastest rate ever and won't be falling anytime soon because of growing demand in China and Latin America and dwindling government supplies.

This year's rally is different from increases in previous years because government surpluses are no longer available in dairy-producing countries such as the U.S., the largest exporter of milk powder, and the EU, the largest exporter of cheese.

U.S. inventories of butter, cheese and dry milk peaked at more than 2.7 billion pounds in 1983. The government that year spent $2.5 billion on surplus dairy products to support prices and farmer income. Today, the U.S. has no surplus after selling the 27 million pounds it held in 2005, USDA data show.

The 14 percent jump in milk demand during the past seven years outpaced the 13 percent rise in oil use, according to estimates from the International Energy Agency in Paris.

This whole supply and demand thing means dairy prices will probably continue to escalate over the next couple years because you just can’t instantly ramp up production by going to Wal-Mart and buying a dozen more heifers to plug into the pumps. Since feed grain accounts for about half the production cost of milk, dairy farmers have been reluctant to expand herd size as ethanol induced madness continues to drive up the price of corn.

So this summer as milk approaches $4.00 a gallon and those nuevo-rich dairy farmers are putting brand spanking new sets of Goodyears on their Ford F-150’s, expect the Governor to declare his outrage at putting profits over the needs of growing babies and pizza eating college students yearning to save the world. Then announcing a new excise tax to address the crisis.