Cost of milk leaves gas prices in dust

BALTIMORE (Map, News) - Milk may build strong bones, but it is makes wallets lighter in Baltimore. With U.S. Bureau of Labor Statistics listing milk as costing an average of $1.60 per half gallon, local consumers are already feeling the price crunch. And with the AAA reporting that Baltimore residents paying nearly $2.95 for a gallon of unleaded regular gas, consumers are faced with an even-faster rocketing commodity, with milk costing nearly 25 cents more at $3.20 per gallon.

Lower milk prices don’t seem to be on the horizon, either. Dairy economists are predicting that by fall, the retail price of milk could rise as much as 9 percent, or 30 cents per gallon, The Associated Press reported.

In the Baltimore region, the largest value of milk sales to the dairy industry were Carroll County with about $21,600, Harford County at $8,500 and Howard County at $2,400. Statewide, milk-cash receipts totaled more than $195 million in 2004, up more than $30 million from a year before, the most recent Department of Agriculture survey indicated.

The study also reported that the number of in-state cows declined by 4,000 to 74,000, with production declining to 1.16 billion pounds of milk.

Economists and farmers see a direct correlation between the cost of gas and how much farmers need to charge for what they produce.

“I don’t think the correlation is always as strong, but it is right now,” said Kirk Kinder, a member of the National Association of Personal Financial Advisors from Bel Air. “The price of corn right now is going up, and of course what are all the cows and pigs and animals eating? It’s corn. So recently, the correlation has been strong because of the ethanol issue.”

Ethanol is added to crude oil when it is refined into gasoline. Typically, ethanol is derived from corn, a popular component of animal feed. And as the cost of animal feed goes up, it costs more money for farmers to take care of their animals, such as cows. So as the cost of making gas goes up, so does the cost of making milk.

As of Wednesday, crude oil was listed as trading at $63.68 a barrel, an increase of more than $13 since January.

dcarey@baltimoreexaminer.com

Advertisement