Milk Prices and the Cost of Corn

I have received several comments and in turn have done much reading on the matter. It seems to be the popular consensus that yes, corn is the grain to blame for the high cost of milk these days. It appears that due to the high cost of corn that the dairy farmers have to purchase in order to feed their dairy cows they in turn have raised the price of their milk to compensate.

My own questions and answers

Do farmers set the price of the milk?

Of course they don't. The above statement is totally false. The prices paid to farmers for their milk comes from the National Agriculture Statistics Service. This organization only takes one thing into consideration when determining what dairy farmers will get for their product, Supply and Demand. It is as simple as that.

Are there no other factors taken into consideration when determining the price paid to dairy farmers?

This price is determined from the wholesale price of certain dairy products. These wholesale prices are obtained by the NASS each week. They then take this information and use it on a monthly basis. The milk market administrator then sets the minimum price that is to be paid to the dairy producers. It is not up to the dairy farmer to tell the processors how much to pay them for the milk they produce.

Yes, the price of corn has risen because of use in ethanol. What does that mean for the dairy farmer?

All it means is that he has to pay more for his feed this year. The price of corn has nothing to do with the price of milk. I am not a dairy farmer, but am calculating that he is getting a little more for every ton of milk he produces. That "little more" that he is making is going to be reinvested to feed (which contains corn) his cows, which due to the hike in corn popularity is going to probably cost him the difference of what he got last year and the profit, if any, he has made this year.

FYI

There is only about 5 cents worth of corn in a box of corn flakes.

Credit: Wikipedia

Copyright: Wikipedia