A drop in dairy prices coming to a store near you

RIVER FALLS, Wis. -- When you run a grocery store in a milk producing county your dairy farmer neighbors become your harbingers of future prices.

"They've been talking to me for a month that their price has been going down," explains Dick Rinehart, owner of Dick's Fresh Market. So it was that Rinehart knew a drop in milk prices would soon be coming from his suppliers as well. He just wasn't prepared for the amount. "As long as I've been in the business I've never seen one that big."

On Friday Rinehart learned that his next shipment of milk will fall in price by not the usual nickel or dime, but by 39 cents a gallon for skim and one percent milk and 43 cents a gallon for whole milk.

A surprised Rinehart says, "I've never seen a 43 cent a gallon drop."

No one has.

After a disastrous couple of months for milk markets, in February dairy farmers are expected to be paid for their milk roughly half what they received a year ago. A collapse in foreign demand is partly to blame, as is the steadily climbing U.S. production that has resulted in more milk than there are people to drink it.

It's taken some time for the reductions to reach consumers, but Brian Buhr, head of the U of M's Applied Economics Department says price declines at the grocery store are inevitable. "At the end of the day if milk prices stay cheaper at the farm level, they're going to get cheaper at the retail level."

Price cuts are coming for bottled milk, but also on many milk based products. "This is from Shullsburg Cheese," says Rinehart holding up a pound of cheddar. "It's our own private label and this one is down between 40 and 50 cents a pound."

Dairy price reductions may be good for consumers, but Rinehart won't be celebrating; too many of his customers are dairy farmers themselves. "I hope this is not a trend that we're going to put our farmers in the United States in a bad position," he says. "You can't produce something where you do not make money."

By Boyd Huppert, KARE 11 News

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