The cost of dairy had its highest increase in 15 years last month. When will prices come back down?
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Milk, cheese and other dairy products sit in front of an upward arrow indicating the rising prices of dairy.
Credit: Allrecipes

Grocery shopping is growing more interesting by the day. In addition to sparsely stocked shelves when it comes to some items, it seems that staples that we're used to buying on a weekly basis are creeping up in price, and the totals at check-out can be staggering. One department in the grocery store that's seeing increasingly rising prices is dairy, but why?

To try and make sense of the rising prices of dairy products we checked in with Rick Naerebout, chief executive officer of the Idaho Dairymen's Association. Idaho ranks within the top five milk producing states in the U.S., alongside California, Wisconsin, New York and Texas. Together, these five states produced more than 50% of the U.S. milk supply in 2020.

"The costs for dairymen are increasing, much like they are for all households around the country," Naerebout told Allrecipes. "Fuel and energy costs are up, labor costs are up, and labor shortages are persistent."

A May 2022 U.S. Bureau of Labor Statistic Consumer Price Index report shows that the food index increased 1.2 percent in May, and the food at home index increased by 1.4 percent, the fifth consecutive monthly increase of more than 1.0 percent. The price of dairy and related products saw its biggest increase this May since July 2007 at a whopping 2.9 percent. The category has increased 11.8 percent since the same time last year. Drilling down a bit more into the price increases compared to May 2021, milk is up 15.9 percent, cheese and related products are up 8.7 percent, ice cream and the like are up 9.6 percent, and "other dairy and related products" are up 12.9 percent.

In addition to the causes he cites above, Naerebout adds, "Feed costs — the largest cost in dairy production — are up significantly, with expectations for those costs to continue to increase.

"Our feed costs in Idaho are at record highs," he continues. "All of these cost increases lead to decreased milk production nationwide, and the end result is higher consumer prices."

Though there may be less milk production throughout the U.S., Naerebout assures Allrecipes that there's no need to worry.

Is There a Dairy Shortage?

"There is no concern of dairy shortages," he says. "Milk production nationwide [in April] was down only 1%, so that might be enough of a reduction to affect price, [but] it is not enough to result in a shortage here in the U.S."

We asked Naerebout about reports in recent years of dairy farmers having thrown milk away, and if that's happening now and affecting pricing.

"Milk was dumped during the early days of the pandemic, when our supply chain was realigning to consumer spending," he explains. "Pre-pandemic, 50% of cheese and 60% of butter was sold in restaurants, with much of that coming in dine-in establishments.

"With their closure, we lost demand through those channels, but picked it up in retail outlets and through quick serve restaurants," Naerebout continues. "It took a few weeks for our supply chain to adjust to the different packaging and sizes used in retail versus food service, but once that aligned, we have not seen any widespread dumping of milk."

When Will Dairy Prices Drop?

So, the question on all of our minds: When can we expect dairy prices to come back down? The quick answer: Not anytime soon.

"There is no clear indication of when prices will soften," says Naerebout. "Our dairymen are looking at putting up record high priced forages this fall (corn silage and hay), and that will lock them into high feed prices until fall of 2023.

"All the inputs for feed are high this growing season," he continues. "Fuel, fertilizer, labor, seed — all of them are at or near record highs, so there is no reason to think feed or food prices will soften."

This may not be the news we and our wallets want to hear, but at least we know why dairy prices are going up, and will likely stay there for a while. In the meantime, it might be good to try out a few dairy-free options.