Following some of the lowest milk prices in the past 20 years, a nationwide increase in the wholesale or "farm" milk price will take affect today. The adjustment of 6 cents per gallon raises California's farm milk price to $1.38, up 6 cents from last month, but down 4 cents from January of this year. Not unique to California, the higher price mirrors similar increases that take effect nationwide.

A decline in milk production across the nation, bad weather in the East, and the reduced supply of dairy products in Europe due to foot and mouth disease have all influenced the recent increase. Milk prices fell to record lows last year as production increased by over 6 percent in California.

So far this year, demand for dairy products have stayed strong while milk production has declined in response to the low prices during 2000. According to USDA, milk production in the top 20 producing states in March was down 2.2 percent from March 2000. The decrease in production across the nation has led to significant increases in cheese and butter prices and, as a result, the farm milk price. Farm milk prices are based on the market values of butter, cheese and powder as traded on the Chicago Mercantile Exchange (CME).

However, California's farm milk price remains below those found in other Western States and the U.S. average.

                 Average Farm Milk Prices for May 2001
                             (per gallon)

          California                       $1.38
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             U.S.                          $1.42
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            Arizona                        $1.42
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            Florida                        $1.59
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             Texas                         $1.48
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           Colorado                        $1.44
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            Oregon                         $1.39
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    Source: California Department of Food & Agriculture (CDFA)

The above prices are for whole milk. The May 1st adjustment may be less for reduced fat and nonfat milks. However, retail prices are not regulated, but are determined by individual retailers and grocers, and often have little correlation to the farm milk price.