Whey's price going way up
Increase should be benefit for state's dairy farmers
By RICK BARRETT
rbarrett@journalsentinel.com
Posted: April 16, 2007
The price of whey, a dairy byproduct used as fertilizer and as an ingredient in many other foods, has soared to record highs as global demand has surged and supplies have tightened.
Prices of other dairy products, including whole milk, also are increasing for a variety of reasons. The average retail price of whole milk could rise to $3.35 per gallon, up from $3.07 in January, according to economist Ken Bailey at Penn State University.
"If you are a dairy farmer, you are delighted. If you are a consumer . . . it's going to hurt a little," said Bruce Jones, an economics professor at the University of Wisconsin-Madison.
Alto Dairy, a 113-year-old farmers' cooperative in Waupun, produces about 80 million pounds of whey annually at its cheese plant.
Years ago, whey didn't have much value and was spread on farm fields as fertilizer.
Now, at about 79 cents a pound, it's valuable both as animal feed and as a food ingredient exported globally.
"We are seeing a huge export demand for whey," said Karen Endres, Alto Dairy spokeswoman.
The cooperative sells whey to Main Street Ingredients, a La Crosse food company. Main Street manufactures whey protein concentrates and non-fat dry milk. Whey has nutritional value, said Bill Schmitz, company president.
"It's a widely accepted product now, compared to years ago," he said. "Alto puts a lot of whey in our pockets, and we have to move it."
In Wisconsin, the economic impact of dairy farming is more than twice as large as the citrus industry's impact in Florida. Dairy farming contributes roughly $20.6 billion a year to the state's economy and employs 160,000 people, according to industry figures.
The prices that processors pay farmers for their milk are expected to rise significantly this year, following a down year in 2006. Whey, as part of a federal milk pricing formula, is contributing to the increases.
The average farm-milk price should rise from $14.50 per hundred pounds to a peak of about $16.62 in August, according to Bailey.
That's good news for farmers, whose petroleum and other energy costs have surged.
Price boost
Dairy-cow feed costs - especially corn and soybean meal prices - have risen rapidly as a result of increasing demand for these feedstocks for ethanol and biodiesel fuel production.
"Since feed represents half the cost of producing milk, farmers are getting squeezed financially, even though milk prices are rising," Bailey wrote. "In fact, there was evidence already in January and February that farmers cut back on milk production. Less milk means higher prices in the grocery store."
Consumers could see sharply higher prices for milk and other dairy products over the next six months, according to Bailey.
Expect to pay more for dairy staples such as whole milk, cheese, butter, yogurt and ice cream, as well as for some food items that use whey, such as bakery goods, candy bars, and sports and nutrition bars.
Fitness enthusiasts have already noticed price increases for whey-based protein supplements.
Ken Weber, owner of the Brickyard Gym, said his costs for protein supplements have gone up twice in the last six months, and another price increase is coming.
"Nothing else seems to have gone up except for that," he said.
Normally, retail milk prices go up very quickly when farm milk prices rise, but decline slowly when farmers face lower prices.
"Since processors are expected to pay more for milk, the retail price will also rise," Bailey wrote.
Wisconsin cheese plants with the equipment to process whey currently get about 79 cents a pound for it.
That's nearly three times higher than the five-year average price. But, unlike Alto Dairy, many plants don't have whey-processing equipment because they don't produce enough of the byproduct to justify the costs.
Alto plans to shut down a plant in Black Creek that uses whey for animal feed and, instead, will sell the whey for other purposes. Nearly all of the plant's 12 employees will be transferred to other jobs in the cooperative.
On average, it takes about 10 pounds of milk to make one pound of cheese. There's about nine pounds of liquid in the process, and most of it is whey.
"It has turned out to be very valuable," Endres said.
