It’s a grocery staple that most of us can’t live without–we pick up a gallon of milk for cereal, for our coffee, and certainly when a storm is on the way. But although you are probably familiar with the general cost of a gallon of milk, you probably can’t name the specific cost of one–that’s because the price fluctuates frequently. And if you’ve ever wondered why, here are some answers.
Just the Facts
According to the government’s Agriculture Marketing Service, a gallon of whole milk set you back an average of $3.27 in 2018–and if that sounds high, keep in mind that it’s actually lower than what the average price was in 2017: $3.35 a gallon. These numbers are based on averages from across the country, but the figure differs depending on a variety of factors, including location, changes by date, and federal pricing rules.
As with most commodities, location is one of the key players when it comes to price fluctuations. According to the Retail Milk Prices Report, The most expensive cities for milk last year were Kansas City and Minneapolis, at $4.06 and $4.07, respectively. The cheapest places to buy milk were Louisville at $1.85 a gallon and Indianapolis at $2.20.
Considering three of these cities are in the Midwest, it may seem strange that their prices vary so wildly–you’d think that one region of the US would feature similar prices throughout. One reason is that some states have milk control laws that provide minimum prices for the product–essentially ensuring that the price of milk will never go below a certain threshold. In addition, dairy cooperatives can make minimum price standards in particular regions, which will impact the prices in those areas.
Additionally, you’d expect the cheapest milk to come from states with large numbers of dairy farms where more milk is produced, but that’s not necessarily the case. The biggest milk-producing states from 2016-2017 are California, Wisconsin, Idaho, and New York. However, these aren’t the least expensive places to purchase milk. From that, it’s apparent that state regulatory pricing regulations may have more to do with the milk price than the proximity of the milk production facility.
However, there’s one additional location-based factor that impacts milk prices significantly, and that’s the retail markup. Different stores can make decisions based on their margins and how much they want to increase the price of milk over and above what they paid for it. Surely, you’ve noticed that you pay more for milk at Whole Foods than you do at Walmart, and that often comes down to the markup, which retailers create by using a complex formula that factors their rent, utilities, labor costs, insurance, and every other aspect doing business that allows them to price items the ways they see fit.
Changes by Date
The production of milk changes based on the season, with most milk being produced in the spring and early summer, and less in fall and winter. However, even though you may purchase milk once a week, the cows are producing milk every day, and that milk has to be consumed or purchased, whether you’re the one purchasing it or not.
So whereas milk prices are typically lower in July than they are in January, you won’t find a day of the week when it costs significantly less than any other. If you are interested in buying milk in bulk, your best bet is to pick it up during the summer months when it’s plentiful, rather than in the winter, when it’s more scarce (and yes, you can freeze milk).
Federal Pricing Rules
If you’ve read this far, you may be expecting to hit the jackpot and get milk for under $1.00 a gallon if you visit a grocery store in Louisville, Kentucky mid-summer. Don’t get your hopes up. The reality is that the government sets minimum prices for milk, and the price cannot fall below that number. This allows dairy farmers to continue doing business, even during slow milk purchasing periods, and also ensures continued stability in the marketplace.
The consumption of milk has been falling over the past several decades with per-capita consumption of fluid milk at 261 pounds a year in 1975, which fell to 208 pounds in 2006. As plant-based milk options are hitting the market, the competition to dairy milk is growing increasingly crowded. This could push milk’s price lower in the future to keep it competitive, but it should continue to stay at least somewhat stable depending on the government’s intervention to support farmers.
Since it remains to be seen how milk prices will fare in the future, your best bet is to always keep an eye on store sales, weekly circulars, and coupons to make sure that when the prices are low, you stock up and get as much as you can use before the expiration date.