Got Milk?

Dear Methane Contributors,

With all the changes that are perpetually occurring throughout the world, it seems normal yet is slightly unexpected that the global village is currently undergoing a worldwide milk boom. Over the past couple of years several factors have contributed to the significant increase in demand for milk and thus commercial dairy farming. Some may even go so far as to say that supply is not keeping up with the rising demands resulting in shortage of the good stuff.

The primary driving force behind the increased demand for milk comes from the "roaring global economy." As millions of people rise out of poverty and into the middle class they have the disposable income to spend on luxury items such as televisions, clothes, meat and of course, milk. Figures from 2000 show that the average citizen in China consumed a mere 9L of milk per year, while pales in comparison to today's 25L consumption rate. Furthermore, in the current state of affairs it isn't at all surprising that China has become the leading milk producer and milk importer in the world.

Another factor contributing to the rising costs of milk are the mounting costs of feeding the source. With the high, "demand for bio-fuels is pushing up the price of corn and other grains, which is what farmers use....to feed their cows instead of grass." Furthermore the milk industry tends to be controlled heavily by the government, though the price supports and subsidies may become somewhat irrelevant due to the sudden milk boom.

How exactly does all this milk activity effect us? Well the answer is simple (and obvious): rising prices. Yet, it goes beyond paying a dollar more for a carton of milk. Because milk is used in a great several forms in an even larger range of food products (baby formula, cheese, chocolate, butter, ice cream, cake etc.) the effects are felt to a wider extent. Now Starbucks sells more milk than coffee and has raised their drink prices accordingly. Pizza parlors and ice cream vendors alike have also adjusted their prices to compensate. Hershey's has suffered a fall in profit tied to the increased cost of production, and even Kraft (think KD) is feeling the blow.

Whats interesting about this entire situation is not that milk can be compared to oil, or even that such a seemingly trivial industry has literally taken off in the past few years, but why. In under five years, the growing middle class (primarily located in developing countries) has transformed the world market. Its interesting how five years ago such people could be labeled as a burden to the society they lived in and now they are a significant driving force in the global economy.

What is unusual, and somewhat confusing, about the milk boom compared with other booming commodities is that milk is not like oil: You can't stick it in barrels and stockpile it. It goes sour. Even in powder form, the most commoditized version, milk has a shelf life. As a result, only about 7 percent of all the milk produced globally is traded across borders. The rest is consumed in domestic markets, which are protected by geography and just as often by tariffs or subsidies.