OCEAN CITY, N.J. – For years, you could buy an ice cream cone for 99 cents at Jilly's Ice Cream Factory on Ocean City's Boardwalk. It was a point of pride for co-owner Jody Levchuk, who held steady on the price while his competitors went to $2.75 or more.
But when milk fat prices recently soared, pride had to give way: A Jilly's cone is now $1.75.
"We caught a little grief from our regulars, because they were so used to the old price. We definitely lost part of our customer count," Levchuk said.
Just when you really, really want an ice cream cone, the price is rising.
The cost of milk fat, the principal ingredient in ice cream, jumped 71 percent over the past six months to $2.22 at the end of June. The industry blames a new government pricing system, while Agriculture Department officials point to a seasonal slowdown in milk production.
As a result, retail prices for ice cream are up 4 percent from last year, manufacturers say. And ice cream consumption is down 3 percent.
"It's terrible," said Janet Friedman, 71, of Margate, N.J., passing up her favorite dessert -- Breyer's chocolate ice cream -- at a supermarket Wednesday. "I used to pay $3.99 for a half-gallon. Now it's $4.99. I won't pay that. I'll do without," she said, walking away from the ice cream freezer empty-handed.
Dreyer's Grand Ice Cream Inc., the nation's largest manufacturer, reported a $4.9 million loss in the year's first quarter, despite a 13 percent boost in sales. William Oldenburg, vice president of operations for Oakland, Calif.-based Dreyers, blamed higher production costs stemming directly from milk fat prices.
Kerber's Dairy Inc. of North Huntingdon, Pa., which makes ice cream, sells it retail and stocks five central Pennsylvania supermarkets, raised its single-scoop cone prices by 15 cents, or nearly 10 percent, to $1.55 this month.
"We haven't had a complaint yet. As long as you keep the quality up, people realize that things have to go up in price," said president Tom Kerber. "We held out as long as we could."
A new milk pricing system, adopted in a 1996 farm bill, went into effect in January 2000. It was designed to bring uniformity to covenants that determine how much dairy farmers earn. In the process, the government tied the cost of milk fat to the price of butter, which has nearly doubled since then on increased demand.
USDA economist Donald Blaney attributed the rise to recent studies indicating butter is not as unhealthy as once thought.
U.S. Department of Agriculture officials say there are other factors at work instead of the price regulation changes.
"We don't see enough evidence to really make any connection," said USDA spokesman Jerry Redding. "What you're seeing is dairy supplies are down, compared to last year, and demand is up. Across the board, dairy prices are very high. It's strictly supply and demand. Prices tend to go up in summer, because there's more demand and because cows don't give as much milk in summer because of the heat."
"I can't say it's going to bother me," said Dan Reigle, 51, of Philadelphia, digging into a $3.75 blueberry sundae from Dairy Queen, just down the Boardwalk from Jilly's.