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Milk Prices Could Soar to $5 a Gallon by Summer's End

Come fall, when the kids head back to school, Mom and Dad are likely to find that a gallon of milk for cereal will cost them more than the gas that got them to the store to buy it.

The national average price for the calcium-rich drink that "does a body good" could hit a record $5 a gallon by September, MarketWatch reported Tuesday. The current average price is about $3.50 a gallon nationally, say dairy experts. That's more than the current national average gas price, which is $2.975 a gallon, according to AAA.

High fuel prices, drought and a spike in the cost of feed and dairy operations are all kicking up the price of the frothy, white beverage. Booming international sales and last year's lower farm milk prices, which slowed its production in the United States, are adding to the soaring costs.

"So many things play into it," said Auburn University dairy expert Boyd Brady. "The price is going to increase a little bit more than what it is right now, that's for sure."

At one Alabama Food Mart, a gallon of milk was already going for $4.39 earlier this month. And agriculture experts say that this summer we could see new record highs, with the price of milk shooting up to $4.50.

Jim Oberweis, owner of Oberweis Dairy Inc. in North Aurora, Ill., said his company is raising milk prices for the second time this year, by $.10 per half-gallon, The Wall Street Journal reported. Oberweis — which has 44 stores and delivers milk to 35,000 homes — implemented the first increase in May.

Americans have been enjoying moderate milk prices for years, so the sudden rise will be a definite hit to the wallet — especially when consumers are already struggling with higher gas and electricity costs.

"We're so accustomed to having a cheap food service, when there's an increase, we say, 'Oh my God, Chicken Little, the sky is falling,'" said Brady. "It's been underpriced. And dairy farmers have no control over what the price of milk is."

In fact, the cost of milk is dependent on the barrel cheese price, according to Brady, who said the reserve dairy supply the United States has had for several years has been depleted over time.

U.S. dairy sales in Asian countries including India and China are growing, according to agricultural economists. At the same time, the United States is compensating for a decline in dairy export from rain-deficient Australia and New Zealand, which hasn't been able to expand its milk production.

The United States Department of Agriculture (USDA) predicts that milk production for the remainder of this year will grow by about 1.2 percent, but demand will far outweigh the production increase.

Prices of other dairy products like butter and ice cream should also continue to climb as a result of surging milk and cheese prices.

Shares of the nation's largest milk distributor and processor, Dean Foods Co., plummeted by 5.5 percent earlier this month after it slashed its profit forecast in light of the rising raw milk costs.

The Associated Press contributed to this report.