It’s not just business expenses rising for dairy farmers across the country — higher prices are impacting every aspect of human life, from the gas pump to the grocery store. Unfortunately, that means dairy consumers are also paying more for their milk, cheese, yogurt, and other products as inflation climbs and supplies remain tight.
The question is, will this price climb cause shoppers to purchase less dairy?
It’s certainly a concern, said Chris Wolf on the April 6 Hoard’s Dairyman DairyLivestream. Dairy demand is typically viewed as inelastic, so higher prices will result in less change in purchasing habits than it would for elastic goods like, for example, a new television. Still, with consumer prices for dairy products 3% to 4% higher, we’re going to see a decline in use, especially to the extent that substitutes are available, the Cornell University agricultural economist described.
“I’ve been a little bit surprised, honestly, that we haven’t seen a little more pushback on the demand side already,” added Ben Laine, who studies dairy economics with RaboResearch. “To this point, we’ve been able to avoid some of those increases along the supply chain before they really hit the consumer. I think this year we’re going to see that hit consumers much more.”
The rise in dairy prices is relatively minor compared to things like gas, which are hitting American wallets especially hard. But as Laine described, households will be looking at expenses as a whole budget scenario, recognize they are spending more, and look for areas to trim.
And while there is still some optimism about pandemic restrictions lifting, the reality of the costs associated with those experiences could lead to some people holding back. That could affect areas like restaurants or travel, and we experienced reduced dairy demand when those institutions were limited at the beginning of the pandemic.
“At some point, I’d say this year, we’re going to start to see some of those realities setting in and some choices being made,” Laine shared.
To watch the recording of the April 6 DairyLivestream, go to the link above. The program recording is also available as an audio-only podcast on Spotify, Google Podcasts, Apple Podcasts, and downloadable from the Hoard’s Dairyman website.
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The next broadcast of DairyLivestream will be on Wednesday, April 27 at 11 a.m. CT. In the new year, we have moved to a new system, and you will need to re-register to continue receiving email updates and links to the webcasts. You can sign up here now. Registering once will sign you up you for all future events.