RISING MILK PRICES
This past weekend, rising prices for fluid milk in grocery stores made state and national news. Prices for butter, cheese, and other dairy products have also risen. Even Starbuck’s coffee shops around the country are raising their prices because of the increase in milk prices. The main reason for the higher prices for milk and other dairy products at the retail level is a simple matter of supply and demand. Low milk prices and poor profits for dairy producers in the late 1990s through 2002 caused many small to medium sized operations to go out of business. With many of the newer, trendy diet programs, consumer demand for dairy products has increased in the past couple of years. As a result, dairy products have been in tight supply, thus causing the sharp increase in retail prices. The good news is that dairy producers have seen some of the highest milk prices ever at the farm level in recent months, which has lead to greatly improved profitability for dairy operations throughout the U.S.

RECORD ETHANOL PRODUCTION
Ethanol production in the U.S. set another record in February when an average of 212,000 barrels per day of ethanol were produced. Two years ago, in 2002, the total U.S. ethanol production in February was only about 120,000 barrels per day. The ethanol production in the U.S. in 2004 is expected to reach 3.3 billion gallons, which would be up about 17% over 2003. Should we be concerned that we’re over-producing ethanol? Not at this point. It’s estimated that the U.S. will need approximately 3.5 billion gallons of ethanol to meet demands in 2004. The demand for ethanol should continue to grow in the U.S. in the coming years as the trend continues toward greater reliance on renewable fuel sources. In 2004, more than 1 billion bushels of corn will be used to make ethanol. This is expected to increase to 1.3 billion bushels of corn usage in the U.S. in 2005, when as many as 13 new ethanol plants are scheduled to begin operation.

Editors note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at kent.thiesse@minnstarbank.com.