Retail inflation of the major dairy products was covered six months ago in a post to this site . A lot has happened since then. This post will cover the U.S. food index, and cheese, whole milk, and butter Inflation.
CONSUMER FOOD PRICE INDEX
The price of food has continued its increase. Chart I below covers the food index and Chart II covers the annual inflation rate by month. After reaching a low 2% annual inflation rate in 2024, food prices have increased faster reaching a high of 3% annual inflation in 2025. The aim is to keep inflation under 2% annually.
CHEESE
Cheddar cheese is the standard used to follow changes in the cheese industry. Chart III and IV cover the changes in the monthly retail price of cheddar cheese and the impact on inflation. The retail price has increased by 11% since the start of 2024. That has caused the current inflationary index to increase at a 4% rate, well above the desired inflationary pace.
BUTTER
Butter prices have been stable for the last year flucuating only slightly (Chart V). This is a little surprising considering the shortages of butterfat and imports to meet demand. Retail butter prices shot up by 40% in 2022 and have stayed high.
As mentioned in prior articles to this blog, increaed production of butterfat is needed to meet the monthly consumer demads driven by butter and fluid milk.
The percent increase in the retail price of butter has slowed and is currentnly showing no inflation (Chart VI).
FLUID MILK
As covered in a recent post, consumption of whole milk is increasing. With that increase in demand, the price of a gallon of milk has increased to near record levels (Chart VII). Annual inflation is increasing between 3% and 5%, well above the Fed guidelines of 2% (Chart VIII).
WHAT DOES ALL THIS MEAN?
Clearly, the retail price inflation of cheese and fluid milk covered above is well above the desired level. It is not caused by tariffs as very little dairy is imported.
In 2022, inflation of all three of the dairy products covered above was extreme. Since then, inflation has decreased and briefly went negative but is now stable to increasing in the above products. The increase in the consumption of whole milk and cheddar cheese seems to be slowing and it may be related to the inflated prices of these products. The retail price of butter has stabilized, but the increase in consumption has also slowed.
The dairy price increases are greater than the increases in revenue of most consumers. While dairy products are important for health, especially in children, it is making the food budget difficult for many consumers.
