This post will cover a subject not typically covered in documents related to milk producers. But dairy products consumer demand can impact producer milk prices. Food inflation is often mentioned as a U.S. problem. This post will follow inflation for total consumer purchases, food purchases, and specifically for dairy products including Cheddar cheese, processed cheese, fluid milk, and butter.
The pattern in all seven charts below follows volatility in 2020 and 2021, the COVID years, followed by huge inflation in 2022. There are moderate increases in 2024 and 2025.
One of the things to consider is that when there is high inflation followed by moderate inflation, the price increase made in a high inflation year like 2022 does not disappear. The impact is cumulative. New lower inflation rates build on the high price of the 2022 inflation.
The data used is from the Bureau of Labor Statistics.
Chart I – Total Consumer Purchases
Chart I below shows the changes for total consumer purchases. There are NO negative numbers, meaning prices are going up consistently and cumulatively. Total consumer prices are currently increasing between 1% and 2% annually.
Chart II – Food Consumer Purchases
Chart II covers the price changes for consumer food, using the same format as Chart I but for food products only. The numbers follow the path in Chart I. However, price increases for consumer food reached higher levels of inflation in 2022. Currently, food inflation is increasing between 2% and 2.5% annually.
Chart III – Cheddar Cheese
Chart III covers Cheddar cheese. The COVID volatility in 2020 and 2021 are more exaggerated than Charts I and II, but the other patterns are similar. Currently, the Cheddar cheese price shows no inflation.
Chart V – Fluid Milk
Fluid milk prices (Chart V) have been volatile. While there have been some decreases in price in 2023 and 2024, the price reductions do not make up the 2022 increases. Current annual inflation is at 2%, but the long-term increase over five years is significant at 38%.
Chart VI – Butter
Butter prices escalated significantly in 2022 but have fallen to a negative inflation rate in 2023. The current 12-month level of a 6% annual increase is still a high annual rate of inflation.
Inflation over 5 years
Over the course of the charts, beginning in 2020 through January 2025, Table I shows the inflationary changes in retail consumer prices. The food price inflation index is 30%. The dairy products, except for fluid milk, are well under the food price Index.
The largest increase is in Fluid milk at 38%. This is a family item, and the increase can be financially difficult for many families. As covered in a prior post, despite the increase in price, fluid milk sales are increasing.
Processed cheese prices are up substantially at 23%, while Cheddar cheese is up only 9% over five years. Cheddar cheese prices are used to price milk protein in the Agricultural Marketing Service calculation so the impact of processed cheese prices will not influence producer milk prices.
Butter prices are up, but so are sales and prices appear to be stabilizing.
