Price of milk may decrease

Tuesday, Sept. 3, 1996 | 11:59 a.m.

CARSON CITY -- Milk prices, like gasoline, have been skyrocketing in Southern Nevada in recent months, but consumers may be in for some relief.

The minimum price for a gallon of homogenized milk in the grocery store set in July by the state Dairy Commission for the Las Vegas area was $2.47. And the minimum price for 2 percent milk, the second most popular milk product, was $2.43 a gallon.

Those prices include a margin of profit for the market.

But stores have been selling milk for as much as $3 a gallon and in some cases higher. And that means a bigger profit for the supermarket.

Robert Barengo, Dairy Commission chairman, said there is no store in the Las Vegas area that is selling at the minimum price. At its Aug. 15 meeting in Las Vegas, the commission voted to change the minimum pricing formula.

The new regulation took effect Sunday. It should mean the price of milk will be decreasing, Barengo said.

"The stores keep blaming us for the high prices," Barengo said. "The stores are to blame, not the Dairy Commission. It's now in the hands of the store."

The commission will meet Sept. 19 in Reno to consider extending the new formula to the western and eastern Nevada marketing areas, where prices also have been increasing. In the Reno-Carson City area, the minimum price set for a gallon of regular milk is now $2.63; for a gallon of 2 percent, $2.59.

Instead of setting a minimum price for milk at the store, the commission decided, under the new formula that the minimum price will be the cost to the market. After that, the store can establish its own profit margin.

"This is an effort to make the stores more in line for what they are paying for it (milk)," Barengo said.

Barengo and acting commission Secretary Bob Roser said this should drive the price down. The old formula built a 3 percent profit level into the minimum price that milk could be sold for, Roser said.

Other dairy products, such as ice cream, yogurt, cottage cheese and butter, also are zooming up in price.

"A year ago, I could buy butter for 99 cents a pound. In some cases, it's now $1.99 a pound," Roser said.

But "this is a tough time for people in the dairy product business," he added. Prices for cattle feed have risen. "Because of the hot weather in California and Nevada, cow production has been reduced by as much as 15 percent."

This shortage of dairy products has pushed up prices. The cost of butter fat has risen from 75 cents to more than $1.60 a pound. There is an increasing demand for cheese, which uses butter fat, so this is driving up the price, Roser said.

The dairy industry in Nevada has long been a government-protected business. Stores cannot sell below the minimum price. This law was enacted to protect against out-of-state suppliers coming into Nevada and selling at below cost for a period of months and driving the local milk producers out of business.

Supporters of the law maintain that when the out-of-state suppliers knocked out the Nevada competitors with rock-bottom prices, they would then start upping the price.

There is nothing in the law that allows the commission to set a maximum price for milk.

Roser said there may be a "slight variation from chain to chain" on the minimum price of milk under the new law. A market may be able to get a better price in buying the product and have a lower overhead.

The commission also sets minimum prices for other products such as cottage cheese, yogurt, sour cream, ice cream and sherbet. The commission has required stores and supermarkets to charge a 10 percent markup on their delivered cost. And the profit on butter is 6 percent above invoice cost, Roser said.

"This all stems back to the production and the shortage of milk and butter fat," Roser said.

Barengo said the commission will be looking at those parts of the industry and possibly changing the minimum price formula for farmers and dairies.

When gasoline prices shot up this summer, Gov. Bob Miller and Attorney General Frankie Sue Del Papa launched an investigation. So far, no public official has said anything about milk prices.