Tighter Supplies Expected to Boost Milk Prices in March

NATIONAL REPORT -- Milk prices could go up by as much as 60 cents per gallon in March, according to several dairy estimates. If the price hike is realized, milk would reach its highest prices ever.

A short supply of cheese is cited as the top reason for the expected rise in milk prices. The average price of a block of cheese reached a new peak in January, rising 56 cents to $2.36, reported NBC News.

In addition, in early 2013, farmers responded to higher feed costs by cutting back on herd growth. International demand from several countries -- especially China -- have added to the tight supply and hence led to higher prices for cheese, the news outlet noted.

Some stores may lessen the impact of rising milk costs by eating some of the price hike. However, Brian West, a spokesman for the Publix Asset Management Co. supermarket chain, told the news source to expect higher milk prices in the next few months.

The current drought in California is providing additional bad news for the price of milk. Without drought relief, production of alfalfa, a key feed for cows, could be curtailed, pushing up milk prices even further, NBC News added.

There is one possible silver lining on the horizon however. Milk supplies are expected to increase after a new batch of calves are born and cows reach peak milk production 60 days later. This could cause milk prices to drop up to 20 percent late in 2014, dairy analyst Jerry Dryer told the news outlet.