The farm gets ~$1.25 for a gallon of milk that sells for `$8/gal retail-where does the $6.75 go?

Question

The cost of marketing milk has not changed much and the price the farmer gets has not changed much but at the retail level milk is twice as much as it was 10 years ago. Where is all thay money going?

Answer 1

You can assume a lot of it goes towards processing or transportation costs, especially since gas prices have been skyrocketing. And of course the store is going to take a chunk.

Answer 2

TAXES,TRANSPORTATION,MARKETING,

Answer 3

I wouldn't drink milk if I was paid $100/gal.

Answer 4

The price of diesel has more than doubled in the past 10 years, and refrigerated trucks use more fuel than regular trucks.

Is it really $8/gallon now?  My soymilk is cheaper than that, so maybe you should switch to soymilk or oatmilk or ricemilk.

Answer 5

Diesel is upwards of $5.00/gallon ($5.29 here) and a salary must be paid to the truck driver and those who were involved in processing it.  It also costs quite a bit to operate a refrigerated trailer, which a lot of people forget.

You also need to figure in that the grocery store pays their employees to stock it and ring it up and in most cases there is a department supervisor in charge of the dairy area.  

And on top of that, they aim to do 3% profit (I think, I'm not sure, that actually may be on the high end of things).  And that's your $6.75/gallon.

Answer 6

most to processing and transporting, and little to profit the retailer I guess.

Answer 7

You are confusing the cost of a thing with the price of a thing.  The cost is what it takes to make and distribute a product, plus whatever overage is needed to make up for spoilage, leakage, theft, whatever.  The price is the cost plus profit.

It's all about supply and demand.  If people are will to pay 8 bucks a gallon for milk, stores are going to sell it for that much.  Everybody down the chain gets a little more.  The grocer, the distributor, the trucking company, the cow, everybody.

There are costs associated with that gallon of milk that have nothing to do with marketing.  Fossil fuels have increased an enormous amount over the last 10 years.  Because more and more arable land is being converted for ethanol, feed grain has sky-rocketed over the last 2 years.  

Hope this helps.

Answer 8

profits to whoever paid the $1.25 a gallon

Answer 9

Well, half of the 6.75 goes to the supermarket since they decided to mark up their prices to produce more profit. Then the other half is split up again and one half goes to the company (which the farmer supplies) and the other half goes to the guy who picks up the milk.

Answer 10

where do you pay $8.00 a gal!  I only paid $2.19 a gal just last night!