Gas Prices Go Up, So Do Dairy

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Knoxville (WVLT) -- Brace yourselves, gas prices are at it again! Nationally you're paying $2.64 a gallon which is up almost 25 cents from last month.

Here in Knoxville you'll find a little relief at $2.44, but even those prices are expected to rise another 20-cents in the next few weeks.

The hike in price's isn't going to stop at the gas pumps either. You'll start paying more for products at the grocery store soon to, all because of those higher fuel prices.

By fall, the cost of milk is expected to go up by 9 percent or 25 to 30-cents more than the current prices. If you live in the Knoxville area, you're already paying about 4 dollars a gallon. As Volunteer TVs Whitney Daniel found out this evening, if you think milk is pricey to drink, imagine having to incur the costs of making it.

"We milk about 200 cows a day," said Mac Pate, a local dairy farmer who has seen a lot of changes over the years. "When I started, we were still milking in pans and pails. Now, you're in pipelines with automatic take-offs and hold tanks, it's quite a bit different."

For Mac, another big difference is the cost.

"Last year I consider the poorest year I ever had."

With higher gas prices, a demand for ethanol and the increased production of bio-diesel, it's not going to get any cheaper to be in the dairy business.

"It's created a situation where the cost of feed to the dairy producer has gone up substantially in the last few months," according to Dr. Gary Rogers who is a Dairy Professor at the University of Tennessee, "that ultimately will lead to slightly lower milk production across the U.S."

Which means when it hits the shelves you will see the difference. According to USDA nutritional guidelines you need three glasses of milk a day, but with a higher price, will you still buy enough? Experts say yes.

"Generally speaking consumers tend to continue to consume milk and dairy products partly because they're such a good deal already," Rogers said. "Consumers need milk and dairy products to meet their nutritional needs."

Meanwhile, farmers need corn to provide the right nutritional needs to their cows. Corn costs have doubled and feed costs represent about half the production costs for farmers, making it tough all the way around

For Mac Pate, that just might be a losing equation.

"I have sold milk much higher than I'm getting for milk right now," the farmer said.

Pate's dairy cows produce two-thousand gallons of milk each day. He is one of the state's largest milk producers. His products are sold by companies such as Mayfield, Weigel's and several other area dairy providers.

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