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WASHINGTON - A sharp decrease in the price of cheddar cheese has prompted the U.S. Department of Agriculture to reduce the wholesale price it sets for milk by 27 cents as of July 1, according to published sources.
Due to milk's perishability, the USDA said it shouldn't be long before the wholesale price cut would have an effect in supermarkets. The agency, which sets the price monthly, will lower July's price from $1.84 to $1.56.
The USDA's price is the least that farmers can get for the milk they sell to processors. The agency sets the price to stabilize the market and head off predatory pricing. Farmers can and do negotiate higher prices, however, Chris Galen, spokesman for the Arlington, Va.-based National Milk Producers Federation told the Raleigh, N.C. News & Observer. But the federally regulated price drives the market, he added.
The USDA sets the regulated price in after monitoring the prices of nonfat dried milk, butter, whey, and especially cheddar cheese to decide where to set the minimum price for milk, Galen explained.
According to Galen, cheese is the largest market driver because if cheese makers can get high prices, they can pay more for milk. When cheese prices fall in trading, the USDA reduces its prices.
Galen said wholesale prices are certain to plunge for farmers, and if grocery stores pass at least some of the savings on as expected, shoppers should see lower prices at the stores next month.