
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, June 3, 1994                   TAG: 9406030100
SECTION: BUSINESS                    PAGE: B-4   EDITION: METRO 
SOURCE: By MAG POFF STAFF WRITER
DATELINE:                                 LENGTH: Medium

VA. PREPARES FOR INCOME DROP

Following a seasonal pattern, Virginia milk production has risen this spring. But unlike the West and Midwest, overall output for the state's dairy industry is trailing last year's figures.

That means milk producers can expect to receive less for their milk in July, but consumers won't see much difference, because retailers generally buffer both the price spikes and the drops.

G.H. Cain of Dairymen Inc. in Roanoke said Thursday he was writing an article to the members explaining why "their income is fixing to head south in a hurry ... Prices are going to fall."

Cain said production in Virginia has lagged behind last year's pace all year. Although the quantity has risen as usual in the spring, he said, the level is still below the same point a year ago.

Production is above last year's record in the West and Midwest, he said. "It depends on where you are."

At the same time, he said, prices to dairymen in Virginia should fall, as they usually do in the summer. So dairy farmers here will receive less money for less milk.

Prices paid to dairymen by processors are established by the Virginia Milk Commission. A commission spokesman, Ed Wilson, said June's price was set at the May level, but he expects a drop July 1. Prices depend on the history of production the prior month, nationally as well as in Virginia.

Wilson said production rises every spring, then tails off during the summer.

Consumers are unlikely to see any drop in prices at the store, he said, because retailers traditionally hold prices for milk at a steady level. Wilson said retailers absorb price increases and decreases unless there is a long-term trend in one direction.

Charles Costigan, spokesman for Valley Rich Dairy in Roanoke, said he's heard that milk production is high in the Midwest. "We could see some reduction real soon" on the wholesale level, Costigan said.

Not only does production increase every spring, said Joann Boone, spokeswoman for the Kroger Co. in Roanoke, but the demand falls off. Because schools are major buyers of milk, she said, when schools close for the summer, students drink what they really want - soft drinks and lemonade.

Jerry Hunter, a supervisor in Forest for the Orange Market chain, said the price of milk rose in May before steadying in June. Retailers absorbed the May increase, he said, so any drop in the cost for July will offset the earlier rise.

by CNB