Why are milk prices so high?

As part of work I have the opportunity to answer customers' questions and resolve customers' concerns. Below is a message I received from a lady who is a small-business owner in Alaska and my response to her.

Customer Message:

I own one of the many espresso drive thrus in Anchorage, AK. I have been purchasing most of my supplies at the East Side Sam's. I am concerned that the dairy prices have gone up dramatically in the past few weeks, more so than at other local stores, including Wal-Mart, Carr's/Safeway, and Costco. Milk was $2.99 a gallon, now it's about $3.79. . . Ludicrous!

I realize that fuel prices have gone up, which translates into more costs for shipping goods to Alaska, but this milk increase is as outrageous as the increase at the gas pumps. Sam's is going to severely hurt the "little guy," like espresso drive through owners. Can't you change your mode of transportation, your carrier, your dairy supplier, or do something????

I am not the only small business who is complaining. I believe that Sam's will feel the decrease of business if prices continue to sky rocket. But then, that's your problem, right?

Check my record. I spend a lot of money for a small business, at Sam's. I am disgruntled, frustrated, and do NOT want to start using powdered milk. DO SOMETHING to make this more equitable. My local Sam's says they can do nothing, that I have to write to the main office.

And so I have. I don't want a generic, computerized response. I want to know what Sam's is going to do about dairy prices? If Safeway, Costco, and Wal-Mart can beat your prices, what does that say?

Thank you,
A Frustrated Customer

Dear Frustrated,

Thanks so much for sharing your concern with us. You can rest assured you are not receiving a generic computerized response. We appreciate small business owners like you, especially when they shop at Sam's Club! We know how hard you work, how much low prices mean to you, and how Sam's Club performs affects your business in a very real way.

As I read your note I extracted two main concerns: 1) increasing milk prices and 2) competitors having lower prices than Sam's Club. These two concerns may seem like one and the same, but in fact they are different and distinct as I explain later. From your note I also extracted that you're an astute businesswoman who understands business and the costs of doing business. Hopefully my responses will resolve your two main concerns.

Increasing gas prices are impacting dairy prices indirectly but are not the driving factor. A major drought in Australia has caused China to look elsewhere for its milk supply, namely the United States. This has caused the demand for American milk to be increased dramatically.

At the same time, because of increasing prices of gas, people are looking for alternative methods of fuel like ethanol, which is made of corn. As the demand for corn increases faster than the supply of corn increases, the price of corn increases. Corn is the main source of feed for dairy farmers' cows. The increasing corn costs for farmers is making dairy farming too expensive for some farmers, forcing them to reduce their herds or to leave the dairy farming business altogether. Overall American supply of milk is being reduced.

Increasing demand for American milk, coupled with a decreasing supply of American milk is raising milk prices throughout the entire United States. Sam's Club (and Wal-Mart for that matter) cannot control the macroeconomic factors discussed above. One could say we're given the playing field we play on.

Even though we don't control the playing field we do control how we play the game. In other words Sam's Club can control its prices compared to the other retailers in town. Our philosophy is to be the lowest price in town ceteris paribus (all other things being equal). Our computer system shows the milk prices at your club to be $2.99 for skim, $3.29 for 2%, and $3.50 for Vitamin D. Our system also shows Fred Meyer has skim, 2%, and vitamin D for $3.50 a gallon. Costco is selling two gallons of skim for $5.99 ($2.995 a gallon), two gallons of 2% for $6.59 ($3.295 a gallon), and two gallons of vitamin D for $6.99 ($3.495 a gallon). As you can see we are very competitive.

Thanks again for your concern. I am really happy you're a member at Sam's and choose to buy from us for your business. As a businessperson I understand the importance of time and money, and I assure you we're trying to save you time and money. I, with you, am hoping dairy prices come down soon but the forecasts I've seen estimate milk prices to increase for the next three months. If you have any more questions or feel the need to discuss anything I've mentioned you can call me at 479-277-8089.

Benn Manning

Moral Decay

What is the commonality of abortion, premarital sex, drug use, homosexuality, and deception? Some may say there is none. I, on the other hand, believe they are all examples of moral decay. The world’s moral decay is a result of people loosing sight of the big picture. I use the following questions to shape my conclusion, “What would be the result if everyone participated in this action” and “What would be the result if no one participated in this action?” This should serve as a simple template for determining what a true moral principle is.

I can already hear the naysayers attacking the logic of these two questions. They say, “People are unique. They have different life experiences, thoughts and feelings that influence their morals. You couldn’t possibly believe that all people would act in one particular way.” For one, morals are principles. They cannot be influenced. You are either aligned with them or you are not. Second, it is likely true that all people will not act in a particular way, but just because they won’t doesn’t mean they can’t or shouldn’t.

Humanity is collectively moving toward one of the two moral polar opposites, goodness or wickedness. We are either improving or digressing. There is no safe middle ground. If this isn’t obvious then the big picture is being missed, which is why we are in the predicament we are in. We’ll start with abortion.

What would be the result if everyone participated in abortion? Need I even answer? Procreation and eventually life would cease to exist. Now, what would be the result if no one participated in abortion? What about homosexuality? What would the results be? What about deceit? What would be the result if everyone were deceitful? Imagine the impact it would have on relationships, families, economies, and cultures.

Now flip the tables. Rather than looking at the affect of living or not living according to bad morals, look at the affect of living according to good morals. What would the results be? Imagine if every man and women in the world, either married, or sought to be married, did not have sex till marriage, was totally committed and faithful in marriage, respected life and the procreative power, was honest, and did not use illegal substances? The outcome would be magnificent. Crime would plummet, families would prosper, schools would flourish and countries and economies would thrive. This concept is an ideal, but it is our ideals that define us and define what we become.

Religious Bigotry!

It is interesting that liberal talk show host, Don Imus, can lose his job for making some untoward remarks about the Rutgers women's basketball team but Slate magazine's editor, Jacob Weisberg, can openly state that he wouldn't vote for Mitt Romney for president just because he is a Mormon, and nobody in the media bats an eye! Evidently, it is not "PC" to rag on women or African-Americans but it is perfectly acceptable to bash Mormonism and its adherents. If US citizens impose some kind of religious litmus test on its presidential canidates this country has turned down a long,dark road!

WHAT IS DIVERSITY?

Many persons in the workplace consider diversity to be a matter of skin color or eye shape. To me, diversity exists in the workplace when you have persons with varied educational and work backgrounds and who possess a plethora of life experiences.

In a conversation I had with Dennis Archer, former Detroit mayor and former president of the American Bar Association, he told me “diversity makes good business sense.” I can kind of, possibly, maybe see the potential for this statement to be true in some instances. Below I explain why I do not more readily believe Mr. Archer’s statement regarding diversity.

At Wal-Mart we talk a lot about being a Store of the Community, which means in the most simplistic terms to have merchandise in stores that reflect the needs of the demographical makeup of the store’s environs. Wal-Mart has every store in the United States categorized into a certain trait. One of the six traits Wal-Mart uses is the Hispanic trait – many stores in California, Arizona, New Mexico, and Texas fall under this trait.

For the stores that fall under the Hispanic trait it makes good business sense to have someone who understands Hispanics and their needs, wants, and desires, to buy products to fulfill these needs, wants, and desires. Are there non-Hispanics who understand the needs, wants, and desires of the Hispanic people? Absolutely! Are there Hispanics who do not understand the needs, wants, and desires of Hispanics? Absolutely! I know many white people who have lived abroad in Central and South America and are intimately familiar with the needs, wants, and desires of Hispanics. I am also sure there are Hispanics who, for whatever reason, were not raised in a Hispanic environment and are very unfamiliar with the needs, wants, and desires of Hispanics.

The workplace’s definition of diversity assumes/stereotypes that because a person has a certain skin color or is a particular ethnicity he/she knows the needs, wants, and desires of his/her ethnic group. Is this a valid assumption? In my opinion, it is NOT a valid assumption. It is not an individual’s ethnicity that makes him/her diverse per se but rather it is the educational and life experiences the individual possesses.

Benn Manning