Two recent price increases have pushed the cost of a gallon of milk above the $2 mark at most Washington-area supermarkets.
In just one month, the major chains that dispense about half of all milk consumed here have raised prices 6 cents a gallon -- roughly 3 percent. The increases came in two steps: 2 cents on Oct. 1 and 4 cents on Oct. 29.
Vitamin D Grade A milk now costs $2.03 a gallon at Giant, Safeway, A & P, Grand Union and 7-Eleven stores. At some smaller outlets, prices vary widely, from a low special price of $1.59 a gallon at Dart Drug to $2.19 at a small northwest Washington store.
The supermarket price works out to 12.7 cents for an 8-ounce glass of milk.
The increases here mirror to some extent national price rises for milk. Dairy products for Washington residents climbed 14.4 percent for the 12-month period ending in September, according to the Consumer Price Index. That outstripped the national average increase of 11.9 percent for dairy products for the same period.
The U.S. Agriculture Department said yesterday that milk prices will rise about 10 percent next year, with most of the increase coming in the last six months.
Retailers sought yesterday to downplay the significance of the latest milk price increases and the $2 plateau. "We don't consider it to be unusual," said Larry Johnson, a spokesman for Safeway, which has 125 stores in the Washington area.
But consumer organizations disagreed. Thomas B. Smith of the Consumer Nutrition Institute, a public advocacy organization, said the milk price increases are "unnecessarily inflationary."
Higher milk price supports by the federal government and increased demand for cheese are largely responsible for the new round of increases, officials in government, industry and private research groups said yesterday.
To a lesser degree, they said, the rising price of beef, which has encouraged dairy farmers to use their herds for slaughter rather than for milk, also have contributed to higher milk prices.
As milk moved through the supply pipeline from the farm to the store shelves, more increases were tacked on by dairies, where milk is processed and packaged, and by retail stores, where mild is sold. Only one increase may be involved if the retailer owns the dairy -- as many do in the Washington area. Giant Supermarkets, for example, buys from farm cooperatives and processes the milk for its stores at its own dairy. Store officials blamed higher energy bills and wage increases dictated by labor contracts for their portion of the price hikes.
New government milk support prices took effect Oct. 1, raising supports from $10.51 per hundredweight (11.6 gallons) to $11.22.
The government's price support system is designed to encourage farmers to produce adequate supplies of milk for drinking rather than turning the milk into cheese, which otherwise would produce more income for the farmer.
In addition, consumers generally pay more for milk depending on how far they live from Wisconsin. This is an effort to prevent cheaper milk from that dairy state from putting out of business more expensive locally produced milk.
Anticipation of the higher government price supports forced up milk prices before the new supports went into effect, milk industry experts said yesterday.
One measure of that anticipation is the sudden increase in milk production. During the first six months of 1979, there was no increase in milk production. But in July production edged up 1 percent. It went up 2 percent in August and again in September. And in October, production climbed 3 percent.
The second critical factor that has forced up milk prices, officials said, is the continued increase in demand for cheese.
"American cheese production is 5 percent ahead of last year," said Ron Sitzman, a statistician in the USDA dairy production division. He said cheese plants have turned out 1.7 billion pounds of the American cheeses, including cheddar and colby, compared to 1.6 billion last year.
"You only get 10 pounds of cheese from 100 pounds of milk," Sitzman said. "So as you continually make more cheese, you divert more of the milk that you could have sold in fluid form."
Earlier in the year, before the milk support action began to affect prices, some dairy farmers took advantage of rising beef prices by slaughtering marginal dairy cows and selling the meat for packaged and canned meat products.
But officials said yesterday that practice has slowed substantially now that beef prices have stabilized and milk prices are rising.
The milk price increases have been softened somewhat for consumers who clip the 30-cents off coupons that appear regularly in local newspaper advertisements. A coupon permits the customer to buy the Vitamin D Grade A milk, for instance, for $1.73 a gallon, rather than $2.03. In some stores, a minimum purchase of up to $7.50 is required to redeem the coupons.
One area chain official estimated that one of every four gallons of milk sold here goes to a person with a 30-cents-off coupon.
Although some consumers still get milk for less than $2 a gallon, others pay substantially more.
A survey of milk prices yesterday showed a 60-cent spread at area stores for the same gallon jug of milk. The highest found was $2.19 for a gallon of whole milk at Family Foods, 3713 New Hampshire Ave. NW; the lowest price was at a $1.59 special at Dart Drug.
The Dart bargain price is expected to end this week. "We'll probably go up to $1.83 next week," an official at the chain said.
The official said that Dart traditionally has priced its milk at about 20 cents below supermarket levels. "But we're 44 cents below them now," he said, because of the latest increases.
High's Dairy Stores, with about 200 stores in the metropolitan area, also have fallen behind supermarket prices by an unusually large amount. "We normally are 2 to 4 cents a gallon under the majors, but we're 10 cents under now," said Charles Sehman, sales manager for High's.
Whole milk now is $1.93 a gallon at most of the High's stores here.
The clearest picture of the impact of supermarket prices on milk drinkers here emerges from government market surveys. The latest one shows that 48.9 percent of total milk sales for the five-star area, including metropolitan Washington, were made through supermarkets.
Here is how the rest of the milk was dispensed: 27.1 percent by drug stores, non-chain food stores, restaurants, hotels, nursing homes and vending machines; 12.4 percent, dairy and convenience stores; 7.2 percent institutions including the military, schools and colleges and 4.4 percent, home deliveries.
The survey area on which those statistics are based included all of Delaware and the District of Columbia, most of Maryland and large parts of Virginia, New Jersey and Pennsylvania.