Last month for this column, I had the fun topic of thanking Moms for all they do. Unfortunately, this month my message isn’t quite so upbeat. As we have all experienced, we are currently in an economic climate where food and energy prices are skyrocketing while home prices are declining. Food costs – particularly dairy and those based on wheat, rice and corn inputs – are rising at unprecedented rates. In 2007, we saw raw milk prices rise massively over 2006. Last year in 2007, higher milk prices cost Oberweis Dairy over $3 million (which is an unbelievably huge number for our company), much of which we did not pass along to our customers. Instead, we accepted poor financial results for the year due to our efforts to absorb much of the cost increase. We did this because we hoped it would be temporary and – at the time – we believed the cost increases would not be at significant as they have been. Unfortunately, the remainder of 2008 looks worse than the second half of 2007, and we are unable to continue to absorb the costs associated with more expensive raw milk. Sacrificing quality to combat these high costs is not an option in our company. Therefore, effective June 1, we are instituting a 20˘ per bottle price increase in our stores and through home delivery. We are hopeful that prices will decline in 2009 as supply increases, but unfortunately even economists are not completely united on 2009. There are three primary causes to our situation. First, a significant increase in demand (particularly from Mexico, China and India) has put a strain on the available supply of milk. Second, the price of corn has increased as ethanol use has grown. Lastly, the value of the dollar relative to other currencies has decreased making U.S. products more attractive to international markets. These increasing commodity prices have helped to drive up the price of farm land, making the prospects for significant commodity price declines a little less likely and the risk to farmers a little greater if they purchase more land at these prices. On top of the increase in raw milk prices, we have had to bear a significant increase in the price of diesel fuel. We must, unfortunately, increase our delivery charge slightly to $2.99 to recover a part of that increase. If diesel fuel stays at the current exceptionally high price, it is likely that we will have to adjust the delivery charge again in the near future. There is a silver lining, however. We’re not experiencing wide-spread significant inflation. Instead, what we are really seeing is an adjustment in the economic value of food relative to other goods. In fact, the U.S. economy as a whole benefits from higher agriculture prices because we are a net exporter. Decades and centuries back, consumers spent a much higher percentage of their income on food. We believe we are simply seeing a rebound of the food market and, hopefully, that should normalize over the next year. - Joe Oberweis

* The FDA states "No significant difference has been shown between milk derived from rBGH-treated and non-rBGH treated cows."