Can someone explain these prices?

Summary

Today, Explained – “Can someone explain these prices?”

Vox, April 5, 2026
Hosts: Jaclyn Hill, Sam Horry, Eileena Pang
Special Guest: Chuck Nicholson

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Episode Overview

This episode of "Today, Explained" dives into why everyday items—gasoline, coffee, and milk—seem so much more expensive lately. Through accessible explanations, real listeners’ stories, and expert interviews, the hosts unravel the complex web of global events, supply chain shocks, climate impacts, and economic forces driving recent price hikes. Expect an informative and relatable journey from the gas pump to your morning coffee and the milk aisle.

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Key Discussion Points & Insights

1. Gas Prices: “Rockets and Parachutes”

• Why are gas prices rising so quickly—and slow to fall?
  • Price hikes at the gas pump happen rapidly due to spikes in global crude oil prices. When disruptions appear (e.g., war, natural disasters), prices “rocket” up but “parachute” down slowly when the disruptions resolve.
  • Local gas stations respond immediately to increases in their re-supply costs, but aren’t pressured to cut prices quickly when oil drops, as consumer outrage dissipates once prices stabilize.

    “The price tends to rocket up very quickly...But then crude oil prices retreat...Gasoline prices tend to take a little bit longer to go down...It’s observable. It’s a real phenomenon. There’s nothing nefarious going on.”
    — Sam Horry (04:01)

• Why do global events affect US prices, even when the country is a major oil producer?
  • Oil is a global commodity—the US imports and exports different types based on refinery needs. Disruptions anywhere affect prices everywhere.

    “A supply interruption anywhere affects prices everywhere. And the moment that we’re living through right now is pretty unique.”
    — Sam Horry (06:01)

• Current crisis magnitude:
  • Disruptions in the Strait of Hormuz threaten up to 10-15 million barrels per day, dwarfing prior crises.

    “The only thing I’m surprised about is that prices haven’t gone much, much higher, much faster.”
    — Sam Horry (07:00)

• Broader impacts:
  • Diesel and jet fuel shortages are rippling across the economy—truckers, farmers, airlines, and shipping hit hard.

    “The cost of, of everything that you buy…got to that store on a truck powered by diesel fuel.”
    — Sam Horry (09:33)

Important Timestamps:

• [02:12] — Intro to gas prices
• [04:01] — Why prices rise fast and drop slow
• [06:01] — Effects of global oil market disruptions
• [09:04] — Ripple effects on logistics and food prices

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2. Coffee Prices: Droughts, Tariffs, and Supply Chain Squeeze

• Personal sticker shock:
  • Listeners report $9-10 for a simple iced coffee—up from $5 in previous years.

    “And I live in Nashville, so coffee’s already expensive. But I went and got an iced coffee with oat milk, and… it was almost $10, and I just think that’s absurd.”
    — Listener Caller (13:29)

• What’s behind the price surge?
  • Severe droughts in Vietnam (robusta coffee) and Brazil (arabica) slash global supply.
  • US importers and roasters are heavily reliant on those two countries, whose dominance makes the market fragile.

    “The boogeyman is ultimately the climate… Coffee is one of those crops that is sensitive to weather, both in terms of rainfall and temperature.”
    — Eileena Pang (15:09)

  • Tariffs (up to 50%) imposed on Brazilian coffee by the US in 2025 add further pressure before being partially lifted, but only after importers locked in expensive contracts.

    “Price of coffee by the pound has jumped more than $2.50 year to year. And it’s partly because of President Trump’s tariffs.”
    — Sam Horry (17:37)

• Will prices come down?
  • Input (bean) costs drive most of the retail price, but rents, labor, and materials (e.g., cup lids) have all climbed.
  • The high price trend is likely here to stay, though some coffee shops might try to reduce prices as their costs fall back.

    “I think the broad understanding is that the coffee prices won’t go back to where they were before all of this started.”
    — Eileena Pang (19:47)

• Shifts in consumption:
  • Americans are less willing to skip their first daily cup, but may cut back on extras—increasing at-home brewing or switching to cheaper alternatives.

    “The first cup of coffee is the one that people are not likely to get rid of…where the market has been concerned…maybe you’ll get iced tea instead.” — Eileena Pang (21:29)

Important Timestamps:

• [13:12] — Coffee price sticker shock stories
• [15:00] — Droughts in Brazil and Vietnam
• [17:00] — Impact of tariffs
• [19:35] — Outlook for future prices
• [21:29] — Consumer behavior shifts

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3. Milk Prices: Behind the Supermarket Sticker

• Is $4/gallon the new normal?
  • Guest Chuck Nicholson (Penn State) explains U.S. milk pricing, pointing out regional variations and market quirks.

    “Paying $4 for a gallon of milk is not an unusual thing to see.”
    — Chuck Nicholson (24:30)

• How is price determined and distributed?
  • Roughly: 50% to the farmer, 20% to processors, 30% to retailers.
  • Prices vary with location, store strategy, and type of milk (e.g., whole, organic).

    “Sometimes we call that a loss leader. It’s a signal that says, hey, all the prices in our store are really good, including the one for milk.”
    — Chuck Nicholson (25:48)

• What drives spikes, and how fast do they hit shoppers?
  • Feed costs are a major input on dairy farms. When feed gets expensive (e.g., from storms), milk production lags but doesn’t instantly shrink.
  • Stores smooth price swings, raising them slowly and cautiously to avoid customer backlash—as seen with eggs and gasoline.

    “They like to try and keep it a little bit more smoothed out…when things come down, they’ll pass it back down, but a little bit more slowly.”
    — Chuck Nicholson (28:12)

• Where does all that milk go?
  • Surprisingly, 40% of US milk becomes cheese—especially mozzarella for pizza.

    “It’s actually getting close to about 40% of the milk that we produce goes into making cheeses of various kinds.”
    — Chuck Nicholson (29:14)

Important Timestamps:

• [24:05] — Intro to milk prices, “Is $4 normal?”
• [26:14] — Who gets paid, price breakdown
• [28:34] — “Where does the milk go?” (~40% for cheese)

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Notable Quotes & Memorable Moments

• On prices at the pump:

  “Every time somebody sneezes over there, the gas goes up two bucks a gallon.”
  — Sam Horry (06:46)

• On US oil independence fantasy:

  “Don’t call us, we'll call you. Yeah, no, it doesn’t work that way.”
  — Sam Horry (07:20)

• On coffee culture change:

  “Now…a lot of the coffee industry has been veering toward things that are fun and convenient…iced coffee, canned coffees…towards a budget minded consumer.”
  — Eileena Pang (22:19)

• On milk & cheese:

  “Anybody who's ordered a pizza in the last couple days has experienced where most of the milk in the United States goes to.”
  — Chuck Nicholson (28:49)

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Summary Table for Quick Reference

| Segment | Main Points | Key Quotes/Timestamps | |------------------------------|------------------------------------------------------------------------------------------|------------------------| | Gas prices | Global oil, rapid price jumps, economic ripple effects, “rockets & parachutes” | 04:01, 06:01, 09:33 | | Coffee prices | Drought, tariffs, global dependency, high prices here to stay, changing coffee habits | 15:09, 17:37, 19:47 | | Milk (dairy) prices | Regional variations, complex supply chain, price smoothing, most milk → cheese | 24:30, 26:14, 29:14 |

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Episode Tone & Flow

Conversational, direct, and sometimes wry—hosts and guests blend relatable listener stories (“$27 for a pizza??”, “My dad and I used to guess grocery bills”) with clear, digestible expert explanations. The mood is empathetic and occasionally irreverent, echoing everyday price fatigue but offering nuanced, evidence-based answers.

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Ideal for Listeners Who...

• Wonder why basic expenses are so volatile and high, beyond just “inflation.”
• Want to understand connections between geopolitical events, climate change, and their own wallets.
• Appreciate a mix of expert insight and practical, relatable storytelling.

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Note: For a complete episode, skip sponsors/intros/outros to stay focused on the deep dive into prices at the pump, café, and grocery aisle.

Transcript

[Narrator/Host]

Support for the program comes from Anthropic, the team behind Claude. Have you heard of him? Every story on the show exists because someone wanted a deeper understanding of the world around them. Anthropic says Claude was built to follow that same instinct. It doesn't hand you the tidy version. It helps you work through the complicated one, pushing back on your assumptions and helping you sit with what doesn't add up. And with deep research, Claude digs across dozens of sources, where they agree and where they don't, so you can trace the reasoning yourself. You can try Claude free at Claude

[Sam Horry]

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[Sam Horry]

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[Eileena Pang]

Oh my gosh.

[Listener/Caller]

Youth sports is insane. Volleyball monthly is $400.

[Jaclyn Hill]

Who is doing that?

[Listener/Caller]

We pay a lot more for Diesel than any other country.

[Narrator/Ad Voice]

I tried ordering a medium Domino's pizza

[Sam Horry]

the other day, and it was like 27 bucks. And I was like, wow, this is insane.

[Jaclyn Hill]

When I was growing up, my dad and I'd play this game every time we went grocery shopping. We'd guess what the total cost would be, and whoever got closest won.

[Eileena Pang]

Hey, we need turkey, Dad.

[Jaclyn Hill]

I actually still do this even though I'm shopping just for me now. That means I'm always paying attention to how prices change. What used to feed a family of three is now just enough to cover my own grocery bill. And those prices just keep going up. So what gives? Why are so many things so much more expensive than they used to be? I'm Jaclyn Hill, and we're going to find out this week on Explain It To Me from Vox. We'll visit your favorite coffee shop in the grocery store later to figure out what's going on with those prices. But first, we gotta stop for some gas, and we're picking up a passenger on the way.

[Sam Horry]

My name is Sam Horry, and I am the executive director of the Institute for Climate and Sustainable Growth at the University of Chicago.

[Jaclyn Hill]

The average cost for a gallon of gas in the US is over $4, the highest it's been since the summer of 2022. So who's to blame for that price?

[Sam Horry]

You know, I think if you really look at the data, the price of gasoline that we pay at the pump is set in the global oil market. So crude oil is like the feedstock that makes gasoline. So more than half of the price that you're paying at the pump is just directly the result of the price of crude oil in the global market. Then you have things like state and federal taxes, the cost of distributing and marketing the gasoline, and of course, then there is some profit making by the oil companies.

[Jaclyn Hill]

I remember when the Iraq war started back in 2003.

[Narrator/Ad Voice]

My fellow citizens, at this hour, American and coalition forces are in the early stages of military operations to disarm Iraq,

[Sam Horry]

to free its people, and to defend

[Narrator/Ad Voice]

the world from grave danger.

[Sam Horry]

A rapid series of 40 explosions lit up Baghdad in the early morning hour.

[Jaclyn Hill]

And the moment we're in now, it feels really familiar. Our objective is to defend the American

[Narrator/Ad Voice]

people by eliminating imminent threats from the Iranian regime.

[Jaclyn Hill]

You know, now we have this new conflict in the Middle east. And gas prices, they went up instantly. And when oil prices finally settle back down, I don't know the price at my local gas station, it takes way longer to go down than it did to go up. Why does the market react so much faster to bad news than it does to good news?

[Sam Horry]

First of all, you're not wrong. This is a measured phenomenon. This is something there's been a good amount of research on. We call this rockets and parachutes. Some people also call it rockets and feathers that the price tends to rocket up very quickly at the pump when crude oil prices go up. But then crude oil prices retreat when the conflict is over or the, you know, the hurricane damage has been repaired or whatever was the factor driving up crude prices. But gasoline prices tend to take a little bit longer to go down in many cases. So it's observable. It's a real phenomenon. There's nothing nefarious going on. It's not the result of, like, collusion or a conspiracy or anything like that. Gas stations tend to set their price that they put up on the sign based on their cost of acquisition of their next load that's going to come in. And so when they see the price of crude oil go up, they know that their next load is going to be really expensive, their next delivery is going to be really expensive. And so, you know, they quickly start to put the price up because they know that their cost of replenishing the fuel at their station is going to go up. On the way back down. There's a few different things that are going on. First of all, the gasoline that those stations have purchased at the higher price is they still have a lot of it sitting in storage on site. They still sell it at the price that they bought that gasoline for. So the other thing that is interesting is that when after prices have kind of hit the high point and they've slowly started to Recede. Consumers are much less picky. They're just happy that prices are going down. So they don't really do a lot of really strong comparison shopping like they might do in a normal market situation. And so there's less pressure on the gas stations to reduce their prices because consumers aren't really comparison shopping quite as hard when the prices are starting to come back down.

[Jaclyn Hill]

That's so interesting. You know, for someone who's living like, I don't know, say you live in the Midwest, why does a drone strike in the strait of Hormuz, 6,000 miles away, immediately make their commute so much more expensive? Especially, like, in the US we produce so much oil.

[Sam Horry]

So it depends on what the drone strike hits. Right? Let's put things in context a little bit. But I guess the first thing to understand is that the oil market is a truly global market. And one implication of that is that a supply interruption anywhere affects prices everywhere. And the moment that we're living through right now is pretty unique. The supply disruption that we're facing right now, you know, through the Strait of Hormuz, every day, you're looking at something like a fifth of the world's oil supply. Normally, if you disrupted even, like, think back to the Libyan civil war. During the Obama administration in 2011, the United States and the world faced a choice.

[Narrator/Ad Voice]

Qaddafi declared he would show no mercy

[Sam Horry]

to his own people.

[Narrator/Ad Voice]

A brutal end for a brutal dictator.

[Sam Horry]

And I don't know what's going on in the Middle east with Libya, where else? They blame it on Libya, but it seems like every time somebody sneezes over there, the gas goes up two bucks a gallon. That's ridiculous. That was a disruption of a million or 2 million barrels a day or something like that. You know, it wasn't anywhere near what we're talking now, which is like a, you know, maybe a 10 to 15 million barrel a day oil disruption. It's just enormous in magnitude. The only thing I'm surprised about is that prices haven't gone much, much higher, much faster.

[Jaclyn Hill]

Wow. So, like, does that mean the US Just can't, like, opt out of the global price roller coaster? Like, we can't just be like, hey, y', all, we got enough gas. We're doing our own thing. We're good over here.

[Sam Horry]

Yeah, don't call us, we'll call you. Yeah, yeah, no, it doesn't work that way. The US Oil market is connected to the global oil market via all the trade that we do. Even though we produce a ton of oil, we were the largest oil producer in the world. United States still actually imports a lot of oil because the refineries that we have in this country are configured to refine and turn into gasoline and diesel, like a certain quality of crude. And it's not easy to change the configuration of those refineries. And so the oil that the United States produces now overwhelmingly is what's called light sweet crude oil. That is not the same as what our refinery complex needs in the aggregate. So we still need a lot of heavier sour crudes. And so we import those and then we export the, we export the light oil.

[Jaclyn Hill]

What is the price per barrel where this stops being annoying and like, oh, hey, I'm going to have a little more debt on my credit card because of gas. And it's more like a full blown economic crisis, like, when is enough enough for us?

[Sam Horry]

You know, that's the magic number. I think people are really trying to understand that there's so many factors that are going on right now. We're still not approaching the historical high of oil prices or anything like that. You know, back in 2007, 2008, oil prices, $147 a barrel, and we obviously had a crippling economic recession after that. We're not at that level yet, but it's hard to be so sure that we're not headed in a pretty dangerous direction at the moment. And remember, it's not only crude oil that was going through hormuz, it was also a lot of refined product, particularly diesel and jet fuel. And so you're seeing now around the world a kind of a parallel crisis in the jet fuel markets and the diesel fuel markets that I think is also kind of underappreciated. Jet fuel, the aviation industry's highest single cost, accounting for nearly about 40% of the operating expenses, has nearly doubled in recent weeks.

[Eileena Pang]

Flights already being canceled because airlines don't have enough fuel.

[Sam Horry]

It's not just the price at the pump, the gasoline price that we face as consumers, as households, as drivers. It's also, how does that diesel price ripple throughout the entire economy?

[Jaclyn Hill]

Farmers here in Iowa and across the country are facing mounting financial strain as the price of Diesel up nearly $2 since the start of the war.

[Sam Horry]

Truck drivers out there, they're also grow

[Narrator/Host]

frustrated with these gas prices.

[Narrator/Ad Voice]

Some are paying up to $1,000 just

[Narrator/Host]

to fill up their tanks.

[Sam Horry]

Wow. The cost of, of everything that you buy when you go to Target or when you go to the grocery store, the produce, you know, all your, your cleaning supplies, everything got to that store on a truck powered by diesel fuel. So diesel is now more than $5 a gallon.

[Eileena Pang]

Wow.

[Sam Horry]

That's a pretty big shock for the diesel market. So I don't think we're at the point yet where I'm really concerned that I'm thinking, okay, this is like flashing red light for a recession. But if this crisis is not resolved, and don't take my word for it, you know, Goldman Sachs is out with their forecast. Saudi Aramco has said what they're worried about. Major financial institutions around the world are putting out what their expectations are. And what they're saying is if this is still going on into mid April, you're going to be looking at oil prices of, you know, $180 a barrel or more.

[Jaclyn Hill]

Oh my gosh. Wow.

[Sam Horry]

If this crisis is still going on well into April, you're prices I think go so high that we are going to be talking about recession.

[Jaclyn Hill]

So we got to give it some time to see how these rising oil prices play out across the economy. Up next, sticker shock at the cafe. Support for this show comes from Groons. Spring schedules can get busy fast. Between travel, longer days and the weather getting nice again, you may not have time for complicated wellness routines. Grun says they're here to simplify things by covering vitamins and minerals, greens and prebiotics in one easy grab and go step. Grun say they are a convenient comprehensive formula packed into a snack pack of gummies a day. They say they're not a multivitamin, a greens gummy or a prebiotic. They're all of those things and then some at a fraction of the price. Gruns also says their products are vegan, nut free, gluten free, dairy free and have no artificial colors or flavors. And bonus, they say it tastes great. Gruns says their ingredients are backed by over 35,000 research publications and it comes in a pack because you can't fit the amount of nutrients like 6 grams of prebiotic fiber into one single gummy. That's like eating two cups of broccoli. But in one tasty little snack pack you can save up to 52% off. With the Code Explainit at Grunes Co. That's Code Explainit at G R U N S Co.

[Sam Horry]

Support for the show

[Narrator/Host]

comes from Anthropic, the team behind Claude. Do you know, Claude, there's a reason you listen to the show. You want to actually understand what's going on, not just hear a headline. Thanks for listening. Anthropic's Claude works the same way. It doesn't flatten a complex topic into one neat take. It helps you think through the nuance challenges where your logic is thin and follows the threads most tools skip past. Deep research pulls from dozens of sources, surfaces contradictions, and gives you a full breakdown you can actually trace. And it can help you get your work done. Cowork lets you point Claude at folders on your computer, notes, research documents, and it just starts working through them. Thanks, Claude. Anthropic was founded by scientists, FYI, who said they wanted AI that expands human thinking. FYI, you can see why problem solvers choose Claude as their thinking partner. And try Claude free at Claude AI todayexplained.

[Sam Horry]

You don't need coffee.

[Eileena Pang]

I need coffee. I need coffee.

[Listener/Caller]

You don't need coffee.

[Eileena Pang]

I need coffee. Dad.

[Jaclyn Hill]

No, it's explaining to me. I'm J.Q. and we asked you if you've noticed the price of things going up.

[Listener/Caller]

I really like to buy iced coffee and iced matcha throughout the week. And I swear I used to be able to get it for like $5 for an iced latte. And I live in Nashville, so coffee's already expensive. But I went and got an iced coffee with oat milk, and that was it. And it was almost $10, and I just think that's absurd. And I know that coffee, you know, being imported and same with Matcha has a lot to do with that, but that felt crazy to me and kind of unsustainable for me to buy that every day.

[Jaclyn Hill]

So why does that latte cost so much more? Now, that's a question for Eileena Pang.

[Eileena Pang]

I'm an agriculture reporter at Bloomberg. I cover soft commodities, so that includes coffee, cocoa, and a bunch of things that go in your tiramisu. Ooh.

[Jaclyn Hill]

Okay. That is a lovely, delicious beat.

[Eileena Pang]

It's very fun.

[Jaclyn Hill]

Okay. Have coffee prices really gone up that much?

[Eileena Pang]

They really have. They've been going up for a few years now. So what you're seeing at the grocery store shelf has sort of been in the making since early 2024 or so, which is when we first started seeing coffee prices rise. That was on dry weather in Vietnam, which is one of the world's biggest producers of coffee. And then dry weather in Brazil is the world's top grower and is also the US's top supplier of beans. And so that shortage started to push up prices, and eventually that trickles down to consumers.

[Jaclyn Hill]

Can you talk a little bit more about what's behind this price jump? Is there a specific boogeyman in the coffee market right now? Or are there a lot of different factors at play?

[Eileena Pang]

The boogeyman is ultimately the climate. I think that's the case with a lot of agricultural goods. And coffee is one of those crops that is sensitive to weather, both in terms terms of like rainfall and temperature. So in 2024, what we saw is Vietnam grows this variety of coffee called robusta. It's a typically cheaper variety. It's a little bit more climate resilient. We don't see that much of it in the US because it mostly goes into instant coffee. It has a higher caffeine content and is also commonly used in espresso blends. But like, if you get a latte at like Starbucks or say your local coffee shop, chances are that's a different variety. That's called the Arabica variety and that's primarily Brazil is the top grower of that. But we saw a drought in Vietnam that was impacting robusta production pretty significantly.

[Sam Horry]

The country has seen very little rain in the last few months, with extreme heat gripping much of Southeast Asia.

[Narrator/Ad Voice]

The droughts dried up this whole area and the surrounding areas. And the water shortage is so severe that compared to last year, the harvest of coffee cherries is very low.

[Eileena Pang]

And so when robusta prices were going up, that also pushes arabica prices up as well. There was a lot of discussion in the market at the time where if you're robust, the prices get so expensive, then instead you replace it with cheaper arabica. So the demand for both beans pretty much goes in tandem. And as that demand was going up for arabica as well, then Brazil was just hit with a series of just like untimely weather events.

[Jaclyn Hill]

Two years of drought in Brazil have contributed to a shortage in supply, driving prices to a 47 year old high.

[Narrator/Ad Voice]

The coffee harvest this year is terrible. And this latest frost we had is going to hit also the next harvest.

[Eileena Pang]

And so that scent price is really soaring towards the tail end of 2024. And then the market came down a little bit. It recover and then tariffs came into play. President Trump bringing total tariffs on Brazil, the world's largest coffee producer, to a whopping 50%. And that's huge because Brazil grows more than a third of all the coffee consumed in the US Never been better

[Sam Horry]

off not being a coffee drinker right now.

[Eileena Pang]

Good for you.

[Sam Horry]

Price of coffee by the pound has jumped more than $2.50 when we compare year to year. And it's partly because of President Trump's tariffs.

[Narrator/Ad Voice]

Brazil has been a horrible trading partner

[Eileena Pang]

and so a lot of roasters where they could Actually swapped out Brazilian beans for other origins that were a little bit more affordable. Commodity prices have come down significantly from the record highs that we saw in 2025 after tariffs were put in place. Coffee was exempt from tariffs in the fall, and so that helped roasters quite a bit with being able to plan, even though a lot of them are still dealing with, like, leftover costs, basically because they brought in inventor. You contract inventories months ahead of when they get to the US and then they get to the US and you're using them for months. So there's a significant lag between that and what you see at the consumer level, which is why shoppers are still paying for record high prices.

[Jaclyn Hill]

Okay, that's so interesting. It sounds like we're super dependent on these two countries for our coffee, which is interesting to me because I feel like I hear people talk about other countries beans all the time. Like, I live in D.C. like, Ethiopian coffee is very big here. Is the global coffee supply really that fragile? That, like, you know, if climate impacts Vietnam or Brazil, it breaks down, like, this entire global market pretty much when

[Eileena Pang]

it comes to, like, commodity coffee. Brazil and Vietnam just produce at a scale that is beyond that of all the other countries. But, yeah, there are a bunch of really good coffee producers around the world. Ethiopia, Kenya, Guatemala, Honduras, and a lot of these countries now with higher prices are trying to incentivize more production. So it is possible that in future years, we will see a little bit of that concentration that's currently in the coffee market shift, which would ultimately be good in the long run.

[Jaclyn Hill]

So is a seven to $10 cup of coffee just the new normal now? Like, even if, you know, we see an end of tariffs, even if. If climate gets back on track, is that just what we're gonna be paying for coffee now?

[Eileena Pang]

I think possibly. I think some of the people I've talked to have indicated that they might try to pull prices back once they can. Like, obviously, everyone wants to be able to keep consumers buying and to maintain that affordable price point. It's not really in anyone's interest to price people out of their daily cup of coffee, but I think the broad understanding is that the coffee prices won't go back to where they were before all of this started.

[Jaclyn Hill]

Beyond just the price of beans. You've reported on friction in the supply chain, like shipping risks in the Strait of Hormuz. How much of that $7 latte people are getting is just based on the cost of the coffee for the consumer.

[Eileena Pang]

The input cost of the beans themselves is still the main driver for higher costs. But if you talk to roasters, it's also the case that just the cost of operating has gone up a lot. Like, you know, people will say the rent costs are up, labor costs are up, the costs of packaging are also up. And so at a time last year when prices were really high, sometimes you talk to coffee shops who would say they had talked to suppliers so they could get slightly cheaper lids for their coffee cups. And that's where people start looking at places where they can cut back on inputs without affecting the taste of the coffee ultimately, since that is the most important thing that they're paying for.

[Jaclyn Hill]

Americans love coffee. Like, we really cannot get enough of it.

[Sam Horry]

This is, excuse me, a damn fine cup of coffee. I love how it makes me feel. It's like my heart is trying to hug my brain.

[Jaclyn Hill]

What do you think it would take for consumers to say, you know, this is too expensive. I am not doing this?

[Eileena Pang]

We're seeing it a little bit. We're seeing it a little bit. What I've heard is that the first cup of coffee is the one that people are not likely to get rid of. Where the market has been concerned about shifts in consumption is like the afternoon cup of coffee where it's like instead of a $5 or $7 cold brew in the afternoon, maybe you'll get iced tea instead. Or some companies have also said their energy drink sales have gone up. You just see a lot more consumption at home. I also think there's been a trend in some ways away from what the coffee industry called like the third wave of coffee, which was like super prem, like almost treating coffee like wine, where people were going out to seek specific flavors and so on. Now, from what I hear, a lot of the coffee industry has been veering towards things that are fun and convenient. So it's like iced coffee, canned coffees, and all of those also do play towards a more budget minded consumer at this point in time.

[Jaclyn Hill]

Coming up. Got milk? Well, it's gonna cost you.

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[Jaclyn Hill]

Milk, Milk. Milk makes everything seem right. It's explaining to me. So we know why gas is so expensive and why our coffee costs so much, but what about the milk we put in that coffee?

[Narrator/Ad Voice]

I am Chuck Nicholson and I teach supply chain management courses and work on agriculture and food supply chain issues at Penn State University.

[Jaclyn Hill]

So today we're talking about milk. And the national average for a gallon of milk is sitting around $4.03 right now as we're recording to a regular person at the grocery store, does that feel normal or is this a really weird moment for dairy?

[Narrator/Ad Voice]

For us, paying $4 for a gallon of milk is not an unusual thing to see when you walk into the grocery store. It depends a little bit on where you're going and a little bit what type of milk you're buying. It's actually kind of in a range

[Sam Horry]

that we might expect.

[Jaclyn Hill]

How does milk compare to the rest of dairy, price wise?

[Narrator/Ad Voice]

Well, we have a really complicated system of setting prices that get paid to farms and that actually gets paid on the basis of what the milk is used for. So the highest value use and the highest price that you would pay a farmer for milk is for milk that's going to go into that carton at the grocery store.

[Eileena Pang]

I like milk for all the good, healthy things that are in it that

[Narrator/Ad Voice]

has linkages to all the other dairy products and their prices because milk can be used for a bunch of different things and it is even from the same farm from one day to the next, it can be used to put it in a carton the other day, it gets made into cheese. But typically that highest value that's going to get paid to the farmer is for milk that we buy at the grocery store are.

[Jaclyn Hill]

So there's like a huge gap in the price for a gallon of milk depending on where you live. You know, someone in Cincinnati might pay 250, while someone in Chicago will pay over $5. How does the same product cost such different prices in places that aren't even that far away from each other?

[Narrator/Ad Voice]

Part of that is different grocery stores have different pricing strategies for milk. We sometimes have stores that would be at that lower end of the price range. Sometimes we call that a loss leader. It's a signal that says, hey, all the prices in our store are really good, including the one for milk. And others have prices that are based on, you know, what the Market will bear in their particular location.

[Jaclyn Hill]

I want to break down that cost of a gallon of milk. Let's say the average is $4.03. Who is getting what from that price?

[Sam Horry]

Yeah.

[Narrator/Ad Voice]

So there's a rough rule of thumb that about half of that value is going to be paid to the farmer.

[Jaclyn Hill]

Okay.

[Narrator/Ad Voice]

Now, if we think about the other things that have to happen to get the milk to the grocery store, Somebody's got to transport the milk from the farm to a place where it's going to get processed. Somebody has to process it. Somebody has to transport it from the place where it was processed, maybe to what we call a distribution center or maybe directly to a grocery store. All those folks have some margin that they're going to earn out of this. So rough rule of thumb might be 50% to the farmer, about 20% to that person who's actually taking the milk and putting it into a carton, and about 30% of that might go to the food retailer. That's kind of a rough approximation of how that pie gets divided up among the different key players in the supply chain.

[Jaclyn Hill]

There's a lot of money that goes into livestock, and a good chunk of that money goes into feeding that livestock. Say, you know, there's a big storm, and it hits the corn belt. How long does it take for that to show up on my grocery receipt?

[Narrator/Ad Voice]

Usually, generally, it's not. Not instantaneous. So even if we had, like, a big shock to the cost of feed, which is the major cost on a dairy farm for actually making the milk, we do have some inventories of product that, you know, can carry us over for a little bit of time. And usually we see the impact of that shock through farms making adjustments to how much milk they produce Rather than, like, oh, my gosh, there's a shortage of milk in the grocery store right now. One of the other things that retail stores do is they do something that we call like, price smoothing, because consumers don't like, in general, to see, like, major, big spikes in prices. Think about what happened with eggs in the last couple of years.

[Jaclyn Hill]

Oh, yeah.

[Narrator/Ad Voice]

Or think about what happens when you have gasoline that goes up really quickly. Gets people pretty excited. So when retailers can control that, they like to try and keep it a little bit more smoothed out. They will ultimately kind of pass along if their cost goes up. And then when things come down, they'll pass it back down, but a little bit more slowly to kind of make up for that difference.

[Jaclyn Hill]

When we look at the total amount of milk produced in America, where's most of it actually going like, is it in the cartons we see at the store or does it go to all those other places that we see milk go or sneak its way in?

[Narrator/Ad Voice]

Great question. Anybody who's ordered a pizza in the last couple days has experienced where most of the milk in the United States goes to. How many kinds of cheese? Is cheese delicious? How about four different kinds of cheese?

[Sam Horry]

The new extra most, bestest pizza from Little Caesars is topped with the most cheese and the most pepperoni for the nation's best price.

[Jaclyn Hill]

And it's stuffed with melty cheese, baked

[Eileena Pang]

with melty cheese, and finished with even more cheese.

[Narrator/Ad Voice]

So it's actually getting close to about 40% of the milk that we produce goes into making cheeses of various kinds. A lot of that is mozzarella cheese that would go on a pizza. And pizza restaurants can also play around a little bit with how much cheese am I going to put on that pizza? Okay. When the price of cheese goes up

[Jaclyn Hill]

a lot, the pizzas get less cheesy. They are not as cheesy as they usually are.

[Narrator/Ad Voice]

Yeah, let's do the meat or veggie special thing. That's got a little bit less cheese on it. So there's that kind of demand, too. And both of them do respond to what's going on with prices, pizzas and their cheese.

[Jaclyn Hill]

Am I right? That's it for this week. What's something in your life you want explained? Call us and Let us know 1-800-618-8545 or shoot an email to askvox.com if you enjoy this podcast. Consider becoming a VOX member. Members get to listen to this show with no ads. Head over to Vox.com members to learn more. This episode was produced by Hadi Mwagdi. It was edited by Avishai Artsy Fact Checked by Melissa Hirsch and engineered by David Tadashore. Our executive producer is Miranda Kennedy. I'm your host, John Glenhill. Thank you so much for listening. I'll talk to you soon. Bye.