With all the worry over whether Congress will take action in time to avert the fiscal cliff, America hasn’t noticed that its skirting dangerously close to the edge of another terrifying precipice that would skyrocket milk prices to $7 per gallon.
‘We call it the dairy cliff,’ said Chris Galen, spokesperson for the National Milk Producers Federation.
Galen is referring to the agriculture bill that could cause milk prices to double by early next year if not addressed.
To keep dairy farmers in business, the government has an agreement to buy milk and other products in the event the prices dip too low. Today’s agriculture bill has a formula for the government to intervene if prices plummet by approximately half of the national average of $3.65 per gallon.
But the current bill expired last summer, and Congress has yet to agree on a new one.
Many of the measures in place to protect farmers have already expired, and more are about to do the same, including a dairy subsidy expiring Jan. 1.
The law states that if a new bill isn’t passed or the current one not extended, the formula used to calculate the price the government pays for dairy products will revert to a statute written in 1949.
Under that formula written more than 60 years ago, the government would have to buy milk at double today’s price, driving up the cost for all consumers.
‘If you like anything made with milk, you’re going to be impacted by the fact that there’s no farm bill,’ U.S. Secretary of Agriculture Tom Vilsack told CNN’s Candy Crowley in an interview on State of the Union airing Sunday, Dec. 30.
‘Consumers are going to be a bit shocked when instead of seeing $3.60 a gallon for milk, they see $7 a gallon for milk. And that’s going to ripple throughout all of the commodities if this thing goes on for an extended period of time,’ Vilsack said.
High milk prices could also be bad for farmers, Galen said.
It could provide a short term boost to profits but then consumers unable to afford dairy would either cut back, look for imported milk products, and use milk alternatives like soy.
To avoid this, the government would have to issue a notice that it would pay the increased price for dairy products then determine a schedule for when the buying would start.
The process would take at least a few weeks.
‘It’s not like people would dump blocks of cheese on the USDA’s front lawn January first,’ he said.
To keep things even, Congress will need to extend the current bill, pass new legislation, or enact a provision to keep the 1949 rule from going into effect.
So all Congress has to do is agree. You might want to visit your local dairy aisle now.
James Gilbert | Elite.