There Is Such A Thing As The Milk Cliff: If Congress Doesn’t Act Soon, Prices Could Double

For the apparently shrinking amount of milk drinkers out there, we’ve got some bad news: There’s a thing called the Milk Cliff, and we’re standing on it. If Congress doesn’t act on a new farm bill that amends a policy from 1949, the price of a gallon of milk could increase and possibly even double. Yes, a milk cliff. It’s a thing.

While the Obama administration dukes it out with Congress over solving the fiscal cliff issue, there’s another problem swiftly approaching the edge in the form of a farm bill that needs to be reformed by Jan. 1. Otherwise, notes the New York Times, a farm law from the days of yore will inflate the price of milk from about $3.65 a gallon to $6 or as high as $8.

Here’s why in a nutshell, says the NYT:

Higher prices would be based on what dairy farm production costs were in 1949, when milk production was almost all done by hand. Because of adjustments for inflation and other technical formulas, the government would be forced by law to buy milk at roughly twice the current market prices to maintain a stable milk market.

Essentially, the 1949 law says if the market price of milk dips below a certain point, the government has to swoop in and buy it up at a set rate in order to buoy prices and make sure dairy producers’ costs are covered.

Of course, if the government has to pay more, farmers would start selling dairy products to the government to get that nice hefty price. But if they’re all selling to the feds instead of in the commercial market, supermarkets will start to see shortages. And shortages usually affect consumers right where it hurts most — at the checkout counter in the form of higher prices.

It would hit other dairy products too, as the manufacturers of those products would also be forced to pay higher prices.

Farmers would likely see this as a boon at first, but as the New York Times Farm Bureau president says, that joy wouldn’t last very long.

“But it would be short-term euphoria followed by a long hangover that would be difficult for us to recover from,” he says. “I don’t think customers and food processors are going to pay double what they are paying now for dairy products.”

The bill was passed by the Senate in July but a House version has yet to be brought to the floor.

Tom Vilasck, the agriculture secretary, has a very ambiguous response to the worries of the country going off the milk cliff.

“We will do whatever we are legally obligated to do,” he said Mr. Vilsack, without outlining any specific steps.

Get it together, Congress. It might sound like a silly thing, this milk cliff, but no one wants to pay double for a gallon just because you didn’t take action to combat a 63-year-old law.

With Farm Bill Stalled, Consumers May Face Soaring Milk Prices [New York Times]