The “Fiscal Cliff” has been dominating the news cycle for the past few weeks, but there may be another cliff in our sights: the “Milk Cliff”. It stems back to the Congress not passing an agriculture bill. The bill contains a formula where the Government will buy milk from dairy farmers if the price gets too low (roughly half of the national average of $3.65 per gallon). However, if something isn’t agreed upon by the end of the year, the Government would “be forced” to buy dairy products at double the current price which, they’re saying, would push the price up for everyone:
But instead of leaving farmers entirely out in the cold, the law states that if a new bill isn’t passed or the current one extended, the formula for calculating the price the government pays for dairy products reverts back to a 1949 statute. Under that formula, the government would be forced to buy milk at twice today’s price — driving up the cost for everyone.
“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.
Sky-high milk prices wouldn’t necessarily be good for dairy farmers either, according to Chris Galen, a spokesman for the National Milk Producers Federation, which represents over 30,000 dairy farmers.
While it might provide a short term boost to profits, there’s a fear that consumers would either cut back on dairy or opt for imported dairy products. It could also force food makers to search for alternatives to dairy, like soy.
Seems like to me this would be a place where the government may just need to let the free market work itself out.