Politics Gone Sour: Why the Price of Milk Might Soon Double

×
Milk and Politics- the Dairy Cliff
It's hard to imagine anything less exciting than the federal government's farm bill: agriculture isn't the most interesting topic even under the best of circumstances, and throwing Congress into the mix seems like a recipe for absolute boredom. Still, the farm bill -- which was created in 1933 and gets updated every five years or so -- affects almost every aspect of America's food, from crop subsidies to food stamps to disaster relief. For the most part, its updates happen quickly and regularly. Good thing, too, as delayed farm bills have the potential to upset daily life in a truly horrifying variety of ways.

Right now, the farm bill is caught in legislative limbo, a victim of the partisan deadlock surrounding the fiscal cliff negotiations. Normally, this wouldn't be a huge problem, except for one minor thing: When the current bill expires, the price of milk could double.

In order to protect farmers from market fluctuations, the federal government sets a minimum price at which it will buy surplus milk, which it then uses for school lunches and other programs. Under the current farm bill, this price is set a little lower than the market rate, so that farmers will be inclined to sell their milk to the public. But the original Agricultural Act of 1949 -- which the current Farm Bill overwrites -- uses a different equation that would make milk much more expensive.

According to The New York Times, if the current Farm Bill expires and the pricing equation reverts to its 1949 standard, the government will pay considerably more for milk. If that happened, Agriculture Secretary Tom Vilsack warns, farmers would rush to sell their milk to the government, prompting a serious shortage in stores. This, in turn, would drive the price of milk from an average of $3.69 a gallon to as much as $8.

As customers demanded milk, markets would look to higher-priced overseas milk producers to make up the shortage, and prices would go up on everything from butter to yogurt to pudding. Eventually, the government would sell off the milk surplus that it had built up, causing milk prices to plummet. In the short term, consumers would be devastated and dairy producers would have a payday, after which consumers would get a break while dairy producers watched their profits crash and burn.

So why hasn't Congress passed a bill to save us from the looming white cliffs of fiscal milk insanity? The answer is simple -- and remarkably familiar. Just as recently occurred with Rep. Boehner's much-touted "Plan B," Republican legislators are locked in battle with each other. In this case, the question is how much money the government should strip out of its agricultural programs. In June, the Democrat-dominated Senate made its bid, passing a bill that would cut agricultural spending by $23 billion over ten years, including a $4.5 billion cut to the food stamp program.

Convinced that even deeper cuts could be made, the House Agriculture committee responded with a bill that would slash $35 billion, including a $16 billion cut to food stamps. Unfortunately, the House bill never even made it out of committee as a group of Republican congressmen wanted to cut even deeper -- they wanted to double the cuts to food stamps.

As Newark Mayor Cory Booker recently discovered when he tried to live on $30 worth of groceries for a week -- the amount that he would get under the government food program -- food stamps hardly suffer from an excess of generosity. Even so, as the GOP-dominated House vacillates between stingy and stingier, we are edging ever closer to a cliff that could leave us all feeling some hunger pangs.

U.S. Milk Prices Could Double

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

Increase your money and finance knowledge from home

Banking Services 101

Understand your bank's services, and how to get the most from them

View Course »

Advice for Recent College Grads

Prepare yourself for the "real world".

View Course »

Add a Comment

*0 / 3000 Character Maximum

311 Comments

Filter by:
ehetrick

This doesn't make sense. If farmers are going to rush to sell the government their higher-priced milk, why would the government buy MORE milk? Even if the government bought the same amount of milk, the supply is still the same. Therefore, what the government does not buy, the public will at a public market price! Can someone straighten me out or is this article nuts? Sounds like a boom for the dairy business.

December 28 2012 at 8:01 PM Report abuse rate up rate down Reply
Frankie

Republicans can't govern worth a damn.

December 25 2012 at 2:15 PM Report abuse +1 rate up rate down Reply
Carol

glad I don't like milk. I'm not paying $8 a gallon .Def not buying from overseas.

December 25 2012 at 1:30 PM Report abuse rate up rate down Reply
THOMAS AND JOYCE

Congress will do whatever will benefit big-ag corporations and not the family farm. Get over it.

December 25 2012 at 11:22 AM Report abuse rate up rate down Reply
WarehouseFlats

obama will just double food stamps allocation so his vote base will not even notice the price increase.

December 25 2012 at 9:35 AM Report abuse -2 rate up rate down Reply
1 reply to WarehouseFlats's comment
EnolaGrey

Apparently you didn't notice the part about the House G.O.P. wanting to slash $16 billion from the Food Stamp program. This was rejected, though, because some of the G.O.P. members didn't think the cut was large enough.

December 27 2012 at 12:52 PM Report abuse rate up rate down Reply
wesivey2

So many politicians are from farm states and they fight for the subsidy's, people who don't need the subsidy get well from it, then some who have never farmed at all, but has a few acres get a big check check for nothing at all. This site gives the name and the amount of taxpayer money that is donated to there welfare, the amount is staggering. http://farm.ewg.org/. Then there is the Federal crop insurance, there is several farms near me with land that want grow ragweed, but ever year they plow it up use a little fertilizer put a few seed out, and when the crop dont materialize the Feds pay them for the full crop. If the real farmer got it and just the ones that needed it it would be ok, but that is not the case.

December 25 2012 at 8:53 AM Report abuse rate up rate down Reply
Kay

GOING TO TO PUT A WHOLE LOT OF FRAMERS OUT OF BUSINESS..THIS MAKES ME SICK...WE ARE GOING TO HELL IN A HAND BASKET!!!!!!!!!!!!!!!!!!!!!!!!! JUST BECAUSE THOSE AHOLES IN THE WHITE HOUSE CAN'T DO THEIR JOB!!!!!!

December 25 2012 at 8:01 AM Report abuse -2 rate up rate down Reply
1 reply to Kay's comment
EnolaGrey

Would you mind telling me why the White House is to blame for all the problems when it is the job of Congress to prepare and pass the budget?

December 27 2012 at 12:58 PM Report abuse rate up rate down Reply
1 reply to EnolaGrey's comment
ehetrick

Because the White House have to sign on to it unless there is a veto proof majority in Congress

December 28 2012 at 8:03 PM Report abuse rate up rate down
AllproInstall

Its too bad a happy medium cant be found. this may hurt a lot of families who are struggling finanially. Now playing devils advocate here, at least the farmers will make some money from the milk. I live in Connecticut and one by one the farms in this tiny state going out of business. Being a lover of a good, cold, fresh glass of milk each day, my fear is that someday all of the milk in New England will be condensed and imported from the Midwest.
Why do the politicians not realize the importance of local dairy farms?

December 25 2012 at 6:59 AM Report abuse +1 rate up rate down Reply
coolair120

Subsidies? Crop insurance programs? The course of our great Nation? If the "politicians" (dirty word) can't do the job, dump 'em. Replace every single one with the competition, whoever it may be.

December 25 2012 at 4:41 AM Report abuse rate up rate down Reply
paddleman1928

get rid of all subsidies and crop insurance programs. If the product can't stand on its own let it go away

December 24 2012 at 11:19 PM Report abuse +2 rate up rate down Reply