Why Milk Prices Could More Than Double After January 1

Come Jan. 1, there is a threat that milk prices could rise to $6 to $8 a gallon if Congress does not pass a new farm bill that amends farm policy dating back to the Truman presidency, reports NYT.

According to NYT, without last-minute Congressional action, the government would have to follow an antiquated 1949 farm law that would force the government to buy milk at wildly inflated prices, creating higher prices in the dairy case. Milk now costs an average of $3.65 a gallon.

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 price. The farmers would then end up selling much of their product to the government instead of in the private sector.

The Senate passed a farm bill in July. A House version of the bill made it out of committee, but House leaders have yet to bring its version to the floor.

NYT goes on:

In a conference call with reporters on Thursday, Tom Vilsack, the agriculture secretary, said the department was exploring all its options to deal with the possibility of the 1949 law going into effect.

“We will do whatever we are legally obligated to do,” said Mr. Vilsack, who declined to say what specific steps the department would take to prepare for what dairy lobbyists and industry officials are calling the “milk cliff.”

It is also unclear what the government would do with any milk it purchases under the 1949 law.