Milk prices could double after 'dairy cliff'

An expiring farm bill will boost costs just as the nation's tastes change.

By Jason Notte Dec 24, 2012 1:30PM

Image: Woman holding a glass of milk (© Katri Lehtola/Folio Images/Getty Images)Amid a holiday season filled with gun violence, Superstorm Sandy fallout and fiscal cliff worries, even seasonal American creature comforts like a short stack of cookies and a tall glass of milk are laden with worry.

Dunk those snowman-shaped sugar cookies at your own risk and ration Santa's to-go glass, because milk is going to get a whole lot costlier if congressional inaction continues.

The current agriculture bill expired this summer, and temporary aid to farmers is set to expire on Jan. 1. That includes a dairy subsidy that allows the government to buy up milk if prices below half of the $3.65 national average. Without that plan in place, the per-gallon price will jump to roughly $7.

New York Sen. Chuck Schumer brought up the issue during a news conference in September, according to CBS News. He warned that milk prices could double for consumers already putting nearly 11% of their grocery budget toward dairy products, according to the Bureau of Labor Statistics.

The problem is that the vacuum left by the agriculture bill's absence would be filled by a statute dating back to 1949. Under those terms, the government would have to buy back milk at double current prices, which would increase costs across the board for companies like Kraft (KRFT), Hershey (HSY) and any other that uses large quantities of milk.

"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 for “State of the Union slated to air Sunday. “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.”

That's not exactly great news for the dairy industry, either. Milk prices were already up after the summer drought stifled milk production and grain prices increased, but Department of Agriculture numbers already show a 30% decline in milk consumption since 1975. It's dropped 3.3% already 2012 from 2011, the biggest decline since 1975.

As much as the dairy industry may want to pin losses on alternatives like soy and almond milk, sales of all types of liquid milk has fallen 2.9% by volume since 2011 as total dollar sales have slipped 2.2%, according to market-research firm SymphonyIRI Group. However, the dairy industry is taking a huge hit as sales of skim and low-fat milk have dropped 4% by volume.

Chris Galen, a spokesman for the National Milk Producers Federation, which represents over 30,000 dairy farmers, told CNN that the looming price hike is a “dairy cliff” that could forces manufacturers to consider dairy imports or alternatives. Though the price hikes would take a few weeks to hit supermarkets, continued Congressional inactivity would ensure a spike if the current farm bill isn't extended or a new farm bill isn't implemented.

Considering Congress is home for the holiday slugging back as much milk as consumers are, Americans may want to savor a relatively cheap sip or two while it can.

More from Money Now

Dec 24, 2012 4:17PM
why don't we just throw all the politicians off the physical cliff. there's not a single one doing us any good !!!!!!
Dec 24, 2012 2:38PM

More horsehockey. Agricultural subsides are PRICE subsidies, to keep the prices UP, they don't keep prices DOWN! He says it himself: "...a dairy subsidy that allows the government to buy up milk if prices go below half of the $3.65 national average".


This is nothing but "corporate welfare" and has been since after WWII. All corporate welfare should be eradicated. If milk prices go up, two things would happen: people would drink even less, and farmers would produce even more. Then the price would stabilize normally, without government payouts.

Dec 24, 2012 2:14PM
Exactly why I did NOT vote for INCUMBENT politicians!  These are the folks that got us in this mess people!  Career politicians must go - going on vacation in a crisis - REALLY????!!
Dec 24, 2012 2:09PM
So Obviously the best answer is to both eliminate the current farm bill, as it is too costly, AND repeal the ridicoulous 1949 statue that makes us pay double the going rate. Why is any of this so hard?
Dec 24, 2012 2:58PM
Did anyone really think these a--holes would do ANYTHING FOR THE AMERICAN PEOPLE-?
Dec 24, 2012 2:57PM
"Dairy Cliff"?  give me a break.  Now everything is a cliff.  I guess Dec. 26'th, we'll be going over the Christmas Cliff & Jan. 1'st we'll go over the New Year's Cliff.  If I drive my car off the road, I'll go over the Cliff Cliff. If I run out of peanut butter, will I go off the "Jiff" Cliff?
Dec 24, 2012 2:50PM

Let the subsidies (AKA corporate welfare) expire!

Why are my taxes used to pay the dairy industry?


Dec 24, 2012 3:14PM

OH NO !!!


Do you mean to tell me that we might have to return to what is called a "Free Market" to determine the price of milk.


What kind of capitalism is that-where supply and demand determine the value of a commodity.


If this type of thing succeded the next idea might be that we don't need the government to meddle in every facet of our lives.


Dec 24, 2012 2:45PM
Im glad to see that people are understanding about who really runs the country its not the present it is congress. I say kick them all out of office and let real people run the show for no pay that is how this country did it at first and should be done again. 
Dec 24, 2012 3:07PM
Welcome to the People's Republic of America.  This outrage is but one tiny grain of sand in the Sahara Desert of federal **** programs.  Get rid of them all!
Dec 24, 2012 3:20PM
Goverment will probably increase food stamp benefit amounts to cover the rising cost of anything they monopolize and furthermore be a burden to the working man and woman in this country to flip the bill for it all. Time to buy a cow.
Dec 24, 2012 4:28PM
I think the greatest threat to the nation today is Wall Street and the Federal Government.  Needless to say, we will have a real problem getting rid of either of them!!!
Dec 24, 2012 4:13PM

What the city folks do not understand is that the farm bills are ment to stabalize the cost of food!  the trouble with the country is that more people live in and grew up in the city. If a farmer has a bad year he could go out of business. The democrats say good but what you city people do not understand is that it takes years to build a dairy herd up.  years likd this one with the droubt alot of farmers could go out of business. If the dairy industry starts to go out then those jobs will go to countries that are friendly to business, and as we all know president Obama is NOT business friendly.

    Because the socalist do not understand the "work" conscept as well as the small business man. You think a dairy farm is a one man job? on the contrary cows are milk 24 hours a day plus feeding time, hay bailing in the summer and grain production (planting and harvesting)  is a lot of work!!! 

Well you were warned about the Obama and the socalist party, As Obama keeps spending money we do not have the value of the dollar keeps going down meaning it cost more for everything. This cannot be allowed to keep happening!! Wake up and realize what it takes to produce your food and what it will cost if subsidies are cut.

    If you think $7 milk is bad wait untill it hits all dairy , Cheese, Icecream, Vitiams ect. everything will go up and up and up!

    Lastley who does this hurt the most?  The POOR the RETIRED and the MIDDLE CLASS!!

Obama talks about fair but this is what the reality of fairness is !!! More jobs exported and wait untill Every employer has to supply his workers with health insurance. Higher prices to cover the additional expence and fewer jobs created in the US. More imports and our money being redistributed to the rest of the world!!!


Dec 24, 2012 3:16PM

When an Republican is office everything is cheaper, but  when a DEMOCRAT is in office everything is tippled.

This  is what my grandfather had always told me. Guess what he was right.



Dec 24, 2012 3:06PM
EPA regulation on electric companies are the real cause.  Their electric bills are about to triple because of regulations Obama pushed onto them with an Executive Order that shuts down coal production and pushed huge expense on the electricity producers.  Watch your electric bill go up too!
Dec 24, 2012 2:59PM
Yes eliminate all the farm bills! you odviously think your food is produced in the grocery store lol. eliminate everything so its costs twice for the farmers to produce your food. then when you starve to death or you and your family couch potatos are reduced to eating bread and water. then let me know how that works out for you.  and no if people drink less farmer will not produce more they will cease and adapt to selling milk for other uses instead of your drinking needs.  none of you have odviously ever studied or looked into what it costs to run a dairy farm or any farm or ranch for that matter. and contrary to popular beleif most farmers and ranchers are not rich and do not make huge incomes. but they do feed you infact they feed 99% of you.
Dec 24, 2012 4:22PM
let's get our FREE  MARKET  back.  Let this crap go over the cliff.  We can and WILL work our way back,....we always have.
Dec 24, 2012 3:13PM

With all the EAP and government regulations, high cost of equipment, insurances, labor, plus the high cost of doing business in this not so business friendly democrat state of washington.  It's a wonder the dairies are still in business. 

Dec 24, 2012 2:41PM

Wow everithyng is going up I can't believe all prices on food is no like before


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