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

363Comments
Dec 25, 2012 1:04PM
avatar
It's so nice to know that our federal government is so concerned about us they leave town while the 'fiscal cliff' looms over our heads. Milk at $7.00 a gallon is reprehensible. Not only will it cost the average citizen in these trying times but it will also increase the payouts to welfare recipients. Gee, more government debt. Who would have thought? Get your arses back to Washington and do something FOR the American people for a change rather than AGAINST us! The only thing that's going to save this country going into the future are TERM LIMITS ON CONGRESS! NO MORE CAREER POLITICIANS! They only care about themselves. To them average citizens, the same people who voted them in to begin with, no longer count!
avatar

It is time to drink less:

 

Milk and dairy industry contributes significantly to green house gasses and pollution

It uses to much water compared to Soy protein for its production and

It contributess to our bad health: Cholesterol and heart disease, hormones and breast cancer(premature puberty in the USA) Other like autoimmune disease, type 1 diabetes.

 

Stop being manupilated by the goverment and big money. Milk is for Cows....(Baby cows..) 

Dec 25, 2012 12:39PM
avatar
Of course the milk prices and everything else is going up.  Blame the bastard up there in the white house.  He said this in 2007, that he would make sure the food prices would go up.  Well merry christmas you bastard.  And where is he, the bastard is in hawaii on the tax payers pockets.
Dec 25, 2012 12:27PM
avatar
your government is here to help. Is anyone running this country?
Dec 25, 2012 12:22PM
avatar
Just another excuse to suck more from the middle class. If you haven't figured it out yet, they will destroy the middle class, so we can go back to days of old, land owners and peasant! Then we can say, off with their heads!
Dec 25, 2012 12:14PM
avatar
Liberals don't complain...you all wanted to pay more taxes and give up your freedom to government control....now your pet boa is going to EAT YOU!!!
Dec 25, 2012 12:09PM
avatar
Why get into politics?  Because big business comes at you with all kinds of "scratch my back, and I'll scratch yours" offers.
Dec 25, 2012 11:54AM
avatar
I'm glad to see most of the posters see through this BS about prices doubling.  The subsidy protected dairy farmers from themselves so that if too much milk is produced they wouldn't have to drop pricing to sell it.  I live in a dairy farm area in California and know for a fact that here dairy farmers are paid NOT to produce milk.  They remove the cows from their ranches for a year and get paid for producing NOTHING! ridiculous.  If prices go up, it is because the farmers decided not to produce product.
Dec 25, 2012 11:53AM
avatar
This is why we have a budget problem and a deficit. There us no reason for the government to buy up excess dairy products. Dairy farmers produce an excess of dairy products necessary to support the market demand and the government subsidizes these excess so that prices stay up and dairy farmers can stay in business and continue the excessive production. This is an endless cycle of waste and just one example of how our government wastes resources. It would better to stop all subsidies and allow the free market to correct itself and then the farmers that do not survive can concentrate their resources on producing products useful to our economy, like maybe corn for ethanol production which there is currently a shortage of which is keeping ethanol from being a viable substitution for traditional oil based fuel.
Dec 25, 2012 11:51AM
avatar
It won't just be milk prices going up....get ready this spring for all food prices going up.  Hope you morons who voted for Obama are happy. After paying the government a penalty for not having health insurance, health premiums going up to pay for Obamacare, payroll taxes going up, hope you have  money left to even buy food..lol
Dec 25, 2012 11:38AM
avatar
what to do .is let go rver an mabey just maby they will fix it. just maby;; merrychrist
Dec 25, 2012 11:28AM
avatar
As in the days of Ramses and Nero those so called leaders are only interested in their on personal gains. Famers and dairymen do not receive the benefits of these so called help laws.
We are not in the turmoil after WWIi.  In free capitalism milk will find its own price.
Please leave us alone USDA.
Dec 25, 2012 11:05AM
avatar

I just wont buy milk anymore. I have weened myself to 1% and using a half gal. a week.  I find it absurd that dairy farmers a decade ago had a surplus of milk and dumped it.  Corprations buying up dairy operations and the farmers themselves have artificially manipulated the market to inflate the milk prices. They have been spoiled on the lucrative pricing and now don't want to loose the flow of dollars.   the customer is the one who pays.    

Dec 25, 2012 10:29AM
avatar
You can't have it both ways America. You get pissed off when the Government bails out GM and the banks but are pissed off now that farmers wont get welfare. What happened to "let them all go bankrupt" this is a free marlet society.
Dec 25, 2012 10:15AM
avatar
we as a family would quit buying milk!, i personally don't drink it that much;
Dec 25, 2012 9:50AM
avatar
Term limits people,it will solve all our problems with congress.Only two terms to get your agenda done.No more senority for chairmanships.And best of all,it will basically put big money backers out of business.Let us demand that congress only get two terms.It might well kill the lobby industry too,would that not be a shame.
Dec 25, 2012 8:30AM
avatar
Congress is a joke. Vacation? Please!!!!! No matter what party runs Congress neither side will ever learn to think of the Americans that put them there. Bipartisin? Ya right!!!! I say just like jury duty have 100 people for one month at a time study and vote on the different articles in front of them and vote on the next to the last day of their term. Their final day they can see the final vote and what they have done for their fellow American. At least every single one of them will institute 100% of their energy and do what they can to fix our desperate country.
Dec 25, 2012 8:16AM
avatar
I guarantee you that everything is going to go up with Obama in the white house and this will fit well with the doom and gloom wishes of MSN.
Dec 25, 2012 7:46AM
avatar

"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"

 

Is the government forced to buy milk at $7.00/gal? This is a poorly written article. Regardless milk should be sold at the prices the market can bear.  This 1949 statute reeks of New Deal socialism that kept us in the last depression longer than we should have been,

Dec 25, 2012 5:39AM
avatar
First it was the Tea Party, now it should be the Milk Party and then since milk and tea go together, we could have the Grain Party and the Chocolate Chip Party, Oh hell ,let's just have a PARTY!
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?

MARKET UPDATE

[BRIEFING.COM] Equity indices closed out the month of August on a modestly higher note. The Russell 2000 (+0.6%) and Nasdaq Composite (+0.5%) finished ahead of the S&P 500 (+0.3%), which extended its August gain to 3.8%. Blue chips lagged with the Dow Jones Industrial Average (+0.1%) spending the bulk of the session in the red.

The final week of August represented one of the quietest stretches for the stock market so far this year. The first four sessions of the week produced the ... More

MSN MONEY'S