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.


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363Comments
Dec 24, 2012 2:45PM
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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 2:41PM
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Wow everithyng is going up I can't believe all prices on food is no like before

 

Dec 24, 2012 2:38PM
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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
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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
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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?
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