Milk prices could double after 'dairy cliff'
An expiring farm bill will boost costs just as the nation's tastes change.
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
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!!!
Forget the milk...Let's eat more beef !! Cows taste good too !! Just make corned beef and summer sausage out of them.
How is that a bad thing? Milk is terrible for humans. Meant for baby cows, not baby humans.
better shop for a cow now. we are going to have to use the cow to mow the grass and in return she will give us our needed milk for our strong bones.
Not only would we stop drinking milk and limilt our kids usage, we would all start to have calcium deficiencies. It would start a bad trend in the health of our babies, children and adults.
Go to National Farmers Union and click on farmers share of the food dollar. All farm commodities are far below parity prices paid to the producers. The government has a cheap food policy, and that is sell to the consumer as cheaply as possible at the expence of the farmer. Farmers should be paid a fair price for the food they produce at the farm gate, and not from the government. If it wasn't for the government, you would be paying alot more for food at the grocery store.
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.
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.
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.
Copyright © 2013 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.
[BRIEFING.COM] The major averages finished the session on a lower note as the S&P 500 lost 0.4% while the Nasdaq shed 0.1%. The Russell 2000, which paced the retreat on Tuesday and Wednesday, added 0.2%, trimming its December loss to 3.5%.
After spending the first half of the session in a steady retreat, the S&P 500 found technical support in the 1772 area. Upon reaching that level, the index reversed sharply, and marched back to its flat line. There was no particular catalyst ... More
More Market News
With the universe of this category in its seasonal sweet spot, these picks have tailwinds propelling them into the new year.