Milk Prices Could Increase in 2013 if Farm Bill Not Renewed

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, reported the New York Times.

If Congress does not renew the Farm Bill by Monday, Dec. 31, the milk price formula reverts back to 1949, reported CBS Boston.

On average, a gallon of milk costs $3.65, according to the dairy industry.

U.S. Agriculture Secretary Tom Vilsack said without a farm bill renewal farmers will be in a hurry to sell to the government, creating a shortage in the stores. It is estimated the price of milk could go as high as $8, he told the Capital Press.

If the farm bill is not renewed the government will be forced to buy milk at inflated prices, driving up the cost for everyone.

As customers demanded milk, markets would look to higher-priced overseas milk producers to make up the shortage, and prices could go up on everything from butter to yogurt to cheese.

Eventually, the government would sell off the milk surplus that it had built up, causing milk prices to plummet.

In the short term, consumers would be devastated and dairy producers would have a payday, after which consumers would get a break while dairy producers watched their profits crash and burn.

“I think there are some serious consequences,” U.S Rep. James P. McGovern, D-Worcester, a member of the House Agriculture Committee, said of the possibility of reverting to decades-old policy to the Worcester Telegram & Gazette. “It’s important that we address the agricultural issues that this nation faces.”

Action on the farm bill this year was stalled by disagreements over the food stamp program, from which some conservative members of the House of Representatives wanted deep cuts, reported the Capital Press.

The National Milk Producers Federation and other farm groups had hoped a farm bill would be part of a final "fiscal cliff" budget package passed before Jan. 1.

However, U.S. Rep. Collin Peterson, D-Minn., said in a radio interview Dec. 20 that Congress appears unlikely to pass a farm bill by the end of the year. He suggested American agriculture may have been too successful at keeping prices low, and sharp price hikes may make people understand "what a good deal they got."