Milk Prices Could Skyrocket if Congress Doesn't Agree on New Farm Bill

Updated: 12/06/2013 6:51 PM
Created: 12/06/2013 5:56 PM
By: Naomi Pescovitz

Would you pay $5 dollars or more for a gallon of milk? Prices could increase if Congress doesn't agree on a new Farm Bill soon.

The deadline to pass the bill is Jan. 1, 2014, but the House plans to recess on Dec. 13.

Cows at the University of Minnesota Dairy Cattle Teaching & Research Center produce more than 100 pounds of milk each day. The price consumers pay is a careful balance between shoppers and farmers.

"Dairy producers need prices to be sufficiently high to stay in business, dairy consumers need prices to be sufficiently low for them to be able to enjoy the milk," said Dr. Marin Bozic, Assistant Professor in Dairy Foods Marketing Economics at the University of Minnesota.

Right now, the average price of a gallon of milk in Minnesota is less than $3.50 per gallon. Without a new farm bill or an extension of the current one, consumers could cough up $5.25 a gallon by February.

"On a gallon that you buy at the store, only half of it goes to dairy producers, the rest goes to people that work in packaging, distribution, retail and so on," Bozic said.

Without a deal, the dairy market would return to a law from 1949.

"We would revert to support prices for milk that made sense 60 years ago, but because of inflation since that time, would make no sense anymore today... The US Department of Agriculture would have to raise the support prices for farm levels of milk, for a level that's approximately double what farmers get today," Bozic said.

Farmers would then do much more business with the government as opposed to commercial grocery stores.

"The dairy cliff, as we call it, is designed to never go into effect. It is designed to pressure politicians not to hurt consumers. Unfortunately with this Congress we've learned to never say never," Bozic said.

The main sticking points for politicians are how much the nation should cut food stamps, and a pricing system for crops like corn and soybeans.

Minnesota Congressman Rep. Collin Peterson is the ranking Democrat on the House Agriculture Committee and one of the main Farm Bill negotiators in Washington. Peterson believes they are on track to get the bill done, possibly by early next week.

Minnesota Senator Amy Klobuchar is on the Senate Agriculture Committee. She released the following statement: "We need to pass a Farm Bill now to make sure consumers aren't hit with higher prices for milk and other goods and our farmers and ranchers have the support and certainty they need. As a member of the Farm Bill conference committee I have been pushing to pass strong, long-term legislation as quickly as possible and that's what I will continue to do."

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