Why Dairy Prices Could Increase

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Why Dairy Prices Could Increase
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Why Dairy Prices Could Increase

Milk is a household staple, but prices could soon increase. Read on to learn more.

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The House and Senate agriculture committees will soon decide the fate of the dairy industry. Both committees have their own farm bills and together they must agree on one solution or milk prices could rise.

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If the House and Senate agriculture committees cannot agree on a bill, the law says that America's farm policy would revert back to permanent law, which, for dairy farmers, would be the 1949 farm bill.

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The 1949 farm bill could be problematic for the dairy industry today. Back in 1949, dairy farming was much smaller and not as effective as it now.

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In 1949 dairy farmers received government money for their products. If the 1949 farm bill were to go into effect today, the government would have to buy butter, cheese and milk at double the price. This would cause dairy prices to increase.

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The House's Farm Bill is estimated to cost about 418 million dollars.

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On the other hand, the Senate's dairy program will end up costing about 302 million more over the next decade.

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If dairy farmers are given a choice between selling dairy to a typical consumer for $18-19 or to the USDA for $38, they will likely sell to the USDA for a greater profit, according to U.S. Agriculture Secretary Tom Vilsack.

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However, selling dairy to the government means that the products would end up in warehouses.

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This issue isn't new either. The government had to deal with similar dairy predicaments last year.

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Without a new farm bill, the prices of other foods could be affected as well.

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Ever heard of the dairy cliff? No, it's not a mountain of ice cream, but it could mean a sudden and sharp increase in the price of milk and other dairy products.

In order to deal with a recent dairy surplus, the government is working on a new farm bill. If Congress cannot agree on a new farm bill, the law will force the industry to revert back to a 1949 farm bill and potentially cause the price of dairy to increase.

Check out the slideshow above to learn more about the potential dairy cliff and why it could lead to $7-per-gallon milk.

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