Politics Gone Sour: Why the Price of Milk Might Soon Double

Milk and Politics- the Dairy Cliff
Milk and Politics- the Dairy Cliff

It's hard to imagine anything less exciting than the federal government's farm bill: agriculture isn't the most interesting topic even under the best of circumstances, and throwing Congress into the mix seems like a recipe for absolute boredom. Still, the farm bill -- which was created in 1933 and gets updated every five years or so -- affects almost every aspect of America's food, from crop subsidies to food stamps to disaster relief. For the most part, its updates happen quickly and regularly. Good thing, too, as delayed farm bills have the potential to upset daily life in a truly horrifying variety of ways.

Right now, the farm bill is caught in legislative limbo, a victim of the partisan deadlock surrounding the fiscal cliff negotiations. Normally, this wouldn't be a huge problem, except for one minor thing: When the current bill expires, the price of milk could double.

In order to protect farmers from market fluctuations, the federal government sets a minimum price at which it will buy surplus milk, which it then uses for school lunches and other programs. Under the current farm bill, this price is set a little lower than the market rate, so that farmers will be inclined to sell their milk to the public. But the original Agricultural Act of 1949 -- which the current Farm Bill overwrites -- uses a different equation that would make milk much more expensive.

According to The New York Times, if the current Farm Bill expires and the pricing equation reverts to its 1949 standard, the government will pay considerably more for milk. If that happened, Agriculture Secretary Tom Vilsack warns, farmers would rush to sell their milk to the government, prompting a serious shortage in stores. This, in turn, would drive the price of milk from an average of $3.69 a gallon to as much as $8.

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

So why hasn't Congress passed a bill to save us from the looming white cliffs of fiscal milk insanity? The answer is simple -- and remarkably familiar. Just as recently occurred with Rep. Boehner's much-touted "Plan B," Republican legislators are locked in battle with each other. In this case, the question is how much money the government should strip out of its agricultural programs. In June, the Democrat-dominated Senate made its bid, passing a bill that would cut agricultural spending by $23 billion over ten years, including a $4.5 billion cut to the food stamp program.

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Convinced that even deeper cuts could be made, the House Agriculture committee responded with a bill that would slash $35 billion, including a $16 billion cut to food stamps. Unfortunately, the House bill never even made it out of committee as a group of Republican congressmen wanted to cut even deeper -- they wanted to double the cuts to food stamps.

As Newark Mayor Cory Booker recently discovered when he tried to live on $30 worth of groceries for a week -- the amount that he would get under the government food program -- food stamps hardly suffer from an excess of generosity. Even so, as the GOP-dominated House vacillates between stingy and stingier, we are edging ever closer to a cliff that could leave us all feeling some hunger pangs.

U.S. Milk Prices Could Double
U.S. Milk Prices Could Double

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.