Late last year, consumers were warned that milk prices could double because of the “dairy cliff.”
The problem was averted when Congress passed stop-gap legislation on Jan. 1. People gave a sigh of relief, thinking the issue would be addressed in a new farm bill later this year. But with last Thursday’s dramatic rejection of a farm bill by the U.S. House of Representatives, the “dairy cliff” could loom again.
It could conceivably happen next Jan. 1.
“…it’s still six months away,” points out Chris Galen, senior vice president of communications at the National Milk Producers Federation. “But given that the House didn’t pass a new farm bill, and the Senate won’t pass an extension of current programs, we may be talking more about the dairy cliff later this year, just as we did in 2012,” he says.
Without a new farm bill or extension of the old one, dairy policy could revert to a 1949 law (also known as permanent law). That, in turn, will increase federal price supports for cheese, butter and milk powder to 75 percent to 90 percent of parity (based on the purchasing power that farmers had between 1910 and 1914). If that happens, milk prices could go to $38 to $42 per hundredweight.
While farmers might look at $38 to $42 milk as a blessing, a doubling of milk prices in the supermarket would impact consumers in a negative way, hurting sales.