Why $7-Per-Gallon Milk Looms Once Again

| December 4, 2013 | 2 Comments
  • 2 Comments
Sticker shock in the dairy aisle? If the government fails to pass the farm bill, milk prices could spike sometime after the first of the year. Photo: George Frey/Landov

Sticker shock in the dairy aisle? If the government fails to pass the farm bill, milk prices could spike sometime after the first of the year. Photo: George Frey/Landov

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Post by Tamara Keith, The Salt at NPR Food (12/4/13)

The leaders of the House and Senate agriculture committees are meeting Wednesday as they continue to try and work out the differences between their respective farm bills. If they fail, the country faces what’s being called the “dairy cliff” — with milk prices potentially shooting up to about $7 a gallon sometime after the first of the year.

Here’s why: The nation’s farm policy would be legally required to revert back to what’s called permanent law. In the case of dairy, that would be the 1949 farm bill.

And if House and Senate negotiators fail to reconcile their farm bills, U.S. Agriculture Secretary Tom Vilsack warns, “I’m going to be put in a position where I have to invoke and implement permanent law. And I will do my job because that’s what I swore an oath to do.”

The problem is that back in 1949, the dairy industry was much smaller and less efficient than the one that exists today, so it received bigger price supports from the federal government. And if U.S. policy reverted to the old law, the government would be forced to go into the marketplace and buy milk, butter and cheese at about double the going rate.

Vilsack says this would distort the market: “So you, as a [milk] producer, would have a choice of selling it to your normal purchaser at $18 or $19 a hundred weight or to USDA at $38 a hundred weight. What do you think producers will do?”

Of course the producers would sell to the government. And that, says Jim Dunn, a professor of agricultural economics at Penn State University, “would be terrible.”

“Every refrigerated warehouse in the United States would be full of cheese and butter,” he says, “and non-refrigerated milk warehouses would be full of powdered milk.”

And for the rest of us, he says, there would be sticker shock in the dairy aisle.

Vilsack says there would be supply issues, too, because the federal government would own the commodities, but there would be shortages in the grocery store. Which is how we’d quickly end up facing milk at $7 a gallon –“If you can find it,” notes Vilsack. “And that is why it is ludicrous for Congress not to get a farm bill done.”

Milk would only be the first commodity affected. Without a farm bill, other commodity prices would spike as well as the year went on, affecting every family in America. Farm policy, often obscure for most consumers, would get personal fast. If this all sounds like illogical and terrible policy — well, that’s the point, says Vilsack.

“It’s a great lever to compel action,” he says of the invocation of permanent law that hovers over every farm bill. “In most cases, it’s the reason why we’ve had fairly routine extensions of the farm bill for the past 50 years.”

Rep. Mike Conaway, a Republican from Texas and a member of the farm bill conference committee, agrees with Vilsack’s assessment.

“It’s applying pressure to me,” he notes.”That’s the whole advantage of having permanent law that’s as bad as it is: To try to get folks to create the new law that we need for the next five years.”

Now if all this talk about a dairy cliff sounds familiar, that’s because it is: Last year, lawmakers narrowly avoided triggering those 1949 price supports by tucking a temporary extension of the 2008 farm bill into last-minute legislation that avoided the fiscal cliff.

This year, efforts to pass a new five-year farm bill have fallen into some of the same philosophical fights about the role of government that have gummed up the budget process on Capitol Hill — and just about everything else.

Copyright 2013 NPR.

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Food and Health-related stories from NPR including NPR Radio; NPR's food blog, "The Salt"; NPR's Health News blog, "Shots"; NPR's Breaking News blog "The Two-Way"; NPR's economy explainer "Planet Money"; food-related technology news from NPR's "All Tech Considered"; and food series "Kitchen Window."
  • http://nhprogressives.wordpress.com John Ranta

    So many problems with this story, and the author’s willingness to repeat vilsack’s points, unquestioningly. First off, what is the problem if milk costs $7 a gallon? It is not a necessity, we can live just fine without it. Secondly, how much are we rally paying for milk today. Granted, the grocery store price is $3, but that’s a subsidized price. When you add in the tax dollars we are all paying to bloated, inefficient and unnecessary dairy industry, the total price probably comes close to $7 a gallon. We just don’t notice that, because half that price is hidden in our tax bills. Thirdly people could, and rightly so, argue that ending farm subsidies would make it harder for poor people to buy food. The fact that many poor people find it hard to buy food is a real problem. But the solution is not to create a byzantine farm subsidy program that enriches farmers and distorts food production. The solution is to address poverty, to enact a real living wage, and end income inequality. The people crying wolf about the farm bill are those making billions off American taxpayers, who hope their gravy train never ends. It is time we eliminated farm subsidies, and addressed the real problems with food production and income inequality in America. $7 a gallon milk, such a misleading issue….

  • blahblah98

    Agreed that farm subsidies need to end, as it’s just corporate welfare for Monsanto, ConAgra, Cargill, etc. The noble family farmer story is trotted out by the corporations as a useful myth, but it’s old, tired & dead; the vast majority of the subsidy goes straight to the Ag company bottom lines.
    The issue of $7 milk, eggs, flour is the Ag lobby dog-whistle for social safety-net for the basic food staples. True, John, milk isn’t generally necessary for most healthy adults, but it DOES make a huge difference in child growth and nutrition, and calcium / protein needs often re-emerges for seniors as a fundamental nutritional supplement (Ensure). It is neither in America or democracy’s best interest to have a malnourished underclass, nor is it in the humanitarian interest of an egalitarian society to have it.
    So the problem is how to defeat the Ag lobby, repeal farm subsidies, while still providing basic food staples as part of necessary social safety net programs. This problem has never been solved.