Going Over Milk Cliff Will Double Price, US Market Loss

If a new farm bill does not pass by Jan. 13, federal price supports revert to a "parity pricing" system created in the Truman Administration.

milk

Photo: Travis S. (Flickr)

The milk cliff would drive prices so high that sales might drop.

While Congress tries to head off a “fiscal cliff” tax hike, a so-called “milk cliff” could double the price you pay for milk after the House refused to vote on a Senate-passed farm bill.

Purdue animal sciences professor Mike Schutz says going over that cliff would double milk prices and cause the U.S. to lose a chunk of its share in the milk market.

“That price would be so far above the world price for milk that other countries would have the opportunity to replace US milk in export markets, and exports account for somewhere around 10 to 15 percent of the milk produced in the US,” Schutz says.

If a new farm bill does not pass by Jan. 13, federal price supports revert to a “parity pricing” system created in the Truman Administration, a system which incorporates inflation and production costs into federal price supports.

Schutz says milk prices have risen on their own to roughly double the price floor set by the government. But if there‘s no farm bill, reinstating the 1949 pricing formula, with 63 years‘ worth of inflation, would quadruple that price floor, forcing supermarket prices to rise to meet it.

Schutz says many dairy producers have wanted higher prices to keep pace with rising feed costs. But he says the milk cliff would drive prices so high that sales would drop.

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