As a result, milk prices could jump as high as $6 to $8 per gallon after Jan. 1, when the government will revert to following antiquated 1949 regulations without a farm bill in place:
Under the current program, the government sets a minimum price to cover dairy farmers’ production costs. If the market price drops below that, the government buys dairy products from farmers to buoy prices and increase demand. Since milk prices have remained above that minimum price in recent years, dairy farmers usually do better by selling their products commercially rather than to the government.
But if 1949 rules go into effect, the government would be required to buy dairy products at around $40 per hundredweight — roughly twice the current market price — to drive up the price of milk to cover dairy producers’ cost.
“It would be bad for consumer demand in the long run,” said Chris Galen, a spokesman for the National Milk Producers Federation, which represents more than 32,000 dairy farmers.
In the short term, farmers would see a windfall by selling to the government at a higher price, but as the New York Times reports, that would lead to higher prices in stores and less milk available for manufacturing butter and cheese. “I don’t think customers and food processors are going to pay double what they are paying now for dairy products,” said Dean Norton, a dairy farmer and president of the New York Farm Bureau.
Members of the House Agriculture Committee say they will go back to work on a new five-year farm bill in the new congressional session.