It would take time for the prices to go into effect, and even then, it might be more like $6 per gallon.
There’s always a reason to freak out about your food these days – look no further than the recent chicken wing, bacon, wine, and chocolate shortages, not to mention the «Sriracha apocalypse». Now comes milk at $8 per gallon. But is it really time to worry? U.S. News has a Q & A to straighten this all out.
This whole expensive-milk thing sounds familiar. Didn’t this happen before?
Yep. It came up at the end of 2012, during the fiscal cliff fight, when the farm bill also appeared set to expire. The potential price hike became known as the «dairy cliff.»
Whatever. I still have my wine and bacon. Why should I even bother worrying about yet another food freak-out?
Well, first of all, because of ice cream.
But second of all, this food freak-out is dependent on Congress, not free-floating prices that can iron out surpluses and shortages. In this case, the farm bill is set to expire at the end of the year. If it does, so will a program called the Dairy Product Price Support Program. At that point, a permanent law from 1949 would kick in, under which the government would support prices for dairy products at almost twice the current market price, pushing prices up nationwide, by buying manufactured products like milk powder and butter.
[READ: Why You Should Care About the Farm Bill]
So the government would pay farmers $8 per gallon?
Not exactly. The government would buy milk products at around $36 per hundredweight, according to the Department of Agriculture, up from the projected fourth-quarter price of $19.50.
Um, this isn’t 1874. «Hundredweight» means nothing to me.
Producers sell milk by the hundredweight, meaning they are paid a certain price per 100 pounds. The key fact here is that letting the farm bill expire could nearly double the price of milk, which was at $3.42 per gallon in September. The USDA estimates this would bring the price nationwide to $5 to $6 per gallon, though some outlets have estimated the price as closer to $8.
So my favorite ginger-avocado gelato will be, like, $16 a cup?
That’s the least of the worries. It also means total milk demand would fall by around 9 percent, according to the USDA, and furthermore that low-income Americans on SNAP and WIC would suffer.
Should I set an Outlook reminder to fill my freezer with cheap dairy products starting on Dec. 31?
It’s not quite that pressing. Manufacturers of milk products have contracts with stores to deliver certain amounts of product at certain prices by certain dates, says one expert. Not all of those contracts run out on Dec. 31.
«I think that if it was much over a month you’d start to see some folks beginning to sell product to the government. But it would probably take at least that long,» says Mark Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison.
Also, the government would have to make sure it’s prepared to buy up a lot of dairy products, meaning having plenty of storage space (the USDA declined to comment on the record for this story). The Department of Agriculture notes that processing could be hard to come by, as processors work to convert milk into goods like dry milk and cheese that have longer shelf lives than raw milk.
[READ: U.S. No Longer Among 20 Most Economically Prosperous Countries]
Still, producers and farmers must be excited.
Well, maybe. But any products sold to the government will also have to meet very exacting standards, Stephenson points out. Labels have to be «printed or lithographed» and not «stenciled or stamped,» for example, and many products also have particular pH and milk fat specifications.
Aren’t grocers worried? People are going to cut way back on buying milk.
Grocers are holding out hope that there can be a solution. The national grocery chains U.S. News contacted either declined to comment or did not respond. However, the Food Marketing Institute – a trade group representing grocery stores – says in a statement that the high-priced milk is «in no way a foregone conclusion.»
«Congress is currently working on finalizing the 2013 Farm Bill through a conference committee, and we are very hopeful that they will complete work on this legislation before there is any need for consumers to begin worrying about a spike in dairy prices,» the group says in a statement emailed to U.S. News.
So will they pass the bill? Congress can’t seem to pass anything.
There are issues to iron out between the House and Senate bills, particularly with regards to food stamps and crop subsidies. Still, the very fact that the bill reached conference committee is a promising sign. And Congress has a knack lately for averting crisis right at the last minute. Plus, allowing milk prices to double could make for an electorate that is upset at both parties at once…meaning members do have a shared goal of getting a farm bill passed.
Source: US News