If Republicans Don’t Act on Farm Bill Issues Milk Support Prices Go Back to the 1940’s Level

No That is Not a Good Thing – Except for the Lactose Intolerant

With the debacle on fiscal policy and taxes still crowding the center of the stage a little noticed problem is that there is no Farm Bill.  The Farm Bill is the massive legislation that preserves depression era welfare for large farming operations.  At the end of this year if Congress does not act, there is no current farm legislation.

Lost in the political standoff between the Obama administration and Congressional Republicans over the budget is a virtually forgotten impasse over a farm bill that covers billions of dollars in agriculture programs. 

The immediate impact, the government would be forced to buy milk at about $8.00 a gallon. 

Without last-minute Congressional action, the government would have to follow an antiquated 1949 farm law that would force Washington to buy milk at wildly inflated prices, creating higher prices in the dairy case. Milk now costs an average of $3.65 a gallon.

Higher prices would be based on what dairy farm production costs were in 1949, when milk production was almost all done by hand. Because of adjustments for inflation and other technical formulas, the government would be forced by law to buy milk at roughly twice the current market prices to maintain a stable milk market.

While this is a temporary windfall for milk producers, it is a disaster for industries that consume milk and consumers.

Farmers, at first, would experience a financial windfall as they rushed to sell dairy products to the government at higher prices than those they would get on the commercial market. Then the prices customers pay at the supermarket would surge as shortages developed and fewer gallons of milk were available for consumers and for manufacturers of products like cheese and butter.

Of course, now would be a good time to end the program of price supports for milk altogether, since the current wholesale price of milk is above the current (not 1940’s) support price level.  Expect to see Conservatives like Paul Ryan from dairy states like Wisconsin argue for the elimination of the program.  Right, just after you see the dairy cows fly.