News Summary: Dairy farmers' fiscal cliff jitters

Published on NewsOK Modified: December 18, 2012 at 1:09 pm •  Published: December 18, 2012
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DOWN ON THE FARM: Anxiety is growing in farm country about an obscure tangent of the Washington political standoff that reaches into the dairy industry and, indirectly, into the household budgets of consumers who buy milk and cheese.

HOOF HITS THE ROAD: If there is now budget consensus before year's end, unfinished farm legislation has raised the specter of a return to an antiquated system for pricing milk that would bring big price increases for consumers. The Agricultural Act of 1949 contains the basic provisions for setting milk prices. The act is superseded every time a new farm bill is passed, but if no new bill or extension is passed the old act goes back into effect.

LAISSEZ UNFAIR: The 1949 Act includes a mechanism for guaranteeing a minimum milk price that covers producers' costs, but if the old mechanism were applied to current market conditions, the government price could be double the current rate. Farmers would sell their dairy products to the government instead of the private market and store prices would surge due to a shortage. Prices might collapse later as the government eventually sells off its dairy stockpiles.



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