The Price of Milk To Double Without a Farm Bill
Thursday, December 27, 2012
Did you know milk, cheese, and other dairy products could double in January if the farm bill isn’t passed before the new year?
At first I thought this was a veiled threat from the farm lobby to get their subsidies, but it looks like it goes deeper than that. In fact, farmers don’t want the price to go up because they fear they’ll be swimming in unsold milk.
“Few will buy milk the USDA will be forced to sell at prices consumers can’t afford, so Congress has no alternative but to stop the change,” UW-Madison agriculture economist Bruce Jones told the Wisconsin State Journal. “We’ll be swimming in milk, with nobody to consume it.”
He added that the dairy industry would experience a short-term windfall but the lack of demand would cause milk prices to eventually plummet which would be a catastrophe for dairy farmers.
But what is responsible for the price of milk, and why would it double without a farm bill?
The price of milk is not set by the free market as Jones suggests. It’s set by USDA regulators that claim to use market indicators and a “variety of pricing regulations”:
Over the past 125 years, a complex system of both public and private pricing institutions has evolved to deal with milk production, assembly, and distribution. The pricing of milk in the United States is part market-determined, and part publicly administered through a wide variety of pricing regulations. (Source: USDA)