'Milk Cliff' Could Make Prices $8 Per Gallon

If Congress fails to pass the Farm Bill before January 1st, milk prices could rise to $8 a gallon.

America could go over the “milk cliff” because of an arcane 1949 provision that could more than double the price of milk:

At the heart of the trouble is an old provision designed to create a floor for how much dairy farmers are paid for milk — a kind of minimum wage. The formula for calculating that price, however, is based on assumptions that are a century old, predating the improvements in dairy farming. That old formula, if not replaced by a new farm bill, would push prices higher.

The dusty law was implemented “as a poison pill to get Congress to pass a farm bill by scaring lawmakers with the prospect of higher support prices for milk and other agriculture products,” says Montana University Professor Vincent Smith.

Some conservatives like Charles Krauthammer say going over the milk cliff would “actually be a good idea”:

I do think if we went over the milk cliff it would actually be a good idea. [If] people actually saw the milk price double, it would be less abstract than watching a debt clock. They would finally understand that we have the insane laws, that acquire barnacles over the decades. And the farm laws are the worst. They are all kind of pressure, special interest favors, pay offs which make no economic sense. I’d like to wipe them out and start all over again, and it would be good if the law expired. People would actually be awakened to how insane our system is and how much we really need tax reform. It wouldn’t be an abstraction, it would be real.

On Thursday, the International Dairy Foods Association (IDFA) sent a letter to U.S. Secretary of Agriculture Tom Vilsack urging him to “consider other legal authorities that are available to mitigate the impact of the 1949 Act.”

Presently, a gallon of milk costs $3.65 per gallon.