Why Milk Could Hit $8 a Gallon

Old law could be reinstated if Congress can't reach compromise

By Kevin Spak,  Newser Staff

Posted Dec 21, 2012 11:14 AM CST

(Newser) – If Congress doesn't get its act together soon, old laws will cost all of America dearly—we're speaking, of course, of the Milk Cliff. If legislators don't take a break from fiscal cliff negotiations/posturing and pass a new farm bill by Jan. 1, the government will be forced to abide by a 1949 law that would force it to buy milk at roughly double the current market price, the New York Times points out. The inflated price tag would spur dairy farmers to sell to the government instead of the commercial market. That would lead to shortages that would push milk prices as high as $6 to $8 a gallon, explains the Times, up from a current average of $3.65.

That new government price would be calculated in part using 1949's almost entirely by-hand milk production costs. Today, milk is much cheaper to produce, so farmers would reap a windfall profit. But it would also drive producers of products like butter, cheese, and yogurt, to find an alternative, like imported milk. "It would be short-term euphoria followed by a long hangover," says one dairy farmer. "I don't think customers … are going to pay double what they are paying now for dairy products."

A man buys milk in this file photo.
A man buys milk in this file photo.   (AP Photo/Dinesh Ramde, File)
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