Milk Prices Could Rise To $8 A Gallon In 2014: Here's Why
Dec 05, 2013 01:22 PM EST
A gallon of milk could be priced at $8 by 2014 if the House and Senate don't agree on a new farm policy for dairy products.
If legal action isn't taken before 2014, the United States farm policy would revert back to "permanent" law, which would be the 1949 farm bill, according to NPR.
"In 1949, the dairy industry was much smaller and less efficient than the one that exists today, so it received bigger price supports from the federal government. And if U.S. policy reverted to the old law, the government would be forced to go into the marketplace and buy milk, butter and cheese at about double the going rate," NPR reported.
U.S. Agriculture Secretary Tom Vilsack warned NPR rising costs of dairy products will "distort" the markert.
"So you, as a [milk] producer, would have a choice of selling it to your normal purchaser at $18 or $19 a hundred weight or to USDA at $38 a hundred weight. What do you think producers will do?" Vislack explained.
Read more of NPR's report here.
According to CNBC, the bill expiring would mean the demand for dairy products would decrease by an estimated 9 percent. The growth of the dairy industry would likely "disappear" as the farm products would become expensive.
"It could take a period of weeks or a month or two for there to be a trickle-down effect at the retail level," Chris Galen, senior vice president of communications at the National Milk Producers Federation, a group of 30 dairy cooperatives, explained to CNBC. "What happens under this permanent law, the USDA is required to basically support a much higher price to dairy farmers."
"This is the second time we've been down this road. The same thing happened last year," Galen added. "It's because of gridlock on Capitol Hill. It's very similar to the showdown and shutdown we had in October."
Read more of CNBC's report here.