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Time to buy the cow! Milk could climb to $7 a gallon

By Catholic Online (NEWS CONSORTIUM)
December 23rd, 2012
Catholic Online (www.catholic.org)

If an agricultural bill goes unaddressed by lawmakers before the touted "fiscal cliff," the United States could be looking at a new meaning for the phrase "cash cow." A gallon of milk could climb as high as $7 a gallon in 2013, some analysts predict.

LOS ANGELES, CA (Catholic Online) - How will prices in the dairy aisle be just as terrifying as a trip to the gas station? The scenario will go something like this: In order to keep dairy farmers in businesses, the government agrees to buy milk and other products if the price gets too low. The current agriculture bill has an agreement that means the government steps in if the price of milk were to drop by roughly half from its current national average of about $3.65 a gallon.

This bill expired last summer. Since then, Congress has been unable to agree on a new one. Several protections for farmers have already expired. Even more are scheduled to expire over the coming months. One of them is the dairy subsidy, which expires on New Year's Day.

The law states that if a new bill isn't passed or the current one extended, the formula for calculating the price the government pays for dairy products reverts back to a 1949 statute. Under that agreement, the government would be forced to buy milk at twice today's price - bad news at the grocery store.

"If you like anything made with milk, you're going to be impacted by the fact that there's no farm bill," U.S. Secretary of Agriculture Tom Vilsack told CNN's Candy Crowley late last year.

"Consumers are going to be a bit shocked when instead of seeing $3.60 a gallon for milk; they see $7 a gallon for milk. And that's going to ripple throughout all of the commodities if this thing goes on for an extended period of time," Vilsack said.

Dairy farmers won't necessarily benefit from the new sky-high prices. While it might provide a short term boost to profits, there's a fear that consumers would either cut back on dairy or opt for imported dairy products, Chris Galen, a spokesman for the National Milk Producers Federation says. The group represents over 30,000 dairy farmers.

It could also force food makers to search for alternatives to dairy, like soy. "We call it the dairy cliff," Galen said.

Congress could step in swiftly to act upon this problem.

Galen said the government would have to issue a notice saying it was going to pay the increased price for dairy products, then set up a schedule for when purchases would start. "It's not like people would dump blocks of cheese on the USDA's front lawn January first," he said.

To prevent the price spike, Congress either needs to extend the current bill, pass a new bill, or enact some provision to keep the 1949 law from taking effect.

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