Dairy Industry Facing Its Own "Cliff"


The dairy industry could be in for a rough ride if Congress fails to pass a new Farm Bill by the end of the year. Milk prices could skyrocket.

Forget a “fiscal cliff”: The nation could be on the verge of a “dairy cliff.” Without a Farm Bill of some kind, dairy policy will revert to a 1949 law, which would have the practical effect of dramatically increasing the minimum price farmers get for their milk. Brian Gould is an agricultural economist at UW-Madison. He says at the time, the law made sense. He says policymakers in the late 40’s wanted to make sure milk production had a reasonable rate of return, “They wanted to make sure the purchasing power of that milk and therefore the revenue that the producers are getting stayed about the same relative to the cost of production.”

Now, the industry is much more volatile and margins are far smaller as the cost of production has risen. In the short term, farmers could actually benefit from a higher minimum price. But Gould says the honeymoon would only be temporary, “Consumers faced with higher prices would switch over to other beverage items, for example. If the dairy would lose a greater share of their beverage consumption versus water, carbonated beverages, they may not get that back if and when prices come back.

Stay informed on the latest news

Sign up for WPR’s email newsletter.

This field is for validation purposes and should be left unchanged.

Gould says supermarkets would swallow the price increase for a while but would eventually have to pass on the added cost to consumers.