WASHINGTON — Forget the fiscal crisis and the automatic budget cuts. Come Jan. 1, there is a threat that milk prices could rise to $6 to $8 a gallon if Congress does not pass a new farm bill that amends farm policy dating back to the Truman presidency.
Lost in the political standoff between the Obama administration and Congressional Republicans over the budget is a virtually forgotten impasse over a farm bill that covers billions of dollars in agriculture programs. Without last-minute Congressional action, the government would have to follow an antiquated 1949 farm law that would force Washington to buy milk at wildly inflated prices, creating higher prices in the dairy case. Milk now costs an average of $3.65 a gallon.
Higher prices would be based on what dairy farm production costs were in 1949, when milk production was almost all done by hand. Because of adjustments for inflation and other technical formulas, the government would be forced by law to buy milk at roughly twice the current market prices to maintain a stable milk market.
But the market would be anything but stable. Farmers, at first, would experience a financial windfall as they rushed to sell dairy products to the government at higher prices than those they would get on the commercial market. Then the prices customers pay at the supermarket would surge as shortages developed and fewer gallons of milk were available for consumers and for manufacturers of products like cheese and butter.
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