Milk to Hit $8 a Gallon if Congress Goes Off Milk Cliff

Posted on December 29, 2012

You've heard about the fiscal cliff. But have you heard about the Milk Cliff? If Congress fails to take action on the farm bill before Tuesday, the government will be forced to purchase dairy at ridiculously high prices. The farm bill contains the Dairy Product Price Support Program. The government is required to buy dairy at certain prices if the price falls below a certain floor. The government has not had to buy dairy in a while because milk prices have met the floor. But when the price is calculated in January, it will be done based on a formula written in 1949 which has many assumptions that are not true today. For one thing, the dairy industry was much more labor intensive in 1949. If you calculate how much hand labor it would take in today's dollars to make a gallon of milk, the price goes sky high. Bottom line: if Congress doesn't act, milk could go to $8 a gallon. That is going to infuriate a lot of voters. The Today Show reports:

NPR has a good explanation of the Milk Cliff and what happens if we go over it.