Jan. 1, a federal dairy program expires and dairy prices then revert to
a standing 1949 law that could double milk and cheese prices for
consumers and school districts -- and powerfully disrupt dairy markets.
Sharp price increases won't happen right away and could quickly be reversed by Congress in the coming weeks.
But if weeks pass without congressional action, the impact would snowball.
everyone from U.S. agricultural officials to Kansas dairy farmers is
scrambling to figure out exactly what it would mean -- for farmers, for
consumers and for the U.S. Treasury.
"We are definitely in
uncharted territory," said Jackie Klippenstein, vice president for
industry and legislative affairs at the giant Kansas City-based dairy
cooperative Dairy Farmers of America.
The program, called the Dairy Product Price Support Program, was part of the most recent farm bill. Although the farm bill expired Sept. 30, the dairy program continues until the end of the year.
part of that program, the federal formula has set the cost of
production below the actual cost to produce milk, meaning no federal
action is needed. But on Jan. 1, that law expires and the prevailing
63-year-old law requires the government to acquire the milk using an
antiquated formula that would set the price that the government must pay
at between $37.35 and $44.82 per 100 pounds of milk, roughly twice what
it costs dairies to produce milk, even with drought driving up feed
The 1949 law also applies to other commodity foods, such
as wheat, corn and grain sorghum. A report by the Congressional Research
Service said that the government might be forced to buy wheat at $13.95
a bushel, a 70 percent to 80 percent increase over current
Orville Miller, of Miller Dairy in Hutchinson, said he couldn't believe this situation has even come about.
would totally ruin the market," he said of the looming jump in milk
prices. "They've pulled some pretty stupid things, but I can't believe
even they would let this go on."
Worries about the wheat purchases are muted for now because wheat harvest is six months away.
Milk, however, is produced twice daily.
report said that corn and grain sorghum prices probably would not have
to rise because the market price is already high enough under the old
Congressional action would quickly solve the problem.
A new milk pricing program is built into the proposed farm
bill. Versions were passed earlier this year by the full U.S. Senate
and the U.S. House Agriculture Committee, but the House version stalled
in the full House when some conservatives balked at the total cost of
the bill, especially the spending on the food stamp program. House
leaders promised in September to bring the bill back up after the
This week U.S. Rep. Mike Pompeo, R-Wichita,
agreed the expiration of the program will cause trouble for farmers and
that Congress must act to provide certainty, but he didn't express
support for the current version of the farm bill.
must turn what is now mainly a food stamp bill into a consumer and
farmer focused bill based on free market principles," he wrote in an
email this week.
U.S. Rep. Tim Huelskamp, R-Fowler, couldn't be
reached for comment. His offices were closed and voicemail wasn't
U.S. Sen. Pat Roberts, R-Kan., ranking
Republican on the Senate's agriculture committee, said consumers and
farmers shouldn't face this uncertainty.
"I am committed to
working with Senate and House leadership to convince them of the need
to, at the very least, pass an extension of the current farm bill and prevent uncertainty in the dairy case and on the farm," he wrote in an e-mail this week.
U.S. Department of Agriculture will follow the law, as required, U.S.
Sec. of Agriculture Tom Vilsack said in a call with reporters this
month, but he said it would take "a while" to develop the rules needed
to administer the law. But once they are written, the government will
start buying milk at the higher prices, he said.
As prices rise,
U.S. dairy exports will dry up and foreign countries will start selling
more dairy products in the United States.
Food processors will start re-writing formulas to reduce or eliminate dairy products, he said.
"This is a bad outcome," Vilsack said.
best outcome would be for Congress to do its job in the remaining time
this year to pass a five-year bill and make it a priority," he added.
"That's the best outcome. The worst outcome would be for Congress to do
nothing and for permanent law to come into effect."
Americans' consumption of milk already trending down, those in the dairy
industry fear what might happen if consumers go to the store to find
milk selling for $6 or $7 a gallon.
Jim Mitchell, a 63-year-old
artist from Milwaukee, said his family of four goes through at least a
gallon of milk a day but might switch to soy or almond milk.
"They're usually more expensive," he said, "but if milk goes to $6 a gallon, all of a sudden they'd be affordable."
"Or we might have to buy our own cow," his wife, Melissa, joked.
producers who are currently experiencing tight margins or even losses
acknowledge they would see windfall, at first. But, they said, customers
would soon adjust by buying less, and that would cause a huge
disruption in the market.
"We are going to have consumer backlash
and it's not the fault of the dairyman," said Byron Lehman, a Harvey
County dairy farmer. "And once you lose those people, they're going to
change their buying habits."
Contributing: the Associated Press