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Milk Prices Could Double In New Year

December 27, 2012, 9:55 PM by Sammi Bjelland

Milk Prices Could Double In New Year
SIOUX FALLS, SD -

With the many distractions facing Washington right now, coming to an agreement on a Farm Bill has seemingly taken a back seat.

If lawmakers don't pass a new Farm Bill or renew the current one, the price of milk could rise to up to $6 or even $8 a gallon in the new year.

Industry leaders are calling it the "Milk Cliff," and for a country already watching their bottom line, this could have an impact on KELOLAND families.

"It would affect our budget slightly I guess. But we're not going to cut back on something that you need daily for health purposes," Hy-Vee shopper Matt Neuhardt said.

If Washington does not take action, a farm law from 1949 would take effect. This would mean the government would be forced to buy dairy products from farmers at twice the current market prices. The decision to sell to the government or not, would be up to the farmers.

While this may sound tempting for dairy farmers looking to cash in, the benefits might not be long lasting.

"The producers know, the dairies know, the retailers know and actually the government knows that long-term that's a bad decision on any of our parts. To double the price of milk because you will push people away from consuming liquid milk. And a portion of them will not return," Hy-Vee Store Director, Bob Trader said.

Trader believes this threat of scaring off customers will play a significant role in farmers' decisions, should the farm bill not pass.

"It's a fight between, you know, being able to run a really profitable business and maybe doing what's right in the long term for your business," Trader said.

While the idea of a price hike can be scary, many dairy suppliers have contracts to fulfill. So prices will stay steady at stores like Hy-Vee for a while longer, no matter what happens. 

"We have contracts with our dairy suppliers. Our actual price quotes for January are 15 to 20 cents a gallon below where they were in December. At least initially we're going to see a decrease come January. And then hopefully Washington D.C. can figure it out and move forward from there," said Trader.

With the current back and forth in Washington, not many people are optimistic a new bill will be passed in time.

"As important as that, I would hope they would be able to, but the way it looks for the rest of the government right now, it's possibly not going to happen," Neuhardt said.

"It's going to be real interesting for all of us to watch and see if the art of compromise still exists in our federal government," Trader said.

The Senate did pass a Farm Bill in July. A House version made it out of committee, but House leaders have yet to bring it's version to the floor.

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