'Dairy Cliff' Could Send Milk Prices to $8 Gallon

Dairy farmers, like the rest of us, have been patiently waiting for Congress to act.

Unable so far to reach a compromise to avoid the so-called fiscal cliff, lawmakers have been stuck in the mud when it comes to negotiating a new Farm Bill which could result in milk prices soaring to as much as $8 a gallon next year.

"If nothing is passed by Jan. 1, the pricing formula [of milk] reverts back to an old 1940s law and the milk price will go up," says dairy farmer Melissa Greenbacker of Durham. "That may be good in the short term for dairy farmers, but consumers will most likely not buy as much milk so consumption is hurt in the long term."

Currently, the average gallon of milk costs about $3.65 — a relatively stable price. But, as Greenbacker points out, dairy farmers are faced with increasingly higher costs for things like feed, fuel and veterinary visits. 

In order to keep the price of milk in check and to prevent dairy farms from going out of business at a greater rate, farms receive subsidies from the government through what's known as the MILC program, or the Milk Income Loss Contract.

But the subsidy program, laid out in the 2008 Farm Bill and since seen as 'too costly', expired in September and soon the government will revert to a depression era policy to maintain milk prices.

"The dairy program we are trying to get passed in the 2012 Farm Bill will replace the MILC with the DSA, or Dairy Stability Act. This will replace direct payments and price supports with a risk management program, similar to an insurance program," says Greenbacker.

While the Senate and the House Ag Committee have already approved the new dairy program, lawmakers in the House appear closer to agreeing to a short-term extension of the current law.

A major sticking point, according to Greenbacker, is the fact that the new legislation is tied in with the SNAP program, more widely known as food stamps.

"That is where the disagreement between the Democrats and Republicans is. Republicans want cuts in the food stamp program. If they separated the farm programs from the nutrition programs then at least the farm part of the farm bill could pass. In my opinion I think there should be a Nutrition Bill and a separate Farm Bill," Greenbacker says.

It's unclear if that will happen.

In the meantime, lawmakers must grapple with the idea that consumers will likely be paying more for dairy products — including milk, cheese, yogurt and yes, even coffee creamer — if they fail to pass a new bill.

The outcome could be even worse for dairy farms.

"More milk and milk products may be imported because it will be cheaper," says Greenbacker.

Note: Of the nearly $500,000 in dairy program subsidies provided to farms in Middlesex County since 1995, Greenbacker Farm, the county's largest, has received $181,647, according to the farm subsidy database.

Related stories:

Milk Futures Showing No Sign of 'Dairy Cliff'

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Connecticut dairy farmers look to Congress for reform

Milk prices may double in new year, if fiscal cliff not avoided

Greenbacker's Brookfield Farm Facebook page