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Milk prices could rise without federal action

End of price supports could drive costs to $7-$8 a gallon, some fear

POSTED: December 28, 2012 11:59 p.m.

Come Tuesday, grocery bills could be higher with a potential hike in milk prices looming.

On Jan. 1, diary price supports will expire if Congress does not pass a new farm bill or extend the current one.

If Congress fails to do so, which it could attach to any “fiscal cliff” legislation to renew tax cuts, the Agriculture Act of 1949 would again become legally effective.

“Basically, there’s something to talk about with a farm bill every year,” said Geoff Benson, agriculture economics professor emeritus at North Carolina State University. “This year, to go along with the gridlock in Congress on many other issues, they couldn’t agree on what the new farm bill policy should be. If nothing happens, the old farm bill expires.”

According to Benson, who specialized in the dairy and cattle industry, the 1949 legislation set target prices on milk based on a formula that now is outdated. To keep prices relevant, and not only in the dairy industry, Congress must pass farm bills updating the formula.

“That formula just generated big surpluses and the government, as a part of that policy, would buy the surpluses and that got quite expensive,” Benson said. “Essentially, they kept passing farm bills that kept modifying the 1949 act.”

If a new bill or extension of the current one is not passed, unverified estimates claim milk could double in price.
Benson said he’s not sure what the price would be, but it would be “way above what it is now.”

And an increase could spell trouble for local dairy farmers.

“I just think, for us as dairy farmers, while it would be nice if the price goes up, if the price does increase, in the long term it doesn’t help us any because the consumers are not going to want to buy our product,” said Dixie Truelove, who owns a 300-acre dairy farm with her brother, Jerry, near Clermont. “A stable market is just better for us than what people are speculating.”

If prices were to rise, she said, more people would opt out of buying milk at prices that could top $7 a gallon.

“If consumer prices increase on their gallon of milk, then there is a large percentage of those who will find something to take its place rather than pay $7 or $8 a gallon,” Truelove said. “So the usage of milk would decrease, which would impact us.”

Scott Glover, who owns Mountain Fresh Creamery in Clermont with his wife, Jennifer, said the impact to his dairy would be “significant.”

Glover is under contract to sell his milk to a co-op, which blends it down, adds vitamins and sells it back to Glover and other dairy farmers at a higher price.

“If we have to double the price of our milk as far as buying it back from our co-op, and then pass that cost along to the consumer, that’s going to really hurt us because people aren’t going to buy milk if it goes to $8, $9 a gallon,” Glover said.

And with the Tuesday deadline looming, the possibility of that happening is becoming a reality.

“The closer we get to Jan. 1, it kind of makes it looks like it’s certainly something that’s going to happen,” Glover said. “It would be a big blow to dairy farmers if milk does go up.”

But some are not convinced it will happen.

“It’s just all speculation,” Truelove said. “I cannot imagine it actually happening.

“I don’t see how our elected officials will allow that to actually happen. I think it that if it’s allowed to happen, then our market takes a huge hit.”

Congress has not scheduled a vote on even a temporary extension to prevent a spike.

The Associated Press contributed to this report.


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