Nevermind the Fiscal Cliff, What About the Dairy Cliff?
It is no secret that the life of a dairy farmer is not without its hardships. Besides the endless tasks of animal husbandry, there are the unforgiving hours (up at 4:30 AM) and zero vacation benefits. But over the last few years, dairy farming has becoming increasingly more difficult and far less profitable (or even sustainable). The dairy industry is currently upside down; meaning that the feed provided for cattle is more valuable than the actual milk they produce. Add to this the fact that the Federal Farm Bill (the little thing that determines U.S. agricultural policy) is caught up in the fiscal cliff gridlock and, while most farmers are covered by crop insurance if all else fails, dairy farmers are left out in the wind dangling (so to speak).
The already perilous lives of dairy farmers are made worse by the fact that they have no safety net to speak of, and as feed prices soar, so must milk prices. This is bad news for producers as well as consumers. According to a NPR report, the federal government “sets a minimum price for milk, but it hasn’t kept pace lately with increased prices for feed or energy or the cost of repairing farm equipment.” The result is dairy farmers need to work longer hours, producing more milk, just to stay above water, which is near impossible for most dairy farmers. There was a program called the Milk Income Loss Contract, which functioned as sort of a safeguard for dairy farmers by subsidizing farmers if milk prices dipped too low or feed prices inched too high, but that program expired back in 2008. This was sort of a stopgap measure, but one that provided a bit of much needed support to struggling farmers.
So what can happen here? Well if agreements are not made in congress by January 1st, a 1949 law goes into effect recalculating price support levels for farmers. In short, milk and dairy prices could easily double (or triple) within a few months. More money for a gallon of milk would seem like a good thing for dairy farmers, but sadly, they don’t always benefit from increased price. But needless to say, if consumers are spending upwards of $7 a gallon for milk come May, no one is likely to be happy.