Milk price May hit Highest on Record

An impending “dairy cliff” may sharply raise the price of milk. This is due in part to the impending expiration of 2008’s farm bill. Should the bill expire, the government will then have to purchase dairy at twice the current price within several weeks or months. This farm bill has existed since 1949.

Chris Galen, the Senior VP of communication for the National Milk Producers Federation, states that milk could jump to prices as high as $7-8. The Executive Office of the President explained that domestic demand for dairy would drop by 9 percent, while dairy exports would drop from the sheer expense.

“Prior to supply management, it was really a hit-and-miss scenario,” said Brian Cameron with Dairy Farmers of Nova Scotia. “There was no link between the supply of milk and the market for milk.”

To sustain higher prices, which would cost $12 billion a year, the government will buy and store dairy. Despite this, Galen believes that Congress will extend the bill for a short-term solution until a 12- or 24-month extension could be agreed upon.

“This is a system written on a typewriter 50 years ago,” said Garth Whyte, head of the Canadian Restaurant and Foodservices Association. “It’s a black box. People don’t know how milk prices are determined.”

Bruce Stone, of Stone Dairy, claims that there’s a lot of uncertainty in the air. Part of his worries stem from rising costs of feed should the bill expire, combined with only minor profits from the dairy industry. Stone Dairy has 450 cows, with most of product being sold to Land O’ Lakes.

On The Web:
Why milk prices may soar to $8 if US goes over ‘dairy cliff’
http://www.cnbc.com/id/101246790