The other, other cliff: With no farm bill, milk prices set to soar

posted at 2:01 pm on December 28, 2012 by Erika Johnsen

A few weeks back, Department of Agriculture Secretary Vilsack lamented the declining influence of rural America and the agricultural lobby’s inability to push next year’s farm bill through Congress. What he conspicuously failed to mention, of course, is that the farm bill and the USDA’s many decades-old agricultural programs in general (numbering in the hundreds and ranging from direct cash payouts to trade barriers) primarily benefit large agribusinesses and hardly ever the small, struggling family farms they claim they are trying to “protect.” In reality, all of these subsidies only help special niche interests, distort free-market signals, provide rent-seeking channels to industries that neither need nor merit it, create virtual taxpayer-sponsored rackets, and come at the cost of a net drain on our economy.

The dairy industry is just one example of the utter convolution perpetuated by the federal government deigning to award market-distorting special treatment, on behalf of what they deem to be ‘fairness’ and at taxpayers’ expense. Sorry to throw another “cliff” metaphor at you, but this is happening:

Distracted by dealing with the Bush tax cuts, lawmakers are running out of time to pass the latest version of the country’s sweeping farm bill and avoid what’s become known as the “dairy cliff.” If Congress misses the Jan. 1 deadline, the price of milk could rise significantly — some say by more than $3 a gallon — as the country’s farm policy reverts back to laws dating from 1949. …

At the heart of the trouble is an old provision designed to create a floor for how much dairy farmers are paid for milk — a kind of minimum wage. The formula for calculating that price, however, is based on assumptions that are a century old, predating the improvements in dairy farming. That old formula, if not replaced by a new farm bill, would push prices higher.

How much higher is difficult to determine because of the complexity of milk pricing. There are middlemen who help determine the price of the supermarket gallon, including processors and companies such as Dean Foods that market dairy products to consumers.

Hmm — perhaps it would have been better if the federal government had never made it their personal business to spend our resources coddling their politically-preferred industries in the first place, no?

I think I’m with Krauthammer on this one; maybe it would be better for us to go over the “dairy cliff.” Few things could as immediately and effectively drive home the costs of federal encumbrance like a sudden spike in the price of that previously innocuous half-gallon. Maybe Americans need to be hit where it hurts before they’ll finally stop supporting backwards and interfering policies like the ones sustained by the USDA. Everybody wants to eliminate expensive subsidies, just not their subsidies:

I do think if we went over the milk cliff it would actually be a good idea. [If] people actually saw the milk price double, it would be less abstract than watching a debt clock. They would finally understand that we have the insane laws, that acquire barnacles over the decades. And the farm laws are the worst. They are all kind of pressure, special interest favors, pay offs which make no economic sense. I’d like to wipe them out and start all over again, and it would be good if the law expired. People would actually be awakened to how insane our system is and how much we really need tax reform. It wouldn’t be an abstraction, it would be real.


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

Comment pages: 1 2 3

Yeah…milk duds.

lynncgb on December 28, 2012 at 3:29 PM

That one got me.

Nick_Angel on December 28, 2012 at 3:30 PM

lol — Me too. :)

Axe on December 28, 2012 at 10:06 PM

ajacksonian on December 28, 2012 at 8:38 PM

Ahhh the market can not figure something out when the lead time to your store shelves is a matter of a few days. Little longer with frozen.

If its worth many people risking getting sick to save some money… I rather keep the USDA in order to not have that hanging over my head.

watertown on December 29, 2012 at 12:20 AM

You are looking at it from a logical and informed standpoint. 50+% of Americans will not.

People will not learn from this. They will demand that whatever was taken away and caused the higher price, to be restored.

Hard Right on December 29, 2012 at 12:38 AM

If milk prices are going to shoot up to $8/gal so be it. It means now we are paying $4/gal in subsidies and $4/gal at the store. Who do you think pays for these subsidies??? Maybe the 47% that don’t pay a dime to run the federal government can get some skin in the game finally.

Let It Burn!!!

trs on December 28, 2012 at 3:50 PM

This is exactly wrong. The new, higher price will be the subsidized price. The current price is the price forced on the milk producers. The subsidy is currently for the consumer, not the farmer.

cptacek on December 29, 2012 at 2:09 AM

This is exactly wrong. The new, higher price will be the subsidized price. The current price is the price forced on the milk producers. The subsidy is currently for the consumer, not the farmer.

cptacek on December 29, 2012 at 2:09 AM

Regardlous, the subsidy is paid from the, 53% who actually pays, taxpayer dollars. Let it end and let the real market set the price. Ag has become the biggest welfare program in this country.

trs on December 29, 2012 at 8:06 AM

Regardlous, the subsidy is paid from the, 53% who actually pays, taxpayer dollars. Let it end and let the real market set the price. Ag has become the biggest welfare program in this country.

trs on December 29, 2012 at 8:06 AM

^^^
this

wheelgun on December 29, 2012 at 9:09 AM

Ag has become the biggest welfare program in this country.

trs on December 29, 2012 at 8:06 AM

Really? I would have thought that would be that other program…what’s the name of it???

Oh yeah, WELFARE/SNAP/WIC.

Nutrition programs take up 3/4 of the USDA budget.

Stop being a jackass, assuming everything is subsidized, look up something before you go off ranting about something about which you have no clue.

Tio on December 29, 2012 at 11:37 AM

Really? I would have thought that would be that other program…what’s the name of it???

Oh yeah, WELFARE/SNAP/WIC.

Nutrition programs take up 3/4 of the USDA budget.

Stop being a jackass, assuming everything is subsidized, look up something before you go off ranting about something about which you have no clue.

Tio on December 29, 2012 at 11:37 AM

I live in the center of the welfare agland and see and know many who are bilking the system. Maybe you can list what other businesses are guaranteed a profit or receive subsidized insurance, or payments for non-production.

trs on December 29, 2012 at 4:29 PM

Oh well… It’s not going to affect me. I hope the price of steak and beef skyrockets too. Cows are a better investment than gold.

moo on December 29, 2012 at 6:56 PM

trs on December 29, 2012 at 4:29 PM

I’m not going to argue in favor of the current system by any means. What I was objecting to is your hyperbole about the people who provide your food. You claimed milk is subsidized by the “53%”. Please inform us all how that is true.

Look up how milk is priced, since that’s more germane to this post. The real market doesn’t exist for milk, it’s a huge cluster of government meddling. The dairy title of the farm bill includes some changes to the pricing formulas. It also includes an insurance program – funded by producers. If you want to participate in the insurance program, then when it kicks in so does a quota system. You go over quota, you don’t get paid for the excess milk. The government gets to collect the money from it and use that to further fund the program, with some of the money going into the USDA general fund.

Dairy producers don’t want more government interference, at least none of them I know – we’re hurting enough.

Tio on December 29, 2012 at 8:48 PM

Maybe many farmers will finally get off the teet and embrace the market instead…………………nah.

Bmore on December 29, 2012 at 10:23 PM

It’s time we stopped arguing about which subsidies are the biggest or most wasteful or most costly to the consumer, and just get rid of all of them.

Adjoran on December 30, 2012 at 1:53 AM

Milk prices would rise, but with the Government out of the way the price will settle at a reasonable price. It is always better to let demand and supply set the price of all goods and services. As the price goes up some of the people will use less so buy less. This will reduce the demand and the price will fall. When the price gets to a certain point some Dairy Farmers will switch to other products, Soy Beans, Corn or Hay, this lowers the supply and the price will find a balance between the amount of money the farmer has to have for a profit and the price the consumer is willing to pay for the milk. Free markets will always change a little because as more consumers enter the market prices will rise as supply is reduced, as producers enter the market the price will fall until the balance is reached again. All without the Government having a heavy hand in the market.

old war horse on December 30, 2012 at 8:34 AM

Then waht about food safety? Yeah, I work in meat manufacturing, and though our plant is very clean and good, many are borderline… you do without USDA, your will NOT want to eat ANYTHING from the store.

watertown on December 28, 2012 at 6:29 PM

If that was the only thing they did, that would be acceptable. But it isn’t. I know a small vitamin supplement company that has been hounded by the USDA for years. They have been raided and had multiple lawsuits brought. And EVERY TIME, the judges have thrown out their cases. The USDA is a cartel that bullies small producers in favor of the big corporations that they sleep with. I believe that about 80% of what the USDA does actually harms small producers and consumers. That part needs cut. Keep food inspection, and gut the other 80% of the USDA.

dominigan on December 30, 2012 at 9:17 AM

Ahhh the market can not figure something out when the lead time to your store shelves is a matter of a few days. Little longer with frozen.

watertown on December 29, 2012 at 12:20 AM

Smelliest BS comment on this entire thread. Stocks run on free market with prices based on minutes, and this idiot thinks it can’t handle days? Seriously?

And how does a government that can’t even pass a budget in the last 3+ years going to handle pricing reliably on a market with a lead time of days? IT’S NOT… hence the subject of this very article!

We must be attracting a lower IQ of trolls these days…

dominigan on December 30, 2012 at 9:22 AM

I have four kids, we go through a gallon of milk a day. But I will pay $8/gallon if that would help the low info voters learn about the problems with government meddling in markets. I agree with many others here though that the low info voters will only clamor for more government interference to bring prices back down, so I don’t see a useful lesson happening here.

toby11 on December 30, 2012 at 11:50 AM

The Farm Bill that wasn’t really wasn’t a farm bill. Most of it was money for food stamps and other welfare moocher programs. Good. I am glad the Farm Bill never got passed.

pdigaudio on December 30, 2012 at 6:07 PM

a deal has been reached

Pragmatic on December 30, 2012 at 6:09 PM

But I will pay $8/gallon

We’re pretty close already. I paid $1.99 for a quart of milk yesterday at the grocery store. Half-gallons were priced at $3.59.

RADIOONE on December 31, 2012 at 6:31 AM

But I will pay $8/gallon if that would help the low info voters learn about the problems with government meddling in markets.

toby11 on December 30, 2012 at 11:50 AM

.
With few exceptions, low info voters are lazy.

Lazy people are easily controlled by the “information gatekeepers” in the field of journalism.

The (so called) “professional journalists” will report some narrative or talking points, pinning the blame on Republicans, farmers, and middle-men in the retail market.

The low info voters will believe the lie, and civil unrest will ensue.

Anyone who thinks I have my chain-of-events wrong, please weigh in.

listens2glenn on December 31, 2012 at 9:46 AM

I guess my solution… REPEAL the 1949 (and any other related law) so you don’t have to keep fixing what is not broken probably is not feasible since it would permanently fix the problem then what is Congress to do?

I don’t know, maybe pass a budget? Deal with entitlements? But I guess that is not a priority.

Russ808 on December 31, 2012 at 3:23 PM

Comment pages: 1 2 3