In the US, we have something called a Farm Bill, which is the main agricultural and food policy for the federal government. The bill is renewed every 5 years by Congress, and manages agricultural activities under the periphery of the Department of Agriculture.
The farm bill can actually be a contentious issue, and can affect international trade, environmental conservation, food safety and rural communities. The most current farm bill, which was passed in 2007, expired this September; however, no new legislation has been passed by Congress since then. Many decisions involved in a new farm bill are directly related, and affected by, our recession and the fiscal package.
The White House and Congress are at a political standoff, which is further worrying farmers. It is farmers’ hope that a new bill will be included in the fiscal package before year’s end — if legislation isn’t renewed, then milk and cheese prices will soar, affecting farmers and consumers alike. Extension of current law would be a relief for now, but would only be a band-aid for the existing problem. However, if neither current law is renewed nor new legislation passed, milk pricing would regress to the old system — the Agricultural Act of 1949 — where milk was set at $6 a gallon. The old system of milk pricing is out-of-date and unaligned with our current economy and market conditions.
The Agricultural Act of 1949 delineates how to set milk prices; the act is overridden when a new farm bill is passed, but will be effective if no new bill or extension is passed. The act includes a component that assures that minimum milk prices will cover producers’ costs. The government also assures producers that it will buy milk products at that price point; however, producers typically profit more through the consumer market. Given the existing market conditions, the government-set price could double, which could persuade farmers to sell their products to the government rather than through the private market. Because of this, store prices for consumers could skyrocket. If the government keeps accumulating milk, then it will subsequently have an excess of dairy products in storage. Eventually, prices could decline as the government sells its dairy stockpiles.
Increased milk prices could put American dairy farmers and cheese-makers out of line with the international market; instead of buying American-made dairy products, consumers could be looking at alternatives, such as foreign-made cheeses, and soy and almond milk.
Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan
December 19, 2012
Copyright 2012 All rights Reserved by Fluid Management Systems, Inc.