The Agricultural Act of 1949 contains the basic provisions for setting milk prices. The act is superseded every time a new farm bill is passed, but if no new bill or extension is passed the old act goes back into effect.
That law includes a mechanism for guaranteeing a minimum milk price that covers producers’ costs. The government guarantees to buy their milk products at that price, but producers can usually do better selling on the consumer market. But if the old mechanism were applied to current market conditions, the government price could be double the current rate, industry officials say. Farmers would sell their dairy products to the government instead of the private market and store prices would surge. Then prices might collapse as the government eventually sold its dairy stockpiles.