Thanks to Congress’s Incompetence, Milk Prices Are About to Double
So how’d we get here? Ordinarily, Congress passes the farm bill, which governs everything from nutrition programs like food stamps, to disaster assistance for farmers, to agricultural subsidies, on a temporary, five-year basis. If it expires, as it did this year, we eventually revert back to the law as it existed in 1949, which was the last time a permanent farm bill was passed. And therein lies the problem.
Federal law puts a giant safety net under the dairy industry by promising that if the price of milk collapses, the government will swoop in and push it back up by buying mass quantities of dairy products. The goal is to make sure that the farmers are paid somewhere close to what it should cost them to produce the milk, a figure that’s determined by a complex formula. Usually, dairies can earn plenty selling their product on the open market, and the government doesn’t need to intervene. But the 1949 law getting ready to kick back in bases its formula for the cost of milk production on how the industry worked in the early 20th century, when it was far, far, far less efficient than today. As a result, it will automatically force the government to start paying a giant premium for milk products, which will then cause prices to jump for everyone else as well.
To give you a sense of how farcical this situation is, it’s not even clear that the government has enough storage space to stow away all the dry milk, cheese blocks, and butter tubs it will have to purchase for absolutely no reason.
This is obviously not something that any rational person wants, including farmers, who prefer not to have the profitable private market ravaged by a pointless Washington intervention. “It’s really serious,” Dana Brooks, a lobbyist at the National Milk Producers Federation, told me. “We’ve never had this, and never would have dreamed we would be in this position.”