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$8 for a Gallon of Milk? [AUDIO]

The 2008 federal farm bill is set to expire at year’s end, and if Congress doesn’t pass a new one, a law from the 1940s would kick in — causing milk prices to jump by $2 or $3 per gallon.

Scott Olson, Getty Images

That would send the United States over the so-called “dairy cliff,” meaning the price of milk might go as high as $8 per gallon in some spots.

“That decades-old law would result in much higher prices for dairy products and other food commodities as well,” said Chris Galen, senior vice president of communications at the National Milk Producers Federation (NMPF). “The permanent law from the 1940s requires the U.S. Department of Agriculture (USDA) to support higher prices for farmers for various commodities, whether it’s milk or corn or wheat.”

Galen said the USDA would accomplish this by purchasing a large quantity of those products and creating demand in the marketplace, to drive prices upward.

If the permanent law were to come back and be implemented, the price increase would not be immediately passed to the consumer.

“A lot would depend on how quickly the USDA would comply with this permanent law,” said Galen. “But we wouldn’t expect any noticeable impact for a matter or weeks or even a month or so.”

Galen does not think the permanent law will go into effect at all, as NMPF officials are optimistic about the chances of a new farm bill advancing in Washington.

“I think there is going to be enough pressure on Congress to either pass a new farm bill or to extend the status quo programs for another period of weeks or months,” said Galen. “Congress doesn’t really want to act until right before the immediate deadline, whether it’s the debt ceiling or whether to fund the government. So, this is just one more example of where we might go right down to the wire.”

Congress also made a last-minute deal to avoid the dairy cliff last year.

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