I’m nerdy on so many levels for this one. First of all, I spent much of a ride back from Charlotte today researching the programs that support the price of milk in the United States. (We’ll get to that.) The second is that I knew that there was a specific reference to milk price policy in an episode of the West Wing. (Yes, it is a pivotal moment, the one where Josh gets on board with the Bartlett campaign, but still … nerdy.) On a tertiary level, I embedded this snipped into a blog post for a blog I maintain (for reasons that defy explanation but which include having the opportunity to use words like “tertiary.”)
But about that milk. There is a rumor floating around that the price of fluid milk may double in the coming year. People seem to be freaking out Sundance Kid style about dying of thirst for milk at the bottom of the fiscal cliff but forget, as Butch Cassidy pointed out, that the fall is sure to kill us. Yet I digress. The current program of the federal government by which we moderate the price of milk in this country is about to expire. Which begs the question, “What do you mean? The Federal Government regulates the price of milk?”
Not just the Feds, my friend, but some of the states too. They have a challenge, as illustrated by the clip above, of balancing the need to keep farmers afloat while not cutting off access to things like milk for the poorest people in our country. It’s hard enough to do this with relatively shelf-stable things like flour or canned corn. To make things stable with something as volatile in both production and demand as milk is especially challenging.
There are, of course, not a few things that can be made from milk that are relatively shelf-stable: butter, cheese, or powdered milk for instance. Like a lot of other commodities, the USDA buys these up in order to support the market price of milk and then distributes the processed items to public schools (for school lunches) and programs that feed the hungry. They’ve also done this in the not too distant past with tomatoes, catfish, chicken, and (inexplicably) fig parts.
There is only so much of this that they can do with milk, however, because milk is, well, milk. It’s hard to transport, hard to store, and, as we discussed earlier, hard to know exactly how much there will be and how much people will want. The USDA has been into stabilizing milk prices since somewhere around The Great War (that would be WWI), and we have learned a thing or two over the years. Part of what we have learned is that milk subsidies should be part of a broader approach to agricultural policy and combined with those policies into what we like to call the “Farm Bill.”
Trouble is, the last Farm Bill expired in September. Not everything in it ended when the bill expired, but everything in it is set to expire at some point. That point for milk is December 31. So what happens then? Do we just go to having no federal action on the price of milk at all? Oh, if only we were so lucky. We will, instead, lose 63 (almost 64) years of regulatory experience and turn the clock back to 1949.
That was a simpler time, when the production and consumption of milk was much more localized. There was little in the way of mechanization, refrigerated storage, and so forth. And we assumed that the price of a gallon of milk would remain relatively stable compared to the price of a pound of turkey. The program set up in 1949 used a “parity pricing” formula to ensure that milk prices would stay stable relative to a pre-selected group of other commodities. If the price of milk did not keep up, then the government would step in and buy milk (or cheese, butter, and powdered milk) until parity was restored.
Good in theory. Not so good in practice. Apparently (I haven’t done the math) parity rules would result in the USDA having to enter the market for milk and drive the price to about double where it is now. Good for farmers (not that they are asking for that much of an increase). Bad for consumers, especially people for whom a gallon of milk is already a luxury. For reasons that your strained patience may not tolerate at this point (but which I may inflict on you later) fixing the fiscal cliff will not necessarily fix this. It is, however, another one of those wonderful “unintended consequences” we keep hearing about.