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Peterson, farm-bill negotiators: Consumers won't go over the 'dairy cliff'

Consumers won't go over the 'dairy cliff'
REUTERS/Michaela Rehle
The threat of a “dairy cliff” has lead House Republicans to consider passing a month-long extension of current law to give lawmakers time to hash out a final deal.

“In the short-term that would be a good thing for dairy farmers, you would think,” Minnesota Milk Producers Association Executive Director Bob Lefebvre said. “Except our consumers, we want to make sure they would continue to consume our products.”

And that’s where things would get dicey. If the government is offering a higher price for producer’s dairy — by some estimates, up to twice as much as the current market rate — normal purchasers would have to match that price, and pass it on to their consumers. Less than half the cost of a grocery store milk purchase is actually based on the cost of raw dairy, but it would still be enough to send prices up to $5 to $10 for a gallon of milk (that number varies depending on who you ask).

Permanent law would be painful and irritating to consumers if it were to kick in, and that’s kind of the point. The threat is supposed to serve as incentive for lawmakers to pass new legislation on time, University of Minnesota Extension Economist Kent Olson said.

“It's a bit like why Congress put the sequester in,” he said. “Now it’s become this threat that it’s such a goofy law that Congress will pass a new one and rewrite the rules and not go back to the old rules.”

“[Permanent law] doesn’t say the secretary is going to raise dairy prices, that’s not what it says. It says he is going to take steps to raise the price of dairy,” Peterson said. “But he isn’t going to do that for a while because his lawyers are not going to let him until they get everything worked out. He’s not going to do anything the month of January anyway; he’s not going to change anything in January.”

Even so, the threat of a “dairy cliff” has lead House Republicans to consider passing a month-long extension of current law to give lawmakers time to hash out a final deal. A vote on that plan could come before the House leaves town this week. Peterson, given his reasoning above, said he doesn’t think an extension is necessary, and Sen. Debbie Stabenow, who’s leading farm-bill negotiations, said the Senate wouldn’t take it up anyway.

Producers: 'Dairy cliff' talk hurts confidence

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