Milk Prices Set to Double in the New Year

Milk Prices Set to Double in the New Year

The New Year is a time of rebirth and starting fresh but this New Year may bring something else —the possibility of milk prices increasing to $7 a gallon.

The fiscal cliff has dominated all of the attention of Congress, which has led other issues to be swept under the rug. One of those such issues is the Agriculture Bill, which if not addressed, could lead to the price of milk skyrocketing, according to CNN Money. It is being dubbed the dairy cliff.

The government helps to keep dairy farmers in business because it has an agreement to buy milk and other products in the event the prices dip too low. Today's agriculture bill has a formula for the government to intervene if prices fall by approximately half of the national average of $3.65 per gallon.

But the current bill expired last summer, and Congress has yet to agree on a new one.

Many of the measures in place to protect farmers have already expired, and more are about to do the same, including a dairy subsidy expiring on New Year's Day.

If the law is not continued or a new one is not set in place, the formula for calculating the price the government pays for dairy products reverts back to a 1949 statute, according to CNN Money.

Under that formula, the government would be forced to buy milk at twice today's price -- driving up the cost for everyone. This comes on the heels of the announcement that global beef prices were going to reach record highs in 2013.

Whether Congress can extend the current bill or pass new legislation, or enact a provision to keep the 1949 ruling remains to be seen.

Claude Saravia
With files from CNN Money

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