Milk prices to $6 or $8 per gallon?

Are retail milk prices going to go to $6 or $8 per gallon if the Congress doesn’t act in the next few days? The answer is a big, fat “NO.” It seems that if there is not a new farm bill, then government starts buying milk at some inflated figure as the result of some archaic price parity formula from the late 1940s. If this is so, the government will very quickly own all the milk. Do you think that they might sell some at a lower price? Alternatively, they could flush it down the sewers. By the way, these price parity computations make no sense whatsoever because of technological change in this industry.

Let’s hope that the government gets completely out of the milk regulation/subsidy business. It would be a great relief. First of all, low-priced milk from foreign producers is currently restricted by quotas. Second, there are some really great substitutes for milk: almond “milk” and soy “milk”. So even if the supply curve shifts to the left as subsidies are eliminated, the demand curve for milk is not insensitive to price changes. Prices would not change much.