Look out! Here comes the ‘dairy cliff’ and the ‘retail cliff’


Overlooked in the fiscal cliff debate is the looming “dairy cliff.” CNBC’s Seema Mody reports that Congress has until Jan. 1 to renew the Farm Bill. If it doesn’t, the price of milk and dairy products could rise sharply.

A gallon of milk now costs an average of $3.65. But that price could soar to $6 or even $8 a gallon without a new farm bill. The reason? One part of the Farm Bill controls the dairy market. Without it, pricing would go back to an outdated law put in place during the Truman era. The government would be required to buy dairy products based on 1949 production costs, when milking was done by hand. That would double today’s price. Farmers would lose incentive to sell directly to producers and prices in the grocery store would skyrocket.

Unlike the fiscal cliff and dairy cliff, the “retail cliff” isn’t the result of a dysfunctional Congress. More than 14,000 East Coast and Gulf Coast dockworkers are threatening to go on strike Sunday. That could cost the economy billions of dollars. Goods such as flat screen televisions, sneakers and clothing would sit idle at ports, or get rerouted–a costly proposition for retailers who would likely pass the cost on to consumers. The 15 ports involved in the labor dispute move more than 100 million tons of goods each year, or about 40% of the nation’s containerized cargo traffic.

The White House is urging dockworkers and port operators to continue negotiations and get a deal done to avert a strike. “Federal mediators are assisting with the negotiations, and we continue to monitor the situation closely” White House spokesman Matt Lehrich said.


Look out! Here comes the 'dairy cliff' and the 'retail cliff'