More Than One Cliff

If anyone is maintaining any quantity of foodstuffs in their pantry including dairy products like instant milk or cheese, now is the time to stock up beyond your normal inventory.  If you were not keeping a large inventory, now would be good time to start.  I expect that the Farm Bill (see below) will not pass in the Congress, we will see dairy product prices about double, and other food prices increase dramatically. 

I do not know exactly when we will see the price increases but for milk and soft cheese products, the time is probably relatively short, hard cheese products may take a bit longer.  For other products, it will probably be around mid-2013. 

The current version of the Farm Bill (2008) expires 31 December 2012.  If the 2012 adjustment version is not enacted, the law reverts to the permanent 1949 version.  The 1949 version requires accounting for inflation and that is what will drive dairy and other commodity prices skyward.  Dairy is just the first one we will see affected. 

The Senate bill is S. 3240 and it was approved.  The House version is H.R. 6083 and it has not passed.  To the best of my knowledge, there have been no joint committee meetings to resolve the differences. 

A summary of the situation is presented at http://en.wikipedia.org/wiki/2012_U.S._Farm_Bill

Find information on the House bill at http://thomas.loc.gov/cgi-bin/bdquery/z?d112:h.r.06083:

Find information on the Senate bill at http://thomas.loc.gov/cgi-bin/bdquery/z?d112:S.3240:

I expect that the Legislative and Executive branches of our government will eventually do something but do not hold your breath.  The Secretary of Agriculture may take some mitigating action but is limited in what can be done and for how long. 

The following summarizes…

“Any government support program, such as direct payments, marketing loans, and ACRE are in effect for a commodity until the end of the current marketing year. For example, that will be June 30, 2013 for wheat and Aug. 31 for corn and soybeans. However, the dairy support program ended Sept. 30, 2012 without any replacement. Under 1949 Permanent Law, parity prices become effective Jan. 1, 2013 for any commodity for which the Permanent Law has not been suspended. (Typically, each new Farm Bill suspends the 1949 legislation, but that has not happened.) Subsequently, at the expiration of the current marketing year for a commodity, familiar commodities will have some unfamiliar prices that the USDA says producers shall be paid.”  http://nationalhogfarmer.com/business/no-farm-bill-will-trigger-production-quotas-parity-prices

What happens when prices increase?  Everybody pays more for their needs and wants.

That, of course, reduces the amount of discretionary spending money available.  Then what happens?

Everybody wants more pay from their jobs (if they have one).  That, in the end, drives prices even higher. 

Can you say hyperinflation? 

People on fixed incomes are screwed.

Weimar Republic anyone? (http://mythoughtsstuff88.blogspot.com/2012/09/the-weimar-republic-then-and-us-now.html)