Got Milk? Drought Threatens to Push Up Dairy Prices

Drought-fueled increase in corn prices puts the squeeze on dairy farmers

Milk prices are on track to jump as much as 15 percent in the beginning of 2013, an industry group said Wednesday, thanks in large part to the worst drought since 1956, which has sent animal feed prices soaring.

Corn prices are up 47 percent since mid-June, forcing some California dairy farms into bankruptcy and others to cut herds to limit losses, according to Bloomberg. As a result, milk futures have surged to a 13-month high.

Americans spend almost 11 percent of their grocery budget on dairy products according to some estimates, and a big hike in milk prices could be big trouble when it comes to consumer budgets already strained by rising energy costs.

The specter of skyrocketing milk prices has been used in recent weeks to push for passage of the Farm Bill in Congress, currently in limbo thanks to partisan discord. If Congress doesn't pass the bill by the end of the year, milk prices could spike to $6 a gallon in some parts of the country, New York Democratic Sen. Chuck Schumer told reporters in late September.

"They say you shouldn't cry over spilled milk, but it seems perfectly reasonable to cry over a 100 percent increase in the price"