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Significantly Higher Milk Prices Possible

posted on December 21, 2012

I'm Mike Pearson. House Republicans handed their leader a stunning tactical defeat Thursday night. Consequently, hopes plunged for a compromise averting sweeping tax increases and spending cuts.

House Speaker John Boehner presented what he called "Plan B" in hopes of averting the so called, “fiscal cliff.” But Boehner was forced to cancel the vote Thursday night when it became clear he lacked the votes to pass it.

President Obama signaled Friday that he will continue to work with Congress and he is hopeful that a bipartisan solution can be reached quickly protecting the middle class and the economy. But the Obama administration didn't say whether Obama would work with Boehner or turn first to the Democratic-controlled Senate to try to salvage a deal.

President Obama met with Senate Majority Leader Harry Reid Friday afternoon to begin crafting a compromise averting the fiscal cliff, but in the end nothing was decided and lawmakers headed for their Christmas break.

Even less certain are prospects for federal farm programs. While large and complex, Farm Bills, typically, enjoy bipartisan support. But not this time…

The Democratically-controlled Senate passed a five-year, $500 billion Farm Bill in June with broad support from both sides of the aisle. But the Republican-controlled House rejected the Senate measure, and failed to pass a version of its own.

And as the clock ticks down to the fiscal cliff, some are concerned that Washington’s failure to enact a Farm Bill could push milk prices above $6 per gallon…

Significantly Higher Milk Prices Possible

As the White House and Congress struggle to avert the "fiscal cliff," dairy producers are concerned that the compromise – or lack thereof -- could have a dramatic impact on milk prices.

 Legislation authorizing federal agricultural programs expired at the end of September.  If Congress doesn't pass a new Farm Bill by January 1 -- or extend key aspects of existing law – provisions kick-in that could push milk prices above $6 per gallon.

Most federal subsidy programs extend throughout the 2012 crop year. But if a new Farm Bill isn’t enacted by January, the Agriculture Department will be forced to end its current dairy price support program and revert to the 1949 Farm Bill. 

Why 1949? Because that was the last time Congress authorized federal farm programs on a PERMANENT basis. 

 Under permanent law, government-supported prices would be about twice as much as current market prices.

Crop producers likely wouldn’t feel the full effect until the 2013 growing season.  But dairy farmers “harvest” their commodity each and every day.  And for producers who either “sell it or smell it,” the absence of government support is expected to have a more immediate effect. 

 The Agriculture Department does have license to tweak some provisions of the 1949 law. But many industry officials and lawmakers caution that milk could soar to $6 per gallon -- or even $7 – early next year if Congress fails to act. 

 Agriculture industry leaders hope that new farm legislation can be attached to any fiscal package the White House and Congress reach this month. But if no deal is reached prior to New Year’s Day, major tax increases and spending cuts go into effect and the fate of dairy programs – and hundreds of other USDA initiatives – become less certain. 

Tags: $6 milk cheese dairy dairy farmers dairy industry fiscal cliff milk USDA