Washington dodges the 'dairy cliff,' avoids spike in milk prices
The House's Agricultural Committee reached an agreement with the Senate to extend the US farm bill that will keep milk prices in check in 2013. Without the compromise the price of a gallon of milk may have reached $7.
Farm-state lawmakers have agreed to a one-year extension of the expiring US farm bill that, if enacted, would head off a possible doubling of retail milk prices to $7 or more a gallon in 2013.
The compromise measure resulted from bipartisan discussions in the House of Representatives' Agriculture Committee and talks with colleagues in the US Senate, Frank Lucas of Oklahoma, the House panel's chairman, said in a statement Sunday.
Separately, lawmakers are working on a last-ditch effort to avert the similarly timed "fiscal cliff," when the biggest tax increases ever to hit Americans are set to start, paired with significant federal spending cuts
US Agriculture Secretary Tom Vilsack, in an interview with CNN taped Friday and aired on Sunday, urged Congress to come up with such a solution, if only an extension of the old law that expired nearly three months ago, lest milk prices start rising after Jan. 1, 2013.
Absent a new bill or an extension of current law, milk prices would revert to rules set in 1949, the last "permanent" farm legislation in the United States. Government price supports would kick in, based on production costs 64 years ago, plus inflation. The potential retail milk price has been estimated at $6.00 to $8.00 a gallon versus current levels near $3.50.
Lucas said in the statement that time had run out in Congress' current session to enact a new five-year farm bill, as farm-state lawmakers and the dairy lobby had hoped.
Vilsack told CNN that soaring milk prices - if it comes to that - would ripple throughout all commodities "if this thing goes on for an extended period of time."
The price of milk will not double on Jan. 1, if Congress fails to act. Instead, prices would rise gradually as supplies are removed from normal markets and land instead in US Department of Agriculture storage facilities.
With supplies more scarce in normal marketing channels, some milk distributors and dairy product manufacturers could have turned to imported supplies.
The Department of Agriculture is reviewing a range of options for administering programs should a permanent law become legally effective on Jan. 1, a spokesman said on Friday.
But the House bill, with large cuts in food-stamp funding for lower-income Americans, has never been brought to a vote by the full House. The Senate and House have for months remained far apart on the issues of food stamps and crop subsidies.
Lucas said the year-long extension "provides certainty to our producers and critical disaster assistance to those affected by record drought conditions."
It would also mean another round of the direct subsidies to farmers that cost about $5 billion a year, and that both sides of debate had agreed earlier to eliminate.