It’s become increasingly improbable that Congress and President Obama will come up with a fiscal cliff bill to deal with the national deficit, and even more unlikely a farm bill will be included. However, House Ag Ranking Member Collin Peterson says he is not worried about a bill being passed before next year. With a failed plan by Speaker of the House John Boehner last week, there’s no clear plan for the Senate and President Obama. The House has already adjourned, but Senators will return to Capitol Hill on Thursday – leaving four work days before the end of the year, and the end of the 112th Congress. If the House is needed back – Boehner says he will reconvene, but the House Ag and Senate Ag-passed farm bills will die in less than a week without any action, and that brings even more problems.
Without a new farm bill or an extension of the current law, ag policy will revert back to 1949 policy, which would raise milk prices significantly. Based on that fact, Senate Ag Chair Debbie Stabenow says a fiscal cliff deal needs to be passed with a farm bill attached. Peterson objects to the term “going over the cliff” because if everything expires – he says nothing dramatic happens. Taxpayers’ withholding will increase somewhat, according to Peterson, but the sequestration cuts don’t immediately go into effect. Even though USDA has to implement 1949 law on January 1 without a new or extended bill, Peterson notes that some economists don’t expect dairy prices to spike until May or June.
Meantime Vermont Senator Patrick Leahy told the Senate Friday that milk market chaos will erupt if Congress doesn’t prevent that 1949 law from going into effect in less than one week. Leahy says the failure to act on a farm bill or farm bill extension would set off a chain of events that could double the prices of milk and dairy products. He says Ag Secretary Tom Vilsack and his staff have been literally dusting off old paper files and mimeographed notes from the 1940s and ’50s to review the Agricultural Act of 1949.
Due to the lack of House action on its own bill and obstruction of the Senate bill, Leahy says the 1949 law will force the federal government to spend billions of dollars to buy and store dairy products in an effort to raise the price of milk for dairy farmers. The law requires USDA to announce a support price for milk at no less than 75% of the ratio of milk prices to production costs from 1910 to 1914. November parity was $52.10 for 100 pounds of milk. The 75% would be $39.8, nearly 4 times the current support rate and double today’s market price. Leahy says higher milk prices would stimulate milk production, but also draw an influx of imported dairy products as processors in other countries would divert products to the United States.
Leahy points out USDA economists say implementing permanent dairy law would cost at least $12-$15 billion dollars a year, not including the cost of product storage. Essentially, Leahy says, USDA would have to stuff every closet with cheddar cheese and powdered milk at its building in Washington, D.C. He blames the House leadership for driving the U.S. “to the edge of the dairy cliff and is refusing to put its foot on the brake,” and calls it “a dangerous game of chicken, dragging all Americans along for the ride.”