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Milk-pocalypse avoided, for now

To hear Brandon’s Agribusiness Report on what’s up with permanent law, click here.

The first of the year has come and gone, and the apocalypse in the milk aisle never came to pass.

The permanent farm law that takes over without a new farm bill resurrects agricultural policy based on prices shortly after the turn of the last century. Back then, USDA was supposed to pay about four times as much as it does now ($37.20 per hundredweight, as opposed to the current $9.90 per hundredweight) to prop up a federally-mandated farm price for dairy products. Follow the math, and the end result is that milk prices could double at the grocery store.

Payments from USDA to raise the market price would cost taxpayers about $12 billion per year, according to the White House.

But. USDA says so long as there’s a farm bill by the middle of this month, there shouldn’t be a problem, but Director of the Center for Agricultural Law and Taxation Roger McEowen says there’s a little more to it than that.

“It’s kind of a cat and mouse game,” he says. “If Congress delays, then the Department of Agriculture is not doing what it needs to do to implement permanent law. So as this delays further, what you’ll see is perhaps it would take a month, or at a minimum a month, to get the regulatory framework in place, but, most likely a lot longer than that, so you wouldn’t see an impact on dairy prices for some time.”

A report from the Congressional Research Service explains that delays in implementing permanent law are to be expected, due to administrative hurdles. Specifically, the report states:

Without statutory instructions to the contrary, USDA would be required to implement permanent law if the farm bill expires and its associated suspension of permanent law expires. USDA has outlined how it would implement permanent law in the absence of a new farm bill.
However, given the nature of permanent law and the differences compared to current law, USDA may need time to develop the processes to implement permanent law and thus may not be ready to implement it immediately upon reversion. Therefore, although permanent law immediately may become the “law of the land” once a farm bill expires and new farm output is ready to be marketed, the practical effect of implementing permanent law may be more gradual. However, the eventual length of an implementation delay is unknown until it happens and depends on administrative actions. Counting on a delay of a definite time may have risks.
Nonetheless, USDA Secretary [Tom] Visack has indicated that it could take at least a month to implement permanent law once it is triggered. He said this in the context that a short-term farm bill extension may not be necessary if a new farm bill is enacted during January 2014: “What I have indicated to Senator [Debbie] Stabenow is that it is unlikely, given the complexity of what would be required to implement the [permanent] law, that we would have that in place through the month of January.”

USDA is banking on Congress to push a farm bill through in the next few weeks, before it has to implement anything, but McEowen says at this point, nothing is certain, not even permanent law itself.

“Only the conferees know what’s going on behind closed doors,” says McEowen. “Congress will soon come into session, and one would hope that this would be a priority item that they’ll deal with first, but we’ll have to see. They’ve got wide discrepancies on a number of points, and the bills are different. Just on the permanent law provision, the House bill deletes permanent law, and it sets up what the law will be from here on into the future. The Senate bill always reverts to permanent law.”