In Tuesday’s 11th-hour vote to avert the fiscal cliff, the U.S. Congress also passed a measure to avert the “dairy cliff,” a major rise in dairy prices set for the first of the year.
The rise in dairy prices was set to begin on Jan. 1, when, in the absence of a new five-year farm bill, American dairy policy would have reverted back to 1940s legislation that would have required the government to take inflation into account and to buy milk from farmers at about twice the current price of milk.
The American Taxpayer Relief Act of 2012, which passed the Senate Monday and the House late Tuesday, extended some 2008 farm bill programs — many of which expired on Sept. 30 — through September 2013, the remainder of the current fiscal year. Still, the measure does not extend all farm bill programs, which include nutrition assistance and conservation funding, among others.
In October, as it became clear that a new farm bill was unlikely to pass both houses, Vermont Farm Bureau president Clark Hinsdale expressed concern, noting that higher bulk milk prices could double the consumer price of milk, in turn reducing demand for American dairy both nationally and in export markets.
The farm bill extension also reinstates a dairy support program, the Milk Income Loss Contract (MILC) that expired with the farm bill on Sept. 30. The program monitors the price of bulk milk on the commodity markets, issuing supplemental milk payments to dairy farmers when the price falls below a certain margin.
Vermont farmers received more than $11 million from the MILC program in 2012, but commodity prices rose from a low in Vermont of $17.10 per hundredweight in June to a high of $23.10 in November, and MILC payments to farmers would have been minimal during the time that the program was expired.
Current bulk milk prices are relatively high, but farmers report that their profit margins are still very low given the current high price of grain. Due to severe drought conditions that plagued much of the country in 2012, grain prices are expected to remain high.
Sen. Patrick Leahy, D-Vt., also helped to maintain a provision from the 2008 farm bill that takes the price of feed into account when calculating MILC payments. Current bulk milk prices are relatively high, but farmers report that their profit margins are still very low given the current high price of grain. Due to severe drought conditions that plagued much of the country in 2012, grain prices are expected to remain high.
In order to finance an extension of dairy supports, the California-based Public Health Institute notes that the act eliminates $110 million in funding for nutrition education programs offered to those enrolled in the Supplemental Nutrition Assistance program, or food stamps, though it does not make reductions to direct nutrition assistance.
The extension also does not include any of the reforms contained in the version of the 2012 farm bill that passed the Senate in June, which aimed to end what Senate Agriculture Committee leaders say are costly and ineffective crop subsidies. That bill included a major dairy overhaul that would require producers to reduce milk production when prices fall, limiting supply on the market and, in theory, driving prices back upward.
That bill hit a bump after the House Agriculture Committee passed its version, as Speaker of the House John Boehner, R-Ohio, never brought the bill to the House floor for a vote.
Roger Noonan, New England Farmers Union president, noted that the temporary extension only extends select farm bill programs, not the entire bill.
“Programs that support renewable energy, farmers markets, beginning farmers, organic and specialty crop research were all stripped of mandatory funding for 2013,” he said.
In a statement, Senate Agriculture Committee chair Sen. Debbie Stabenow, D-Mich., expressed her disappointment with the extension.
“Rather than embrace the Senate’s bipartisan Farm Bill which cuts $24 billion in spending and creates certainty for our agriculture economy, Senator McConnell insisted on a partial extension that reforms nothing, provides no deficit reduction, and hurts many areas of our agriculture economy.”
While Vermont’s congressional delegation voted in favor of the measure, Leahy stressed the need for a new five-year omnibus farm bill, not simply an extension of 2008 provisions. As Congress begins its 113th session, Leahy noted in a Jan. 1 press release, the Senate will need to once again take up the bill that it passed last year.
“But most importantly,” he said, “House leaders need to allow a farm bill to be debated and brought to a vote.”
