In recent weeks, fresh fears have emerged that the price of a gallon of milk, which currently stands at around $3.50 according to the US Bureau of Labor Statistics, could increase by as much as $3 if a new Farm Law is not passed by Congress before the end of the year.
If Congress is unable to pass a new Farm Bill before the 2008 Farm Law expires at the end of this month, legislation dating back to 1949 will come into force, under which the US government will buy milk direct from the producer at around twice the current market rate.
Speaking with DairyReporter.com, Chris Galen, senior vice president of communications at the NMPF, which represents the interests of dairy producers and cooperatives in the US, said however that a price hike as a result of the ‘dairy cliff’ is unlikely.
“Right now, there are three 3 possible scenarios regarding the farm bill,” said Galen.
“Congress will either pass a new farm bill, even if it means a short-term, month or two extension of existing programs to stave off to stave off the return of permanent ag law after January; extend the status quo for a year or two, which is not acceptable to us; or allow permanent law to kick in after January, which is unlikely because it is not sustainable policy politically or economically.”
“So we don’t expect the hike in dairy prices is a realistic possibility,” said Galen. “Yes, we do face that hike in theory, but practically speaking, it is the least likely outcome.”
The “most likely next step” is the passage of a “short-term extension of perhaps one month, in order to buy enough time to pass a new bill," said Galen.
“…final passage may have to wait till 2014, provided a brief extension of a month is passed to extend the deadline just a bit longer.”
Great deal of progress in 2013
The 'dairy cliff' hit the headlines for the first time late last year, as the 2008 Farm Law approached its initial expiration date.
On that occasion, Congress cleared a bill to extend the five-year old legislation for an additional nine months in January 2013.
Despite there being no resolution to date, a lot has been achieved in the last year, said Galen.
“There has been a great deal of progress in 2013, compared to where we were 12 months ago. Last year in December, the House had not passed its own farm bill, and thus there was little realistic hope for a new bill to get done by January 2013. By contrast, in December 2013, we now have two separate bills, from the Senate and House, that are very close to being reconciled in the joint conference committee that’s been working on this matter for two months. As we saw with the wrangling over the debt ceiling in October, this Congress has tended not to make the hard decisions on policy matter till the very last minute.”
“We want a new farm bill,” said Galen. “While the process is not done yet, at this moment we are hopeful that it can be completed in the next month.”