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Milk-Price Doubling Delayed Even as Congress Fails to Act

December 13, 2013

Although Congress is poised to go home for the holidays without passing a new farm law, milk prices will not double on Jan. 1.

Congress is poised to go home for the holidays without passing a new farm law, which should mean milk prices will double on Jan. 1. That isn’t going to happen.

The lapse in legislation means the nation will revert to a 1949 dairy program, though Agriculture Secretary Tom Vilsack said it will take at least a month for his agency to put the rules in place.

"It is unlikely, given the complexity of what will be required to implement the law, that we would have that in place through the month of January," Vilsack told reporters in a conference call yesterday.

That delay makes unnecessary a short-term revival of the most recent law, which passed in 2008 and lapsed Sept. 30, and should give congressional negotiators time to complete a new bill, he said. Lawmakers have so far have been unable to resolve differences over cuts to food stamps, changes to crop insurance and other farm aid in Senate and House versions of the USDA reauthorization.

A measure to extend the 2008 law, including the current dairy program, until Jan. 31 proposed by House Agriculture Committee Chairman Frank Lucas was passed by the chamber on a voice vote today. Senators have already rejected the idea, saying they’d rather focus on passing a complete, five-year farm bill early next year.

Farm-bill negotiators from both chambers have said they’re confident they’ll have an agreement that can pass Congress in January, before any disruption of dairy markets is likely to take effect.

Stockpiling Milk

Under the 1949 farm law, the government would be required to stockpile milk until it reached $37.20 per hundred pounds, almost double the current price of dairy futures traded in Chicago. The market isn’t taking seriously the threat of a doubling of milk prices, said Bill Brooks, a dairy economist at INTL FCStone Inc. in Kansas City, Missouri.

"It’s very, very, very slim possibility that we’ll see any kind of increase based upon federal legislation," Brooks, who grew up on a Missouri dairy farm and has covered the industry for about two decades, said in a telephone interview. "It’s on people’s radar screens, but not from the standpoint that it’s really going to impact markets any."

Dairy prices have risen this year, with milk futures traded on the Chicago Mercantile Exchange heading for a second straight quarterly gain, while nonfat-dry milk rose to a six-year high on surging overseas demand. Milk futures for December delivery fell 0.3 percent to close at $19.03 per 100 pounds yesterday.

Farm Subsidies

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RELATED TOPICS: Dairy, Policy, Marketing, Milk, USDA

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