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Dairy Cliff Approaches Along with Fiscal Cliff

December 4, 2012

If Congress fails to approve the pending 2012 farm bill, the 1949 permanent law will kick in next month. The result could be dairy support prices of $40 per cwt.

Source: National Milk Producers Federation

As the stalemate in Washington continues over a budget deal that would avert the arrival of the “fiscal cliff” on Jan. 1, the fate of the farm bill also remains in limbo, even as a “dairy cliff” also looms at the start of 2013.

Congressional leaders have not made significant progress since the election on a deal that would halt the implementation of billions of dollars in spending cuts, along with significantly higher income, payroll, estate and capital gains taxes. If no deal is worked out in the next four weeks, those budget cuts and tax increases will begin taking effect next month.

At the same time, if Congress fails to reach agreement on the pending 2012 farm bill, the 1949 permanent law will kick in next month, leading to a recalculation of price support levels for a variety of commodities. The first of these will be the dairy price support program, which will see its levels adjust dramatically upward, in the range of $40 per cwt. This is nearly quadruple the current price support level, and about double the present market price for dairy commodities.

If Congress fails to address the farm bill in the coming weeks, NMPF will urge Agriculture Secretary Tom Vilsack to implement the provisions of the 1949 law as of Jan. 1, 2013.

“Along with Secretary Vilsack, our organization wants a new farm bill, and not an extension of current programs that don’t really serve dairy farmers. A one-year extension only gives new life to programs that we are seeking to replace with the new Dairy Security Act,” Kozak said.

“We do not support doing anything that relieves the pressure on Congress to pass the new bill," he added. "A much higher milk price support level in the short-term is the threat of dramatic change that is needed to force Congress's hand. Otherwise, there is no impetus for completing work on the farm bill, in the same way that the pressure of a fiscal cliff deadline is what Congress imposed on itself last year in order to reach a long-term budget deficit deal. Washington needs deadlines to prompt action, and it has two big ones at the end of this month.”

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