A deal was reached to cut about $9 billion from the program over 10 years, but was held up when Speaker John A. Boehner objected to a measure to help dairy farmers by limiting milk production to stabilize prices.
Mr. Boehner called it a "Soviet-style" program that would interfere with the dairy market. He had the provision taken out of a House farm bill that passed last year and said he would not allow it to be part of a final bill in the House.
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Progress has also been stalled by disagreements over a catfish inspection program at the Agriculture Department and over payment limits to farmers who receive subsidies. But it is the dairy provision that has brought talks to a standstill, people familiar with the negotiations said.
A vote on the bill has been delayed until at least late January while lawmakers continue to work on a compromise for the dairy provision, catfish inspection program and subsidy limits.
If Congress is unable to reach a deal before the end of the month, the Agriculture Department will be forced to put policies in place that would cause milk prices to rise. The current farm bill expired at the end of September, and agriculture programs have reverted to operating under 1949 farm legislation that calls for higher milk and agriculture subsidies.
(Read more: Where's the beef? Industry at crossroads
The 1949 legislation is known as "permanent law" because all subsequent farms bills simply amend it every five years. The last farm bill was passed in 2008.
The Agriculture Department told Congress before the holiday recess last year that it could hold off the higher milk prices if a new farm bill could be completed before the end of January. But as that prospect dims, the department may have no choice but to follow the 1949 provisions.
(Read more: Drought—it's what's for dinner)
Agriculture Secretary Tom Vilsack, speaking at an American Farm Bureau conference this week, called on Congress to end the impasse before that happens.
"We are on the one-yard line," he said. "We just need congressional leadership to push it over the line."