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Standstill on Farm Bill may revive 1949 rules

Ron Nixon
Saturday, 18 Jan 2014 | 10:03 AM ET

Pressure is mounting on lawmakers working on a farm bill to come up with a deal before the end of the month, when the Agriculture Department is to begin enforcing a series of decades-old laws that could cause the price of milk and other agricultural products to double.

In the nearly two-year effort to pass the $1 trillion bill, lawmakers have been able to reach a compromise on most of the farm and nutrition programs it covers, including what was expected to be the most contentious issue: cuts to the food stamp program.

Holstein dairy cows
SimplyCreativePhotography | E+ | Getty Images
Holstein dairy cows

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.

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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.

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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."

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Agriculture economists said that if a new law was not passed in time, milk prices would be based on dairy farm costs in 1949, when production was handled almost all by hand. Because of adjustments for inflation and other formulas that are used to determine how to keep milk prices from slumping, the government would be forced to buy milk at roughly twice the current market price to maintain a stable milk market.

But that would cause it to be anything but stable, experts said.

Dairy farmers would experience an initial windfall as they rushed to sell their milk to the government at higher prices than what they would get on the commercial market. Prices at the grocery store would surge as shortages developed, with less milk available for consumers and the manufacturers of cheese, butter and other dairy products, experts said.

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"The alternative to a farm bill conference agreement — a return to permanent law — would result in much, much higher levels of government intervention in the market and could nearly double consumer milk prices," said Chris Galen, a spokesman for the National Milk Producers Federation, a trade group that supports the dairy provisions opposed by Mr. Boehner.

Before members of Congress left for the holidays, the House passed an extension that would have kept farm and nutrition programs going through the end of January. But the Senate rejected it. Senator Debbie Stabenow, Democrat of Michigan and chairwoman of the Senate Agriculture Committee, and the majority leader, Harry Reid of Nevada, said they objected to the extension because it would continue a $5 billion subsidy program called direct payments, which go to farmers and farmland owners whether they grow crops or not. The new farm bill would eliminate direct payments.

—By The New York Times' Ron Nixon

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