Price Of Inaction
Impasse On Farm Bill Could Drive Up Cost Of Dairy Products
Posted: December 28, 2012
HARRISONBURG — Americans already soured over Congress’ inability to work together could have another grievance come next year: the price of milk.
Without a new farm bill in place by the time the current legislation expires at the end of the year, some fear the cost of a gallon of milk could skyrocket to $8.
Many in the industry think Congress will act to prevent the hike, but the threat looms as long as intransigence prevails among Democrats and Republicans, who remain at a standstill over another piece of legislation that could send the economy into recession — the so-called fiscal cliff. What’s more, Agriculture Secretary Tom Vilsack expressed pessimism earlier this month that lawmakers would act on the farm bill in time, according to published reports.
‘Much Larger’ Than Milk
Gridlock in Washington is pushing the U.S. ever closer to the fiscal cliff as House Republicans and the White House continue to bicker over how to avert a combination of spending cuts and tax increases set to take effect Tuesday with the new year.
The changes, which would hit the pocketbooks of Americans across the board, were included as part of a deal struck in 2011 to increase the nation’s debt limit.
Vilsack tried to tie renewal of the farm bill to negotiations over the fiscal cliff, but GOP House Speaker John Boehner has resisted that, according to The Washington Post.
If the farm bill isn’t renewed, the U.S. Department of Agriculture must revert to a 1949 program in which the agency pays nearly double for the milk and other commodities it purchases, driving up the cost for private processors as well, according to Eric Paulson, executive director of the Virginia State Dairymen’s Association.
While commodities like wheat and corn would also be affected, the cost of milk in particular is getting a lot of attention because consumers would see the change immediately when they go to the grocery store, Paulson said.
“It’s much larger,” said Paulson, whose Bridgewater-based organization represents dairy producers throughout the state. “Wheat prices will go up, but nobody buys wheat [at the grocery store].”
Paulson said the pricing mechanism was put in place to ensure Congress passed a new farm bill — much as the fiscal cliff was supposed to force lawmakers to agree on a deficit-reduction plan that never came to fruition.
In theory, it could cause the price of milk to nearly double, but no one knows for certain what will happen because Congress has always passed a farm bill before its deadline, Paulson said.
“That’s the biggest thing — we’ve never really gone through it before,” he said.
In the short term, higher prices would benefit producers, but the long-term effects are negative as demand for milk drops off, those in the industry say.
“No one wants to see that happen,” said Gerald Heatwole, a Rockingham County producer.
Heatwole, who has 300 cows on his farm in the Pineville area, said most people in the dairy industry expect Congress to pass a stopgap measure to extend the farm bill.
“Obviously, we all know this Congress is having a difficult time getting anything done,” he said. “At the last minute, they’ll extend something 60 or 90 days.”
Failure to do so will cost the federal government a lot of money because it would be forced to pay higher prices, Heatwole said, and the ramifications would be devastating to the agricultural industry.
“Usually the conversation and the fear of something is much worse than what comes down the pipeline,” he said “Everything I’ve heard and read [says] Congress won’t let that happen because it would be disastrous for everything from milk to commodities.”
Contact Jeremy Hunt at 574-6273 or firstname.lastname@example.org