No Use Crying

12.10.13

Milk & Cookie Cliff in House GOP Hands

Milk could hit $8 a gallon if there’s no breakthrough in Farm Bill negotiations, and it won’t just be dairy products spiking in price -- cookies and most other food would also be hit.

The Milk Cliff.  The Butter Bust.  The Ice Cream Crash. Call it what you want, but if Congress fails to approve a new Farm Bill before the end of the year, agriculture experts warn that the price of milk and all milk-based dairy products like cheese, yogurt and baby formula will spike in coming months.

Chris Galen, vice president of the National Milk Producers Federation, estimated that dairy products alone could go up 40% to 50%, explaining that the price changes would not happen right away, but could send milk toward $7 or $8 per gallon. “It would be a noticeable increase,” Galen said.

But it’s not just dairy prices that could skyrocket if the House and Senate fail to agree to new Farm Bill or at least extend the current legislation that is set to expire on January 1st.  From dairy to wheat to rice, corn, barley, oats and honey, some of the most ubiquitous crops in the United States would revert back to artificial price supports that Congress first created at the end of the Great Depression and made permanent in 1949.  Subsequent Farm Bills have suspended those price-supports, but a lapse in the current Farm Bill would make the Depression-era pricing formula the law of the land once more and potentially send prices on nearly all food products through the roof.  The Milk Cliff is actually an Everything-You-Eat cliff.

A conservative rebellion among House Republicans this summer sank an earlier version of the bill.

According to the Congressional Research Service, dairy prices would be the first commodity prices to shoot up, followed by other crop prices based on the timing of their planting season.  The financial effects would cascade across the calendar as prices of the commodity crops, as well as livestock that eat them and that products that contain them, increase sharply.

“It would wreak havoc on the entire agriculture industry and the consumer food market,” says Ben Becker, the spokesman for the Senate Agriculture Committee.  “That’s a major reason why we need to get a new Farm Bill done.”

But getting a new Farm Bill done is easier than it sounds, with major differences separating the House and Senate versions of the bill that went to a conference committee earlier this year and has yet to emerge as a final product.

The biggest sticking point for conferees has nothing to do with milk prices or commodities futures, but rests instead with nutrition assistance, or food stamps, which account for nearly 80% of the cost of the overall bill.

A conservative rebellion among House Republicans this summer sank an earlier version of the bill, forcing GOP House leaders to split it into two pieces, with agriculture funding moving forward in one bill and nutrition assistance getting slashed by $40 billion in a separate bill. Conversely, the Senate kept the bill unified and cut $3.9 billion out of SNAP, producing the savings from anti-fraud and abuse measures rather than kicking large swaths of people out of the program entirely.

After weeks of huddling behind closed doors, Rep. Colin Peterson, the top Democrat on the House Agriculture Committee, told the North Dakota Inforum Monday that the four top negotiators had come to a compromise on levels for food stamp funding and said the number would be “substantially closer to the Senate’s” level of $3.9 billion in cuts.   Senior staffers close to the negotiations could not confirm Peterson’s news, but said negotiators are “close” to an agreement.  Even with a deal among the top conferees, Peterson said he did not know if it could win enough Republican support in the House to pass.

If Congress fails to get a full-fledged conference agreement, the House and Senate could pass a short-term, one-month extension to buy negotiators more time, or a one-year or even two-year extension in an admission that agreement on new farm and food stamp policies are not possible with the Congress as it stands today.

But Chris Galen of the Milk Producers Federation said that after years of fits, starts, political standoffs and frustrating delays, dairy farmers want to see a full, 5-year Farm Bill pass without more of the temporary fixes that have defined the dysfunctional 113th Congress.  “If we end up with a one or two-year extension, guess what?  We end up with the status quo and no reforms to system at all,” Galen said.

News on Monday pointed to enough significant progress among members of the House and Senate to think that a conference report could emerge soon, if not within the week, then by the early part of 2014.  Agriculture committee staffers stress that farm programs will continue in the very near term without market disruptions even without a short-term extension.  “If it looks like we can get this done in early January, we would still be good to go, even without an extension.”

But the great unknown that continues to shadow the Farm Bill effort—in addition to whether we’re all going over the Dairy Cliff-- is the plan of outside conservative groups, including Heritage Action and the Club for Growth, which both “key voted” the summertime votes that sent House conservatives scrambling and left the Farm Bill in its unprecedented and precarious position.

“There’s a lot of difference between politics and governing,” Chris Galen said of the outside groups’ political pressure tactics on the Farm Bill.  “That was about politics.  This is about governing.”