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Farmers seek to avoid ‘dairy cliff’

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As if the country didn't have enough to worry about with the looming "fiscal cliff," the price of a gallon of milk is at risk of doubling in early 2013 if Congress doesn't pass a long-delayed farm bill.

The 2008 farm bill expired at the end of September without a replacement, though coverage for most agriculture-related federal subsidy programs extends throughout the 2012 crop year. But if a new farm bill isn't enacted by January, the federal Agriculture Department will end its current dairy price support program and revert to the 1949 farm bill -- the last permanent farm bill written into law.

Under "permanent law," government-supported prices would be about four times higher than current law and about twice as high as current market prices, says the National Sustainable Agriculture Coalition, an alliance of grass-roots organizations that advocates for federal policy reform.

Crop farmers wouldn't feel a sharp pinch until the 2013 growing season kicks in. But for dairy farmers, who "harvest" their product daily, the adverse effects of having no farm bill will be more immediate.

"We call this the dairy cliff," said Chris Galen of the National Milk Producers Federation.

Milk prices likely won't shoot up immediately on Jan. 1 without a farm bill, as the Agriculture Department could delay or tweak implementation of some aspects of the 1949 law. But many industry officials and lawmakers warn a gallon of milk could balloon to $6 or $7 in the first weeks or months of 2013 unless Congress acts.

Farm bills, while large and complex, typically are among the most bipartisan legislative matters on Capitol Hill. The Democrat-run Senate passed a five-year, $500 billion farm bill in June with wide bipartisan support.

But the Republican-controlled House rejected the Senate measure, then failed to pass their own version.

With time running out, one option gaining traction is to include a new farm bill in any overall package to avoid the fiscal cliff. Agriculture industry officials support the move but are pressing for a multiyear farm deal as opposed to a stopgap measure that would only extend subsidy programs through the 2013 fiscal year.

"Why go through all this pain this year only to find yourself in the same spot" next year, Mr. Galen said. "We've come so far, just pass the bill."

Mary Kay Thatcher of the American Farm Bureau Federation says if Congress doesn't act on a farm bill during the end-of-year lame-duck session, she's not overly optimistic of the chances of a long-term measure passing next year.

"In the election, we got more liberal and more conservative and less centrist, which means I think it will be harder ... to come to a deal," she said.

One farm bill program, the Milk Income Loss Contract Program, which compensates dairy producers when domestic milk prices fall below a specified level, expired when the 2012 fiscal year closed at the end of the September. But because farm-level milk prices have been relatively high the past few months, the program's absence hasn't had a significantly negative impact on the dairy industry.

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