Government Stand-Off On Farm Bill Will Cause Rise In Milk Prices Next Year

While a budget compromise was reached late last week a new farm bill was not, leaving farmers in limbo once again, a Purdue Extension farm policy expert says.

The Senate and the House have each passed their own vastly different versions. Dairy support programs, the subsidy payment basis and nutrition assistance have been the most heavily debated issues.

“With the start of fiscal year 2014 on Oct. 1, authorization for previous farm legislation written in 2008 has already lapsed, triggering a reversion to farm subsidy laws first enacted in the mid-20th century,” said Roman Keeney, an associate professor of agricultural economics. “With the 2013 crop just harvested being the last that is subject to the 2008 law, farmers are left making plans for their 2014 crops with uncertainty about the rules and regulations that will govern the farm commodity system.”

But farmers won’t be the only ones affected by a lapse in farm policy. With no farm bill before Jan. 1, milk procurement prices could double. According to Keeney, that could sharply increase dairy product prices at the grocery store within just a month.

The rapidly approaching deadline could mean legislators would again extend the five-year 2008 farm bill- either for the short term or long run. They previously extended it for one year, and that extension expired Sept. 30.

“Extensions of the 2008 farm bill ranging from one month to two years have been discussed,” Keeney said. Such an extension would prevent the jump in dairy prices until a new, long-term bill could be passed.

What the extension wouldn’t do is give farmers any more certainty about what farm regulations will entail in coming years.

“Farmers already will be making their planting decisions for the 2014 crop with the uncertainty of markets and weather. The odds would seem to favor that those unknowns will be compounded by the uncertainty of the regulations and support mechanisms that govern the agricultural economy via the farm bill – just as they were for the 2013 crop year,” Keeney said.

According to Keeney, a new farm bill passed quickly in 2014 would necessarily be closer to the Senate version, which includes smaller reductions in nutrition assistance and a greater reliance on historical planting for determining subsidy payments. The Obama administration has declared a preference for the Senate version and would likely threaten a veto to any law that reduced nutrition spending by more than $1 billion per year.

“After a fall session that included a government shutdown over failures in budget negotiations, we can’t assume that entrenched positions on reducing spending in the farm bill have softened,” Keeney said.