The Free Press, Mankato, MN

January 16, 2014

Farm Bill faces final hurdle with dairy cliff looming

Compromise reached to cut $9 billion

By Josh Moniz
jmoniz@mankatofreepress.com

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With congressional lawmakers scrambling to avoid the looming threat of milk prices spiking at the end of the month, it seems fitting that the last debate holding up passage of a new federal Farm Bill deals with price support for the dairy industry.

The U.S. Congress has a tight deadline for avoiding the impacts of the “dairy cliff." But with recent compromises on highly controversial elements of the Farm Bill, the outlook for the legislation is starting to look bright.

“Soviet” dairy

The newly emerged debate that is holding up the Farm Bill revolves around finding methods to protect dairy farmers from overproduction. U.S. Rep. Collin Peterson of Minnesota proposed a program that will offer dairy producers a version of profit-margin insurance, but the producers would be obligated to cut milk output if prices fell below a certain level. Dairy farmers are strongly supportive of the proposal while processors of dairy items such as cheese or ice cream are strongly opposed, particularly due to the risk it could raise dairy prices.

House Speaker U.S. Rep. John Boehner vehemently opposes the program as a “Soviet style” attempt at supply control by the government. He said he would not allow the program to be part of the final bill.

Mankato Democrat U.S. Rep. Tim Walz said he supports Peterson's program as a way to protect small dairy operations and prevent the “boom and bust” cycle of dairy prices. He said losing smaller dairy operations would ultimately raise the overall price of dairy and would lead to price instability in the market.

But he said he would be willing to pull the program to ensure the passage of the Farm Bill. He said there are indications Boehner will present an alternative program in the coming days.

Over the cliff

Congress is rushing to resolve Farm Bill disputes because the “dairy cliff” is set to increase milk prices to $7 per gallon at the end of the month. The “dairy cliff” refers to the impacts and cost increases caused by federal law automatically reverting to the 1949 Farm Bill. The legal mechanism was originally intended to pressure Congress into regularly passing new Farm Bills and it triggered when Congress failed to pass a bill last year. Because the 1949 law is out of sync with modern farming practices, it is poised to negatively impact food prices. So far, the U.S. Department of Agriculture has prevented the "dairy cliff" by delaying its implementation, but the tactic can only last until the end of the month.

Walz said the Farm Bill negotiations are “95 percent complete” and the bill could be quickly passed if the bigger disputes are resolved. The House has scheduled sessions for the last week of the month.

Light at the end of the tunnel

Despite the outstanding disputes, the Farm Bill made big progress in recent weeks when compromises were reached on the approach for food stamps and price supports for crops.

Congress has been divided for nearly two years over the level of cuts for the nutrition portion of the Farm Bill, which contains food stamp legislation. The Democrat-controlled Senate passed $4 billion in compromise cuts last year while the Republican-controlled House passed $40 billion in cuts, which was reached after House Republicans rejected the $20 billion in proposed compromise cuts as insufficient.

In recent weeks, negotiations have tentatively settled on $9 billion in cuts. The agreement was strengthened by achieving the savings through efficiency instead of reductions in benefits. The cuts will be generated by raising the minimum level of heating assistance required before qualifying for further food stamp benefits. The change is to impact 800,000 households, according to the Congressional Budget Office.

Walz said he supports the $9 billion in cuts as a positive compromise level. He said he greatly prefers the cuts to the $20 billion level of cuts, which he voted for last year to move along the Farm Bill. He said he was concerned the $20 billion level could seriously harmed needy families.

“This is a good compromise. I'm glad to see most folks have ratcheted down the rhetoric,” Walz said.

He voted against the $40 billion in cuts passed by the House.

The other major compromise settled on basing price support of farm crops on the historic, averaged use of the land instead of the production each year. The proposal is popular with farmers of the major crops, but it carries the risk of funding farmers for more land than they actually planted in a given year.

The best indicator of how well lawmakers in both chambers will accept the compromise proposal reached by party leadership will be the finalized details of the bill that will be released in the later part of next week.