Fiscal plan averts "dairy cliff," buys time for farm bill

WASHINGTON Wed Jan 2, 2013 12:03am EST

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WASHINGTON (Reuters) - A deal approved by the U.S. Congress late on Tuesday to avoid the automatic tax hikes and spending cuts known as the "fiscal cliff" also includes measures to avert the "dairy cliff" - a steep increase in milk prices.

The tax agreement contains a nine-month fix for expiring farm subsidy programs by extending a 2008 farm law. That gives lawmakers time to come up with a new five-year replacement.

Without the fix, the farm law would have expired and dairy subsidies would have reverted to 1949 levels, meaning retail milk prices could have doubled to about $7 a gallon in coming weeks or months.

Lawmakers have so far failed to finalize a new $500 billion, five-year farm bill to replace the 2008 legislation, which authorizes spending on food stamps and crop subsidies.

They had agreed to eliminate $5 billion in annual direct payments to grain, cotton and soybean growers - subsidies deemed wasteful at a time of high prices and record farm income.

The extension of the 2008 farm law is designed to buy time for Congress to complete a new farm bill and still allow for another round of direct payments.

But three dozen programs in the law have no money left, including disaster relief and biofuel development as well as a soil conservation program and some rural economic development and agricultural research programs.

As the year-end deadline drew closer, farm-state lawmakers had drafted a one-year fix that would have included disaster relief money for livestock producers hurt by drought.

It also would have created a dairy subsidy program to compensate farmers when feed costs are high and milk prices are low.

That was nixed by Senate Republican Leader Mitch McConnell during the final hours of fiscal cliff talks, a Senate aide said.

Dairy processors said the proposed new dairy plan would have interfered too much with the market.

(Editing by Bill Trott and Peter Cooney)

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Comments (3)
AlkalineState wrote:
The last farm bill was 500 billion dollars.

Here’s a simple proposal for the next farm bill: (Current bill) X 0.1

That’s still 50 billion in freebies to the ag sector in this cycle. GM had to pay their stimulus back. The farmers and ranchers never do. As for the argument, “Yeah but we NEED food.” We already know that. That’s why we pay for it when we buy it, unless your suggesting that farms are some sort of collective. Last I checked, they’re a for-profit business.

Jan 02, 2013 12:20pm EST  --  Report as abuse
AlkalineState wrote:
Why is it still called a bill? The ‘farm bill’ has passed ten times now. I think we can safely call it a law. We spent the money. Many times over. It’s not a bill :)

Food and Agricultural Act of 1965
Agricultural Act of 1970
Agricultural and Consumer Protection Act of 1973
Food and Agriculture Act of 1977
Agriculture and Food Act of 1981
Food Security Act of 1985
Food, Agriculture, Conservation, and Trade Act of 1990
Federal Agriculture Improvement and Reform Act of 1996
Farm Security and Rural Investment Act of 2002
Food, Conservation, and Energy Act of 2008

Jan 02, 2013 1:08pm EST  --  Report as abuse
Romas wrote:
Gee, all I hear is that most of the programs that people have paid into are “entitlements” (social security. medicare, etc); but we keep subsidizing businesses. What happened to this free market and capitalism I keep hearing about? Must only apply to those that don’t run a business.

Jan 02, 2013 4:20pm EST  --  Report as abuse
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