* Senate plan extends 2008 farm law until Sept 30
* Without fix, dairy price supports would spike to 1949
* Still needs House vote to avert price hike
* Plan gives lawmakers time to finalize new 5-year farm bill
By Charles Abbott and Roberta Rampton
WASHINGTON, Jan 1 A deal reached by the U.S.
Senate 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, which could face a vote by the U.S. House
of Representatives as early as Tuesday, 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
Unless the measure is passed by the House, the farm law will
expire and dairy subsidies will revert to 1949 levels, meaning
retail milk prices could double to about $7 per 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 would buy time for
Congress to complete a new farm bill and still would allow for
another round of direct payments.
However, 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 new dairy subsidy program to
compensate farmers when feed costs are high and milk prices are
But that was nixed by Senate Republican Leader Mitch
McConnell during the final hours of fiscal cliff talks, a Senate
Dairy processors said the proposed new dairy plan would have
interfered too much with the market.