All Eyes Are On The Fiscal Cliff, But The Dairy Cliff Is Important Too

As few people were paying attention to the stalled Farm Bill, a deadline snuck up that could double the price of milk. If the Farm Bill expires on Jan. 1, an antiquated law would kick in that requires the government to buy milk at inflated prices. The average cost of a gallon of milk is now $3.65, but could reach $6 to $8 if Congress fails to make this fix. Peggy Lowe of Harvest Public Media reports.

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Amid all the talk of going over the fiscal cliff, we have a report now on another midnight deadline tonight. Few were paying attention when Congress failed to pass the Farm Bill last fall. But now lawmakers are scrambling to extend the law for a year, to dodge a spike in milk prices. While an agreement is in the works, another vote is necessary, and none is scheduled yet. Peggy Lowe of member station KCUR in Kansas City explains how farmers, processors and consumers ended up at what is being called the dairy cliff.

PEGGY LOWE, BYLINE: Temperatures are below freezing on Chris Heins' dairy farm two days after Christmas. Puffs of white steam rise near the cows' noses as they eat their feed. Inside, next to a huge stainless-steel tank filling with warm milk, two new calves are still wet but up on shaky legs, born just three hours ago. The clock is always ticking on a dairy farm.

CHRIS HEINS: You know, our milk has to leave the farm every 24 hours, no exception. And we only have so much storage here, and so - I mean, it has to go somewhere.

LOWE: If Congress doesn't act, the so-called dairy cliff will hit tomorrow when a subsidy from the last farm bill expires and a law from 1949 kicks in. That would require the government to step in and buy milk at double the current cost. Chris Galen, with the National Milk Producers Federation, says you won't see higher prices tomorrow, but you could be paying much more for milk, yogurt, cheese and other products in the coming weeks.

CHRIS GALEN: So what the USDA would do is come in with an unlimited checkbook and be willing to pay about double the going rate for those things, and then the market would react because they'd be competing with Uncle Sam.

LOWE: That 1949 law was resurrected in the 1980s by farm-state lawmakers to do exactly what it's doing today, a maneuver that Montana State ag Professor Vincent Smith calls a poison pill.

VINCENT SMITH: The reason why it's a poison pill is because it's included quite deliberately by the House and Senate agricultural committees to force Congress to vote on new farm policy.

UNIDENTIFIED MAN: Hello.

LOWE: Here at a large grocery store in suburban Kansas City, a gallon of 2 percent milk is more expensive than the national average of 3.50. Michelle Burge just bought some for her family and is surprised that it could soon possibly go for as much as $8 a gallon.

MICHELLE BURGE: The products that they focus on, I think, will all go up, like yogurt. Doesn't everybody feed their kids yogurt now, you know? And, yeah. So that's a serious problem.

LOWE: Back at the dairy farm, Chris Heins is hoping Congress passes the farm bill soon so he can start making business decisions for next year. But time doesn't stand still here, he says, and this latest wrinkle won't affect him on New Year's Day.

HEINS: January 1st, I'll be here on my farm, you know, milking and breeding and feeding cows, you know, regardless of whatever happens.

LOWE: If Congress doesn't pass the farm bill extension today, lawmakers could get a little more time from the USDA. It has the authority to refuse to buy up surplus milk - at least for a while - in hopes of keeping the milk market stable. For NPR News, I'm Peggy Lowe.

SIEGEL: That story came to us from Harvest Public Media. That's a public radio reporting collaboration that focuses on agriculture and food production.

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