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Farmers worry about dairy prices as deadline nears

MILWAUKEE — As the nation inches toward the economic "fiscal cliff," anxiety is growing in farm country about an obscure tangent of the Washington political standoff that reaches into the dairy industry and, indirectly, into the household budgets of consumers who buy milk and cheese.

Little noticed in the struggle over major looming tax increases and spending cuts is that the outcome could also affect the farm bill, on which Congress didn't complete action this year after it expired in September. Agriculture industry leaders hope the farm legislation can be added to any final fiscal package before the end of the year. But if no fiscal agreement is reached, and the farm legislation is left adrift, farmers could face the prospect of returning to an antiquated system for pricing milk that would bring big price increases for consumers.

"It's going to come down to whether leadership tells them in enough time to get (the farm legislation) into a bill," said Chandler Goule, lobbyist for the National Farmers Union, referring to the agriculture leaders' wait on the fiscal cliff negotiations.

The problem is serious enough that industry officials are considering fallback options. The likeliest would have Congress passing an extension of current farm law, which would provide a temporary fix.

But farmers still shudder at the thought of any prospect, even remote, of reverting to an old system under which milk could surge to $6 a gallon.

The Agricultural Act of 1949 contains the basic provisions for setting milk prices. The act is superseded every time a new farm bill is passed, but if no new bill or extension is passed the old act goes back into effect.

That law includes a mechanism for guaranteeing a minimum milk price that covers producers' costs. The government guarantees to buy their milk products at that price, but producers can usually do better selling on the consumer market. But if the old mechanism were applied to current market conditions, the government price could be double the current rate, industry officials say. Farmers would sell their dairy products to the government instead of the private market and store prices would surge. Then prices might collapse as the government eventually sold its dairy stockpiles.