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Economist: Doubled dairy prices not likely

By Staff | Dec 19, 2013

ITHACA, N.Y. – Mainstream media has been warning consumers and lawmakers alike that if a new farm bill is not passed by Dec. 31, the old dairy parity law from 1949 will kick in that could cause a doubling of milk process.

But according to Washington lawmakers, a new farm bill will likely not happen by mid-January, and Andy Novakovic, an ag economist from Cornell University, said the dairy crisis will also likely not happen.

Novakovic issued a paper on Dec. 11 that said Ag Secretary Tom Vilsack will likely delay implementing the law.

That’s not to say Vilsack can skirt the law, Novakovic said, but he expects the ag secretary will stall for at least through January, giving lawmakers a chance to finish their negotiations between the Senate and House versions of the bill.

“It’ll be more critical,” Novakovic said, “if the law is implemented. Doing the right thing, in this case, is doing nothing.”

Novakovic said he was in Washington on Dec. 5 and 6 in daily contact with dairy officials and doubts ag leaders will criticize Vilsack for delaying implementing the law.

And Congress is thinking the same way, he said.

On Dec. 12, the House approved a one-month extension for the farm bill, which Senate Majority Leader Harry Reid, D-Nev., said is not necessary.

“Let them vote on it. We’re not going to do it,” he said on Dec. 10.

“We will be ready to vote in January,” said Senate Agriculture Committee chairman Debbie Stabenow, D-Mich.

Although Novakovic said he thinks a corner has been turned in the long overdue farm bill, “I won’t bet a penny for or against getting a farm bill pass by mid-January.

“But the principals are saying, ‘Give us a chance to get in a room and we’ll work it out.'”

Stabenow said a short-term extension could allow direct payments to continue. Those subsidies are paid to farmers whether they plant or not and have come under political fire from conservatives and others who have lobbied for less spending on farm programs.

Both the House and Senate farm bills would eliminate the subsidies and create new ones.

Finding a compromise on cuts to the nation’s $80 billion-a-year food stamp program has been the toughest obstacle in the talks between the House and the Senate.

The House passed a bill this summer that would cut $4 billion from food stamps annually and allow states to create new work requirements for some recipients. The Democratic Senate, backed by President Barack Obama, passed a farm bill with a $400 million annual cut, or a tenth of the House cut.

Negotiators have focused on cracking down further on a practice in some states of giving low-income people as little as $1 a year in home heating assistance, even when they don’t have heating bills, in order to make them eligible for increased food stamp benefits.

The Senate found its $400 million in annual cuts by proposing that states have a $10 heating assistance threshold for such eligibility, while the House doubled that cut by requiring that recipients receive $20 annually – bringing the savings to around $800 million a year.

Sen. John Hoeven, R-N.D., who sits on the House-Senate conference committee, confirmed that negotiators have floated as a compromise $800 million in annual cuts plus pilot programs that would create new work requirements in a handful of states. But he stressed that there is not a final deal.

Hoeven said he agreed that the Senate should not pass an extension.

“We want to keep the pressure on to get a farm bill done,” he said.

Negotiators are also working out how farm subsidies should be restructured in the absence of the direct payments.

The two chambers have argued over how to replace those payments, with major farm groups squabbling over whether subsidies should kick in based on crop prices or farmer revenue, and how to count the acreage on which the subsidies are based.

The Associated Press’ Mary Clare Jalonick contributed to this article.

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