The average price of a gallon of milk is $2.89, but that price could soon increase to more than $7 if the U.S. Senate and House of Representatives do not pass a new farm bill or re-extend the 2008 farm bill before Jan. 1.
Dairy producers are currently getting a little more than $20 per 100 pounds of milk, Taylor County Extension Agent for Agriculture and Natural Resources Pat Hardesty said. However, Hardesty said that price could increase to approximately $38 per 100 pounds because of legislation passed back in 1938 and 1949 requiring the federal government to compensate dairy farmers based on the production costs from that era.
While much attention has been paid to milk, Hardesty said prices on wheat, grain, corn and soybeans would also increase.
There have been 10 farm bills passed since 1965, including the 2008 farm bill. However, none of them are permanent law and only make amendments and suspensions to the existing laws. And since the extension of the 2008 farm bill expired Sept. 30, the government will have to honor the terms of those antiquated laws if the Senate and House do not reach a compromise before Jan. 1.
According to Joe Cain, director of national affairs and political education for Kentucky Farm Bureau, the reason for this is because the legislation from 1938 and 1949 would have such a dramatic impact on government policy across the board that it motivates Congress to continue passing new farm bills.
Cain said a new farm bill must be drafted about every five years because it is so extensive.
Many experts say the passage of a new farm bill has hit so many snags, not because of agriculture programs, but because of the Supplemental Nutritional Assistance Program (SNAP), formerly known as food stamps. The program accounts for about 80 percent of the farm bill. While the Senate and House agree that funding to the program should be cut, they are far apart on just how much.
In the farm bill drafted by the Democrat-controlled Senate, about $4 billion would be cut from SNAP. The Republican-controlled House, however, is calling for a much more substantial cut of nearly $40 billion.
One of the few cuts the Senate and House agree on is eliminating $5 billion in subsidies known as "direct payments" to farmers, which have received much scrutiny in recent years because they pay producers of certain commodities such as corn and wheat the same amount each year, whether or not they plant crops.
Hardesty said these direct payments are based on agriculture bases determined by the amount of acres of a certain crop raised on each farm. He said at one time this played a vital role in stimulating farm expansions because when farmers bought a piece of land, they would know how many acres of base they had as income to pay for it.
To get the ball rolling on a new farm bill that Congress can agree on, a super-committee consisting of representatives appointed by the House and Senate will meet on Wednesday.
“Now we’re in a conference so we are making some progress, I guess you could say,” Cain said. “I think what happens will probably tell us a whole lot of where we’re going to go.”
Hardesty said what the majority of the agricultural community wants from the farm bill is a safety net for farmers. Right now, agricultural commodities have a price support system. For dairy, if the market price of milk drops below $12, Hardesty said, producers will receive a subsidy payment from the government. However, $12 is less than the cost of production.
Dairy farmers were in a bind because of this just two years ago when the cost of feed soared and milk prices dropped.
According to Hardesty, the two biggest issues farmers face is weather and the resultant volatility in the market. And because this also stabilizes the food supply for consumers, Hardesty said the farm bill protects everyone who eats.
What farmers would rather have, according to Hardesty, are subsidies for insurance and marketing safety nets, which would prevent producers such as dairy farmers from losing money due to the market that is out of their control.
Cain said the super-committee will have to jump hurdles before both sides can come to an agreement.
However, he predicts that the House and Senate will be eager to tout a new farm bill as a budget-saving measure in the political climate that is obsessed with cutting federal spending.