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Outdated pricing system possible

Published on December 27, 2012 3:01AM

Last changed on January 24, 2013 8:31AM

Vilsack says USDA prepared to revert to 1949 law if farm bill fails to pass


Capital Press

U.S. Agriculture Secretary Tom Vilsack said his agency is prepared to do whatever it is "legally obliged to do" under an antiquated milk pricing law in the absence of a new farm bill.

It looks increasingly possible that Congress won't pass new farm legislation before the first of the year, forcing the government to begin buying milk to prop up farm prices.

"We obviously are looking back in history to limited periods of time to consider ... how to improve upon it if it can be improved upon," Vilsack said during a conference call with reporters on Dec. 20.

Farm groups are concerned about the prospect of returning to a more than 60-year-old permanent law that includes a system for pricing milk that could force consumers to pay up 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 The act is superseded every time a new farm bill is passed, but if no farm bill or extension is passed the old law goes back into effect.

Under a mechanism for guaranteeing a minimum milk price that covers producers' cost, the government guarantees to buy milk products at that cost, but producers can also sell on the consumer market.

Industry officials say in current market conditions the government price could be double the current rate. In that scenario, farmers would sell their dairy products to the government instead of the private market and store prices would surge, then they could collapse as the government sold off its stockpiles.

Vilsack said he didn't "want to be specific" about how long it would take for milk prices to rise. He said the situation would entice importers to enter the market, which would also trigger more costly milk products in grocery stores.

He said food processors would be put in a position of having to consider using substitutes to dairy products, and the situation would put a strain on public nutrition programs.

"This is a bad outcome," Vilsack said. "Let me be clear about this. I don't think we should want ... nor Congress should consider it a good outcome that the permanent law goes into effect. The best outcome would be for Congress to do its job ... and pass a five-year bill."

Action on the farm bill this year was stalled by disagreements over the food stamp program, from which some conservative members of the House of Representatives wanted deep cuts. The National Milk Producers Federation and other farm groups have been pleading with Congress to wrap up the legislation rather than pass a temporary extension, which would leave issues unresolved.

Vilsack and others have expressed hope that a farm bill would be part of a final "fiscal cliff" budget package passed before Jan. 1. However, U.S. Rep. Collin Peterson, D-Minn., said in a radio interview Dec. 20 that Congress appears unlikely to pass a farm bill by the end of the year. He suggested American agriculture may have been too successful at keeping prices low, and sharp price hikes may make people understand "what a good deal they got."


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