Posted: Friday, December 28, 2012 11:23 AM
By CAROL RYAN DUMAS
Dairy industry representatives are unsure how long the USDA can forestall implementing antiquated dairy policies set to go into effect Jan. 1.
The USDA is beginning the rules and regulations process for setting minimum milk support prices required under the 1949 legislation that will guide farm policy until Congress replaces or extends the farm bill that expired in September.
Under that law, milk prices below the minimum support price trigger government purchases of dairy product to help clear the market and increase prices.
"USDA continues to review a variety of options for administering programs should permanent law become legally effective on Jan. 1, and remains hopeful that Congress will act to prevent uncertainty for farmers and consumers in the new year," the USDA said in a statement.
The 1949 law, which is based on parity pricing calling for a minimum milk price relative to 60-year-old milk-production costs, would result in ridiculously high milk prices, said Jerry Slominski, International Dairy Foods Association's senior vice president for legislative and economic affairs.
Milk around the country is selling for an average of $19 to $20 a hundredweight. Reverting to the 1949 farm policy would move the support price from $9.98 per hundredweight to $38 per hundredweight, he said.
That would be disastrous for the U.S. dairy industry and the ag economy. Domestic demand for milk and dairy products would drop and exports would disappear. In addition it would lead to huge price volatility because markets would be lost while the program was in place and once it ended, the country would be flooded with milk, he said.
That's why he says it's unlikely that the milk-price support formulas in the old law will ever be implemented.
Knowing the devastation those high prices would cause, he said, Ag Secretary Tom Vilsack is likely to delay implementation until Congress can fix the problem. And he has the ability to do that through the rules and regulations process, he said.
It'll take time to determine what products the government will buy, where it will be delivered, how it will be packaged and other physical attributes such as moisture content. Then any rule would have to go out for a 30-day comment period before it could become final, he said.
And there's no real deadline on when a rule would become final. That's at the discretion of the secretary. A rule can be proposed and just sit there while comments are taken. There are proposed rules that have been on the books for years, he said.
It's likely Congress would take action before any of this would be implemented, he said.
National Milk Producers Federation is not nearly as confident. While it would take time to work out the details of government purchases, the law is the law, said Dana Brooks, National Milk's senior vice president of government relations.
The 1949 policy was put in place to force Congress to always act on farm policy to ensure there'd always be a price support program for commodities to ensure production. She said the current Congress has failed to understand the seriousness of farm policy, failing to pass or extend a farm bill.
There's no telling when Congress might act on farm policy, she said.
The secretary won't really be able to prolong the process of setting those support prices. There's no getting around the law, and it's likely new price supports will be implemented, she said.
"It will be disastrous. The market will not be able to bear this weight," she said.