At some point during 2012 you may have heard or read news bits about a farm bill that determines legislation for agriculture and food policy. Congress failed to take action this year when it expired in September, and it appears the looming "fiscal cliff" may be a major determining factor in future dairy prices.

According to the Associated Press, farmers hope the dairy legislation will be included in the year-end fiscal package that will be set before Congress. Without a fiscal agreement reached by January 1, and without the farm bill part of any package, farmers "could face the prospect of returning to an antiquated system for pricing milk that would bring big price increases for consumers."

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This "antiquated system" is the Agricultural Act of 1949, which is reverted to each time a new bill fails to pass. In that post-World War II pricing mechanism, the farmers would sell their diary products to the government, which could price milk at double the current rate. Politico reports that this would mean the Agriculture Department would pay producers $38.53 per hundredweight versus the current payment of $16.22, effectively doubling the consumer prices. It won't just be milk prices that would skyrocket — the entire dairy industry would be affected, from cheese to ice cream.

Agriculture Secretary Tom Vilsack said at a press conference, "It's fair to say milk prices will increase and that's an unfortunate circumstance." Politicians are speculating that there will be an extension but hope that there will be specific language that will address the dairy industry. White House Agriculture Chairman Frank Lucas told Politico, "Neither I nor the committee has been asked for specific language. You have to believe that leadership can't write a farm bill by themselves, they can't write an extension by themselves. They will need information."

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The farm bill was stalled earlier this year due to disagreements over the food stamp program, reports the Associated Press. The National Milk Producers Federation along with other farm groups are hoping Congress will review the legislation and take action rather than leave the issues unresolved and thus revert to the former legislation.

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