Ahead of "milk cliff," McConnell piecing together new farm bill

Milk prices could spike to $6 to $8 a gallon in January if lawmakers fail to reach a 'fiscal cliff' deal and renew a farm bill that's been in place since 2008 and sets the price at which the government buys milk. / Photo by Scott Olson/Getty Images

To stop milk prices from climbing to $8 a gallon come January, Senate Minority Leader Mitch McConnell, R-Ky., is scrambling to piece together what is essentially a new farm bill using select scraps of the bipartisan extension deal approved Sunday by both the Senate and House agriculture committees, according to a Senate aide familiar with the bill, who called McConnell's proposal a "lose-lose."

The move comes a day after GOP leadership indicated to CBS News that it had not signed off on a nine-month extension of the 2008 farm law put forward by both chambers' agricultural committees in a last-ditch effort to avoid the "dairy cliff" awaiting Americans if Congress doesn't pass a new five-year bill or a temporary extension before year's end. It's just the most immediate of what would be gradual price increases on foods across grocery stores if Congress doesn't pass some measure to replace the farm law that expired nearly three months ago.

Technically, the country has been operating under a 1949 "permanent" law since Oct. 1, but because the 2008 law covered all crops planted in 2012, and funding for many agricultural programs is assured through March 2013, the earliest of the law's antiquated policies - milk prices based on dairy farm production costs 64 years ago - were not set to go into effect until January 2013.

• Deal to avert milk price hike may not come up for vote
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Now, the Senate aide said, McConnell is seeking to only extend parts of the deal offered by agriculture committees, including the Dairy Product Price Support Program (DPPSP), a product purchase program where the government buys up products like cheese, non-fat dry milk, and butter, at roughly the equivalent of a $9.00 all-milk support price. "Basically," the aide wrote in an email, it's "what is in the permanent law we're all trying to avoid, just at a lower level."

One sticking point within both chambers over the past several months has been how to best provide crop insurance for farmers. Peanut and rice farmers had backed the House version, which proposed $35 billion in spending cuts, and replaced the current agriculture subsidy program with what is essentially a safety net, guaranteeing government payments if crop prices fall below a certain point; corn and soy farmers preferred the Senate's approach, which had proposed $23 billion in spending, and offered insurance when revenue from a crop is more than 11 percent below average.

Instead of either of those paths, the Senate aide said, McConnell's bill would continue $5 billion in direct payments to farmers, whether they grow crops or not, and would extend at the post-August 2012 level the USDA's Milk Income Loss Contract (MILC) program, which compensates dairy producers when domestic milk prices fall below a specific level. McConnell would also propose eliminating the energy title, conservation programs, specialty crops and organic provisions, and would not include disaster assistance in his bill, the aide said.

Senate Agriculture Committee chairman Debbie Stabenow, D-Mich., is prepared to fight these changes to the bill agreed upon by her and her House counterpart, Rep. Frank Lucas, R-Okla., whose spokesperson did not immediately respond to request for comment. The Senate aide said the timing of a potential farm bill vote is "up in the air," but House leadership tells CBS News a milk "fix" may be among legislation dealt with if and when they convene New Year's Day to vote on a deal to avert the much more publicized, so-called "fiscal cliff."

[knsn_for_cmn_sense]

They need to let it end. This year so many farmers planted corn in the desert. In order to farm the insurance.

Farmers have their hands out more than poor people.

Hell. I dont really know any welfare recipients. BUT i know a HELLA lot of farm welfare recipients.

Let it go.

[pansy085]

Most farms don't have their hand out. Do you know where he money goes most goes to welfare and medicade and wic the farmer only gets a small part of the farm bill or should I say the Companys get it. We get paid $21. for a 100 lbs. of milk and It cost over $ 18. for feed for the cows . Their is 8 Lbs in a gallon of milk due the math don't foget to count in the cheese price that we don't get

[knsn_for_cmn_sense]

So Pansy..... You are against foodstamps but for your "subsidy" Like so many other welfare recipients I know.

I need mine. But no one else is worthy.

Hypocrisy ALL.

[Saint_Rapier]

Supply and demand means nothing then. We keep manipulating markets and calling them free; if price was to go up in a free-market, it would soon crash due to supplies being increased to take advantage of the rise in price. I guess everyone in America missed that day in class.