Tuesday night, the U.S. House of Representatives approved a "fiscal cliff" package from the Senate that rescinds tax increases for a majority of Americans, as well as extending federal dairy policy for another nine months in the absence of a new farm bill. 

The fiscal cliff package extends the Milk Income Loss Contract program through Sept. 30, as well as the dairy price support program. 

Because Congress had not passed a farm bill by the end of 2012, dairy policy on Jan. 1 would have reverted to a 1949 law without the fiscal cliff fix. That, in turn, would have increased federal price supports for cheese, butter and milk powder to 75 percent to 90 percent of parity (based on the purchasing power that farmers had between 1910 and 1914). That would have been the equivalent of $38 to $42 per hundredweight milk. 

Under this scenario, milk prices in the grocery store would have increased -- possibly doubling -- which led to the term "dairy cliff" in the national media. 

While the latest congressional action averts the "dairy cliff," it also postpones dairy policy reforms that were sought by the National Milk Producers Federation and approved last summer by the U.S. Senate and the House Agriculture Committee. The reforms, part of a larger farm bill, never got passed because the farm bill never made it to the House floor for a vote. 

In a statement Tuesday morning, following Senate passage of the fiscal cliff deal, National Milk Producers Federation president and CEO Jerry Kozak expressed frustration over the continuing delay of policy reforms. 

“The Senate’s vote earlier today on a nine-month extension of current farm policy is a devastating blow to the nation's dairy farmers," Kozak said. "After months of inaction, the plan that passed overnight as part of the fiscal cliff package amounts to shoving farmers over the dairy cliff without providing any safety net below...  

“Dairy farmers across the country have united behind the Dairy Security Act provisions in the original farm bills that have already been approved by the full Senate, and by the House Agriculture Committee.... 

”Despite the progress made in 2012 on the farm bill, we’re starting 2013 on a bad note. We oppose any farm bill extension of any duration that does not contain the Dairy Security Act, and resolve to work this year on achieving that as a long-term goal,” Kozak said.

The International Dairy Foods Association, meanwhile, was more congratulatory toward Congress’s efforts.

"We appreciate that the (fiscal cliff legislation) includes provisions that will avoid the resurrection of dairy policies from more than 50 years ago. This agreement allows Congress time to fully and openly consider future reforms to our nation's dairy policies,” said IDFA president and CEO Connie Tipton.

"Dairy manufacturers are an important segment of our nation's economy, and we are committed to working with Congress this year as formulation of the 2013 Farm Bill begins. The interdependence of this industry from farmer to consumer is critical, and our nation's dairy policies deserve to be updated and supported. We commend the bipartisan effort of Representatives Bob Goodlatte (R-Va.) and David Scott (D-Ga.) in proposing a margin insurance program ― a safety net ― for dairy farmers that does not impose new government rules and conditions on milk production. This approach has broad support from consumer and taxpayer groups, from farm organizations and from across the food manufacturing and retail industry,” Tipton said. 

Also, see “Fiscal plan averts ‘dairy cliff,’ buys time for farm bill” from Reuters.