The United States Congress next week will begin work on a new Farm Bill, hoping to avoid rises of between $3 and $4 for a gallon of milk at the supermarket, punishing Cayman Islands consumers.
The price hikes, set to increase living costs significantly, could come as soon as January if U.S. legislators cannot reach an accord on a new bill, replacing 64-year-old legislation, or renew the historical law, providing subsidies for more than 32,000 American dairy farmers.
The threat to milk prices, first raised in January, initially stemmed from efforts to deal with “the fiscal cliff,” a simultaneous increase in tax rates and decrease of government spending in early 2013.
A last-minute deal avoided the worst consequences of the fiscal cliff, but left spending cuts, called “the sequester,” and the debt ceiling unaffected. That deal extended dairy subsidies until Sept. 30 while, even more recently, a two-week shutdown of the federal government – since restored until Jan. 15 – has renewed efforts to shave expenses.
Lawmakers are scheduled to gather on Oct. 28 either to renew or rewrite the 1949 Farm Bill, focusing on government subsidies to dairy farmers’ feed and production costs.
“If nothing happens, by January 2014 the USDA will, under 60-year-old legislation, have to increase prices on milk,” said Chris Galen, senior vice president of marketing for National Milk Producers Federation, based in Arlington, Virginia.
“The conference begins one week from [Monday, Oct. 21] to begin work on the Farm Bill. We are moving along, but there is a lot of work to do and a long way to go. The leaders would like not to fall back on that 1949 bill,” Mr. Galen said.
Without action, however, he said, a gallon of milk, retailing in the Cayman Islands between $4.70 and upwards of $5, could attain or exceed $8 per gallon, a level described by local retailers as “unrealistic and unacceptable.”
“I’m very concerned. Going up to $8 or something? We are hoping that good sense will prevail,” said Woody Foster, managing director of Foster’s Food Fair IGA.
“We don’t have alternative suppliers,” he said, confident that Washington would find it politically untenable to permit a radical price spike for the staple item.
“I have spoken to our suppliers and they are pretty confident the U.S. will not allow this to happen. We don’t have a plan at this stage of the game, but we are watching closely.”
As part of efforts to rewrite the Farm Bill, the 29-member combined House and Senate Agriculture Conference will confront the latest hot-button issue, the enormous growth of the U.S. government’s Supplemental Nutrition Assistance Program, known as “food stamps.”
Payouts from the program have risen from US$28.6 billion in 2005 to US$74.6 billion in 2012, expanding 20 percent annually since 2007. The program incurred additional costs of US$3.8 billion last year.
As of September, 47.7 million Americans, more than 15 percent of the population, received an average US$134.29 per month in assistance.
The increases have been driven largely by recession and unemployment, as well as changes in eligibility rules.
“The Senate and House bills are different,” Mr. Galen said. “but as they look for savings, the Farm Bill is part of where they might save a couple of billion dollars.”
Between 70 percent and 75 percent of the money spent, he said, goes to the “feeding program,” food stamps, while the balance is applied to farm subsidies, and an even smaller percentage to dairy supports.
Mr. Galen said the milk producers federation was “guardedly optimistic” about congressional efforts to resolve the problem, but acknowledged ‘there are headwinds in the discussion of food stamps.”
Should congress fail to navigate those “headwinds,” Mr. Foster said, higher prices were likely to present a formidable problem.
Replacing U.S. imports with, for example, shipments from Jamaica, was unlikely.
“They do ultra-high temperature milk, they have Parmalat, but that is not a market for Cayman,” Mr. Foster said. “We have looked also at Central America, but there are issues of labeling – Spanish or English – and delivery. There is not a lot we can do about it at this point, so we are waiting and watching and hoping for the best.”