A long-standing dispute over dairy policy is holding up a deal between House and Senate lawmakers on a new farm bill, House Agriculture Committee Chairman Frank Lucas said.

The most obvious sticking point "is the dairy policy," Lucas said. "We're just not quite there yet," added the Oklahoma Republican, who said that once a "handful of things" are resolved, a meeting will be held to resolve the remaining issues.

Congress has been debating the bill for more than two years. The measure governs farm subsidies, which encourage the planting of soybeans, cotton and other crops that reduce the cost of materials for commodity processors including Bunge Ltd.

Profit-margin insurance

The bill also subsidizes crop insurers such as Ace Ltd. and funds consumer purchases at Kroger Co. and other grocers through food stamps, its biggest expense. Under a bill passed by the Senate in June, a new program offering farmers profit-margin insurance for dairy products would require producers who voluntarily enter the program to agree to cut milk production once prices fall below a set limit.

Producers who ignore the agreement would receive less from the government. Money saved would buy dairy products for distribution to the poor — another way to reduce inventories. Language endorsing that approach was stripped from the House version of the bill at the urging of Speaker John Boehner, R-Ohio.

House Democrats, including Agriculture Committee ranking member Collin Peterson of Minnesota, supported the Senate provision. Peterson has said supply management is needed to deal with price swings and to protect small farmers.

Other issues include potential changes to country-of-origin labels on meat products, farm-subsidy payment limits, and a proposal to ban localities from passing laws requiring specific production practices to be followed in other jurisdictions as a condition for sale within their own boundaries.

Supporting the Senate language on the dairy issue is the National Milk Producers Federation, which represents dairy marketing cooperatives including Arden Hills, Minn.-based Land O'Lakes Inc.

Potential pricing effects

The International Dairy Foods Association, whose members include Dean Foods Co., Nestlé SA, Unilever NV and Kroger, has warned against that approach, saying it could lead to occasional price spikes harming trade and consumers.

The previous farm bill was passed in 2008, and an extension expired Sept. 30. That may force the Agriculture Department (USDA) to reinstate farm programs governed by a 1949 law, potentially doubling dairy prices.

The dairy snag is unrelated to debates over food stamps, the biggest USDA program. Lawmakers are coalescing around a reduction in food stamp costs of about $8 billion to $10 billion over a decade, much closer to the Senate's goal of a $4 billion reduction than the House plan for $39 billion.