Washington Report - 7/1/11

By: Steve Kopperud

Corn Acres Higher than Expected, Surprise Trade

Corn area planted for all purposes this year is estimated to be about 92.3 million acres, up 5% from last year and the second highest acreage planted in theU.S.since 1944, USDA said this week.  The American Farm Bureau Federation (AFBF) said the total acres translate to a crop of about 13.47 billion bushels, 5% more than a year ago.  AFBF added the report “caught everyone by surprise” since acreage was expected to decline based on bad weather and delayed plantings. The department said growers expect to harvest 84.9 million acres, up 4% from last year. The total acreage planted exceeded private industry estimates of about 90.77 million acres, according to reports, with experts noting this week’s estimate is higher than the March estimate, higher than the estimate included in the May World Agricultural Supply & Demand Estimates, and shows higher acreage in high-yield states.  Soybean planted acreage is estimated at 75.2 million acres, down 3% from last year, USDA said. Area for harvest is pegged at 74.3 million acres, also down 3% from 2010.  All wheat planted area is set at 56.4 million acres, up 5% from 2010, with winter wheat at 41.1 million acres, up 10% from last year.  Of the total, 29.1 million acres are hard red winter wheat; 8.3 million are soft red winter, and 3.7 million are white winter wheat.  Area planted to other spring wheat is estimate at 13.6 million acres, down 1% from 2010. 

TAA, Timing Row Blocks Senate Finance Committee Action on Trade Deals

Republican members of the Senate Finance Committee this week refused to show up for a committee “mock” markup of the Korea, Colombia and Panama trade agreements because a reauthorization of the timing of the meeting and because Trade Assistance Authority (TAA) is set to be included in the Korea implementation bill.  Senate rules require at least one minority member to be present at a committee meeting and the boycott forced cancellation of the session, with ranking committee member Sen. Orrin Hatch (R, UT) angry the meeting, originally scheduled for the morning of June 30 and agreed to by both sides of the aisle, was switched to 3 p.m.  Hatch denounced the time shift, saying he was “very offended” by the move, adding “the President jammed us and we’re not going to put up with being jammed,” particularly since 97 discussion “amendments” have been filed for consideration during the markup.  He also said the GOP had asked for the markup to be rescheduled for Tuesday, July 5, but the request was rejected.  U.S. Special Trade Representative Ron Kirk, referring to GOP calls for the President to formally send the three trade agreements to the Hill for a vote, said, “Today, the agreements were there – and Senate Finance Committee Republicans were not.”  Ag and business group supporters of quick approval for the three trade pacts were disappointed in the delay in what was seen as the first concrete signal a deal has been struck to move the agreements to ratification.  TAA is a 50-year-old package of federal assistance toU.S.workers whose jobs are affected by the trade deals, providing health insurance, wage and hour protections toU.S.workers.  The law expired in February and has experienced a rocky road to reauthorization since opponents say the program is expensive and ineffective.  Finance Committee Chair Sen. Max Baucus (D, MT), in setting the markup, said he has reached agreement with the White House and Rep. David Camp (R, MI), chair of the House Ways & Means Committee, on TAA extension. Camp scheduled similar meetings for last week, but cancelled them, saying they’d be rescheduled.  Camp, however, has also said publicly he does not endorse the Democrat process plan and will defer to Senate GOP leadership on advancing the bills.  As part of the deal announced by Baucus, TAA extension will be part of theKoreatrade pact implementing bill, while the reauthorization of the Generalized System of Preferences and the Andean Trade Preferences Act will be extended until the end of 2013 as part of theColombiaimplementing bill.  The decision to add TAA to theKoreabill has some GOP members upset, with Hatch calling it “a highly partisan decision.”  Senate Minority Leader Mitch McConnell (R, KY) said he was disappointed in the move, and urged the White House to send all three treaties to the Hill at the earliest possible date and “without extraneous poison pills included.”  In related developments,South KoreaandCanadaannounced this week they have come to an agreement on resuming Canadian beef sales toKorea. Koreawill allow bone-in beef from animals less than 30 months old, officially endingKorea’s eight-year ban on Canadian beef over BSE concerns.

Senate Cancels July 4 Recess to Focus on Debt Ceiling Talks; Potential Agreement will Rewrite Spending Process

Senate Majority Leader Harry Reid (D, NV) this week followed the advice of President Obama and cancelled the Senate’s week-long July 4 recess in hopes a deal can be cut on extending the federal debt ceiling.  And as President Obama points fingers at Congress and Vice President Biden continues to try and hold his bipartisan negotiating team together in hopes of coming up with an agreement by which Congress can raise the federal debt ceiling while cutting spending even further, the appropriations process is in limbo pending the hoped-for debt deal.  The Senate has yet to come up with its own budget resolution, the gross amount of how much is available for spending, and while Senate Budget Committee Chair Kent Conrad (D, ND) says he’s got the plan in draft form to cut about $4 trillion over the next 10 years, he won’t release it for “at least a couple of weeks” in hopes a debt ceiling agreement will be reached so he can rework his plan if he has to.  Ag spending, including farm program payments, are on the table, even with the deep cuts included in the House-passed FY2012 appropriations bill, as House and Senate negotiators from both sides of the aisle acknowledge they’ve come up with over a $1.5-1.7 trillion in cuts over the next decade, but are at loggerheads over “revenue increases,” be they restrictions in existing tax credits or increases in taxes across the board.  The tax increase question brings into play the so-called Bush tax cuts extended at the end of the last Congress, as well as other actions to “reform” the federal tax code, and there is significant bipartisan opposition to raising taxes in any way going into the 2012 elections.  If the debt agreement cuts as deeply as the GOP hopes – House Speaker John Boehner (R, OH) continues to demand that cuts will equal increases in the debt ceiling – then the work done so far in both chambers on appropriations goes out the window and it’s back to square one.  For the Senate this likely signals only a couple of individual appropriations bills may move independently – military construction and Veterans Administration are cited as “noncontroversial – meaning Congress is likely going to have to wrap the rest of spending into an omnibus bill or settle for another round of continuing resolutions until an agreement on spending and debt ceiling increases is finalized.

Deal Coming as Ethanol Tax Support Continues to be the Symbol for Tax Cuts

Sen. Dianne Feinstein (D, CA), author of an amendment to kill federal tax support for corn-based ethanol production, said she and Sens. Tom Coburn (R, OK), Amy Klobuchar (D, MN) and John Thune (R, SD) are continue to talk on how to best reform, if not end, federal support for ethanol.  Feinstein told reporters this week she, Klobuchar and Thune are in agreement, but that Coburn has told her he can’t support the tentative consensus, and stressed a final deal is not done.  The preliminary package will contain continued incentives for cellulosic ethanol and federal assistance for installation of blender pumps, and if modified before the August recess will save about $2.5 billion, with $1 billion in savings going to deficit reduction, according to Klobuchar.  She said she hopes an agreement will be reached to attach any ethanol agreement to the spending/debt ceiling package given there is no active tax legislation to which to attach it.  Earlier this week, Sen. Charles Schumer (D, NY), another vocal ethanol opponent, said he wants an ethanol tax cut added to the spending/debt ceiling bill, but the White House said it supports “reform” of the program to reduce spending; it does not support an outright end to the federal tax supports.

Bills to Extend Biodiesel, Kill Ethanol Programs Introduced; ‘Trigger Bill’ Expected

As expected Sens. Maria Cantwell (D, WA) and Charles Grassley (R, IA) introduced legislation late last week to extend for three years tax credits for biodiesel and renewable diesel, but shifts the benefit away from a blenders’ credit paid to oil companies and makes it a tax credit for the producer of biodiesel.  The bill is the companion to a similar bill introduced in the House by Reps. Aaron Schrock (R, IL) and Collin Peterson (D, MN).  At the same time, two members of the House Ways & Means Committee – Rep. Wally Herger (D, CA) and Rep. Joseph Crowley (D, NY) – introduced legislation to kill off the blenders’ credit for ethanol along with the import tariff on imported ethanol.  “The ethanol program has driven up the cost of corn to sky-high levels and has cost the chicken industry and consumers billions of dollars,” saidMike Brown, president of the National Chicken Council.  Also expected is a House bill that would create a “trigger” mechanism requiring the Secretary of Agriculture and the Secretary of Energy to waive the Renewable Fuels Standard (RFS) requiring specific percentages of biofuel to be mixed with gasoline, when the corn stocks-to-use ratio and/or price hit certain levels.  The bill is aimed at ensuring sufficient supplies of corn at affordable prices for feed and food use. In testimony this week before the Senate Agriculture Committee reviewing the state of the livestock industry, Nation Turkey Federation (NTF) witness Rick Sietsma, partner and chief financial officer of Sietsma Farms in Allendale, Michigan, told the panel that the current runup in feed prices due to short corn supplies based on ethanol competition has created “significant uncertainty in the turkey industry,” and is the industry’s greatest challenge.

Cardin Says He’ll Block Pesticide Registration Fix

A bill to eliminate duplicate registration of pesticides used near waterways, passed by the full House and approved last week by the Senate Agriculture Committee, hit a wall this week as Sen. Ben Cardin (D, MD), chair of the Senate Environment & Public Works Committee subcommittee on water and wildlife, said he’ll block the measure based on environmental concerns and procedural disputes.  A priority for farm state legislators, the bill would stop EPA from requiring new Clean Water Act (CWA) permits for pesticides already registered and permitted under FIFRA.  Cardin’s office said his action is to ensure “the bill be treated with all appropriate deliberation, including the opportunity to offer amendments.”  Sen. Pat Roberts (R, KS) said Cardin has moved into an area in which he lacks jurisdiction.  “The Senate Agriculture Committee has long had jurisdiction over pesticide issues. The appropriate committee of jurisdiction has acted on this bill,” Roberts said.  Congressional action is up against an October deadline set by the 6^th U.S. Court of Appeals for EPA to act in accordance with a 2009 lower court ruling that held pesticides are a pollutant when used in, on or near waterways.

Roberts’ Bill Aimed at CDL Class A Regs

Sen. Pat Roberts (R, KS) this week introduced legislation to exempt all Class A commercial driver’s license holders who are custom harvesters, ag retailers, ag business employees, ag cooperative employees or producers from a requirement by the Department of Transportation that they get a hazardous material endorsement while operating vehicles carrying more than 1,000 gallons or less of diesel fuel as long as the fuel tank is clearly placarded as “diesel fuel.” 

Roberts said his bill would avoid costly regulation that stifles the affected parties’ ability to do business “quickly and effectively.”  Roberts said eliminating the license endorsement is a “common sense way to provide more flexibility for these industries that are already weighed down with too many needless regulations.” The Roberts’ bill is cosponsored by Sens. Jerry Moran (R, KS), Mike Johanns (R, NE) and Ben Nelson (D, NE). 

EPA Extends Comment Period on Draft U.S. Waters Guidance; Inhofe Says EPA Water Proposals Straining State and Local Budgets

EPA and the U.S. Army Corps of Engineers announced this week they are extending by 30 days the comment period on their draft guidance on identifying waters protected under the Clean Water Act (CWA).  The new deadline for comments is July 31.  At the same time, Sen. James Inhofe (R, OK), ranking minority member of the Senate Environment & Public Works Committee, released a minority staff report showing several EPA CWA actions – both on the books and contemplated – are “significant unfunded mandates” that will cost state and local governments “tens, if not hundreds, of billions of dollars.”  The rules cited by Inhofe’s report include new water quality criteria in Total Maximum Daily Load (TMDL) and numeric nutrient criteria for geographic locations; new stormwater rules, and the New Pesticide General Permit (PGP) rules.  He said the rules are not the product of hearings or deliberation, but simply EPA’s reaction to environmental activist lawsuits.  Inhofe also said the cost of the rules is not outweighed by the benefits, adding “these rules will cause a lot of economic pain for state and local governments without any guarantee of water quality improvement.  Meanwhile, the draft guidance is controversial as agriculture interests contend it is little more than an administrative gimmick to expand EPA authority over just about any body of water, including farm ponds and other non-navigable waters.  Details are found here: 

 http://water.epa.gov/lawsregs/guidance/wetlands/CWAwaters.cfm

STB Hears Rockefeller Charge it to Act on Rail Competition Issues

Sen. Jay Rockefeller (D, WV), chair of the Senate Committee on Commerce, Science & Transportation, personally testified at a June 22 hearing of the Department of Transportation’s Surface Transportation Board (STB) that the board must be “scrupulous in its review of competition in the railroad industry,” and must ‘act boldly where you can,” according to a report on the hearing published by the National Industrial Transportation League (NITLeague).  Rockefeller said “what the STB has meant forWest Virginiais near-bankruptcy of steel mills, chemical companies being bullied on prices and services to the point they consider relocating their facilities overseas and consumers who have to pay more for their electric rates.”  He said he wants to see the STB “at a minimum” show progress “even if it’s incremental,” adding “you must regulate for the future of the industry – not continue to solve the rail industry problems of the past that have already been remedied,” NITLeague reported.  Rockefeller said his three priorities for the STB are captive shipper competitive options; making the board accessible to more shippers so that disputes get settled faster and more cost effectively, and giving the STB authority to “proactively address” industry-wide problems.  He also acknowledged, NITLeague reported, that legislation he and his ranking member Sen. Kay Bailey Hutchison introduced to exact the reforms he calls for is unlikely to move given “the legislative gridlock that has overcome Congress.”  While shipper after shipper echoed Rockefeller’s concerns, NITLeague reports the Association of American Railroads (AAR) argued for no changes in the regulatory status of rails, saying only Congress has the authority to bring about the changes demanded by shippers.