Washington Report

10-7-2011

White House Formally Submits All Three Trade Pacts to Congress; 90-Day Clock Ticking

With the formal White House submission this week of the free trade agreements with Panama, Colombia and South Korea, Congress now has 90 days to approve the treaties.  The agreements enjoy nearly unanimous business and agricultural support, though the National Farmers Union (NFU) came out publicly against the trade deals this week, saying the pacts “are similar to the North America Free Trade Agreement (NAFTA) and the Central American Free Trade Agreement (CAFTA)… (and) those agreements have worsened the U.S. trade deficit” because U.S. companies operate under stricter environmental and labor laws than do trading partners. However, the approval process is expected to proceed quickly and successfully—no amendments are allowed—and will move on a parallel track with agreements on trade-related legislation. The House Ways & Means Committee kicked off the process by approving the individual implementing legislation for all three agreements, and House Majority Leader Eric Cantor (R-VA) said the full House will vote on the bills next week. Those votes will take place along with votes on a Senate-passed bill that includes reauthorized expansion of Trade Adjustment Assistance (TAA), a federal program which provides financial, health care and other assistance to U.S. workers who hours, wages or employment is materially affected by U.S. trade pacts.  Senate action is expected to occur immediately after the House acts.  Secretary of Agriculture Tom Vilsack called on Congress to act quickly on both the trade deals and affected U.S. worker assistance, stating, “For American agriculture passage of these agreements means over $2.3 billion in additional exports supporting 20,000 jobs here at home.”  President Obama has adopted the three trade pacts as part of his jobs initiative, saying their approval will lead to $13 billion in increased U.S. exports and job growth nationwide.  All three treaties were negotiated by the Bush Administration, but a Democrat-controlled Senate has blocked ratification since 2007.

RFS Bill Draws Praise from Animal Ag; Corn Interests Not So Happy 

A bipartisan bill was introduced this week requiring the Secretary of Energy to consult with the Secretary of Agriculture twice annually to review the U.S. corn stocks-to-use ratio, and if that stocks percentage is below 10%, the energy secretary must lower the federal Renewable Fuels Standard (RFS) for corn-based ethanol.  Nearly 50% of the RFS mandate would be waived if the stocks-to-use ratio drops below 5%.  “The Renewable Fuel Flexibility Act” introduced by former ag committee chair Rep. Bob Goodlatte (R-VA) and Rep. Jim Costa (D-CA), a member of the agriculture committee, October 5 at a press conference attended by most of the nation’s largest livestock and poultry producer groups.  The use of corn by ethanol refiners forces corn “rationing,” said one of the groups.  This rationing falls on the feed users and feed users cannot reduce feeding quickly because animals must be fed, the groups said.  Costa said, “I continue to support the RFS, but our continued reliance on corn-based ethanol has impacts.  While ethanol is not the only factor, I am convinced it is a factor in the high prices farmers pay for feed and consumers pay for food.” The National Corn Growers Association (NCGA) said the livestock industry and meat packers are enjoying “pretty healthy profits now”, so why would they want to drive corn prices down?  In a related development, a report out this week from the National Research Council (NRC) of the National Academy of Sciences (NAS) entitled “Renewable Fuel Standard: Potential for Economic and Environmental Effects of U.S. Biofuel Policy” said there is a real need for biofuels innovations and a need for policy changes or the RFS mandate of 16 billion gallons of ethanol or cellulosic fuels is unlikely to be met by 2022.  The report, requested by Congress, said the RFS may not contribute to overall reductions in greenhouse gas emissions, but would definitely continue to increase federal spending. 

September 1 Corn Supply Number has USDA Officials Surprised

The most recent USDA corn supply number—1.13 billion bushels as of September 1—has  USDA analysts scratching their heads, said the chairman of the USDA World Agricultural Outlook Board during a presentation to the National Chicken Council (NCC) annual meeting in Washington, DC, this week, adding U.S. producers should also pay attention to production trends in South America. The corn stocks figure is 34% less than a year ago, but 23% higher than predicted just last month and exceeded the average industry analyst prediction of 962 million bushels.  Corn disappearance during June-August was 2.54 billion bushels, down slightly from the 2.6 billion during the same period a year ago.  According to a report in meatingplace.com, Jerry Bange noted the surprising 1.13 billion bushels in corn stocks at the end of the 2010-11 marketing year, saying that when a stocks number is that big “it implies something drastic happened in…the feed and residual use category.”  Bange also said the wheat stocks number is higher than expected in light of a lower-than-expected crop, particularly since many assumed more wheat is being fed.  Also unusual, according to the meatingplace.com story, was the quarter-to-quarter corn feeding patterns, with less than 25% coming in the last two quarters of the year, a development Bange called “very unusual.”  Bange said both producers and blenders of corn-based ethanol are making money, signaling continued high corn demand, adding that soybean meal prices are being driven by oil demand, in part for biodiesel production. Bange said corn production in Brazil is rising dramatically, opening up production much the way that nation built its soybean production.

EPA will Issue Pesticide Permit Rule as Bill Languishes in the Senate

A House-passed bill to remedy a court-ordered redundancy in EPA pesticide applicator permitting continues to languish in the Senate, so EPA will go forward and issue the controversial permits.  EPA said the political stalemate means it will issue a final rule October 31 to require applicators to apply for the general NPDES permits. EPA said it will not seek another extension of its deadline from the Sixth U.S. Circuit Court of Appeals which ordered the permits because pesticides used near water to control weeds and insects are pollutants when they run into lakes and streams. The House bill would stop EPA from requiring Clean Water Act (CWA) NPDES permits for pesticides used on or near water as long as the pesticides are registered under the Federal Insecticide, Fungicide & Rodenticide Act (FIFRA).  The bill is being held up by Sen. Barbara Boxer (D-CA) and Sen. Ben Cardin (D-MD), even though it’s been approved by the Senate Agriculture Committee.  

Lugar Says His Farm Bill Plan Saves $40 Billion over 10 Years

Former Senate Agriculture Committee Chair Richard Lugar (R-IN) this week unveiled his 2012 Farm Bill plan, a strategy he says will save $40 billion in federal spending over the next decade.  Lugar, who along with Rep. Marlin Stutzman (R-IN), a member of the House ag committee, unveiled the five-year farm program plan, and said this Farm Bill is an opportunity to “overhaul the system” due to the pressures of deficit reduction and spending cuts.  Lugar’s plan would kill direct payments, saving $16 billion, and take another $13.9 billion out of nutrition programs by closing eligibility gaps in the food stamp program, coupling those two changes with a reduction of $11.3 billion in conservation program spending.  The food stamp cuts would amount to about 2% of the program’s budget, which amounts to about 75-80% of overall USDA spending.  Part of the direct payment cut would include ending a sugar program that restricts imports, and current dairy programs would be replaced by a voluntary program that would protect about 80% of a farmer’s production history when the difference between market price and operating expense falls below $4 a hundredweight.  Lugar would also create an aggregate risk/revenue program that would allow farmers to protect 75-90% of their expected crop income, with producers having the ability to purchase supplemental revenue insurance through programs underwritten by USDA. 

AFBF Rolls Out Its Farm Program Recommendations

Setting itself apart from various commodity groups which have reinvented their farm income safety net programs—an acknowledgement of the likely demise of direct farm program payments—the American Farm Bureau Federation (AFBF) this week said it favors retaining the current income safety net system, recommending 30% in proportional spending cuts in all four titles of the current Farm Bill which cover income support programs. AFBF submitted its recommendations to the chairs of both the House and Senate Agriculture Committees in advance of the October 14 deadline for those panels to submit their budget/spending reduction recommendations to the Joint Special Committee on Deficit Reduction.  Insiders said the AFBF recommendations reflect dissatisfaction with recommendations that only benefit “one or two commodities,” a slap at revenue-based alternative programs proposed by the National Corn Growers Association (NCGA) and the National Cotton Council (NCC).  “All of our current programs, including direct payments, crop insurance, ACRE, target prices and a marketing loan program should be maintained,” ABFB said. “Farm Bureau is willing to look at modifications and adjustments to these programs to make them more effective in a reduced budget environment.” Program reductions should focus on direct payments, ACRE and dairy programs, the association said, with direct payment savings—and ACRE cuts—coming from payments on a smaller percentage of a producer’s historical acreage rather than lowering payment yields. The 23 separate conservation programs should be consolidated into a working lands program, a retirement lands program and the Conservation Reserve Program should be authorized at a cap below its current 32 million acres.  On crop insurance, the cuts should not come from producer premium support, but should be made on the operations and administration side of the program.  AFBF also said the SURE disaster assistance program doesn’t work, should be allowed to lapse and no attempt to reinvigorate SURE should be undertaken.

Ag Worker Shortage Moves to Senate; Feinstein Says Bill Coming on Visas

The ongoing debate over how best to insure agriculture has enough “guest workers” shifted to the Senate this week with Sen. Charles Schumer (D-NY), chair of the Judiciary Committee’s subcommittee on immigration, saying at a panel hearing that 18 state laws mandating the federal government’s electronic E-Verify system post an “existential threat to U.S. agriculture,” a back-handed slap at action in the House Judiciary Committee to mandate the E-Verify system for all employers. Schumer said it’s time for realistic solutions and an end to rhetoric that does match what’s happening in the country, calling for a solution that “penalizes farmers who hire illegal immigrants and exploit their workers…but we also need to provide farmers with the ability to transform their current workforce into a tax-paying, English-speaking legal workforce.”  Sen. John Cornyn (R-TX), ranking member of Schumer’s subcommittee, said it’s estimated nearly 70% of the 1.8 million hired workers in agriculture are illegals, evidence “our immigration system is broken,” but he defended E-Verify while saying he’d work with Schumer to find a solution.  Sen. Jeff Sessions (R-AL) told ag witnesses “you’re not entitled to unlimited amounts of low-cost labor even if that is your desire,” and called for a protecting the borders as the top priority. Sen. Dianne Feinstein (D-CA) said she’d introduce as early as next week a bill to let ag guest workers stay in the U.S. for five years as long as they remain employed in agriculture—Sessions says he can support workers in the U.S. for less than a year and without their families—while phasing in E-Verify but also reforming the H-2A visa program, a move endorsed by farmers and ranchers.  All witnesses at the hearing said the key to fixing the labor crisis in farming is legalization of the current workforce and without a remedy, production jobs will move overseas along with food production.

DOL Wants to “Equalize” Ag and Non-Ag ‘Child Labor’ Regs

In a move it says will “equalize and strengthen the safety requirements for young workers employed in agriculture and related fields,” the Department of Labor (DOL) has proposed a rewrite of its child labor protection regulations. “Children employed in agriculture are some of the most vulnerable workers in America,” said Labor Secretary Hilda Solis.  The details of the proposal are so onerous to farm organizations a massive joint letter to DOL is being developed seeking a 60-day extension of the November 1 comment deadline, and individual farmers, ranchers and others are being urged to comment.  Under the proposed rules, “farm workers” under the age of 16 would be prohibited from working in cultivation, harvesting and curing tobacco, and it would also prohibit youth in ag and non-ag employment from using electronic—including communications—equipment while operating powered equipment, but the rule also prohibits young workers from operating almost all power equipment.  Minors under the age of 18 would be barred from working in the “storing, marketing and transporting of farm product raw materials,” with specific prohibitions on country elevators, grain bins, silos, feedlots, stockyards, livestock exchanges and livestock auctions. The rule holds youth under 16 years old “lack the cognitive ability” to herd animals on horseback—no cutting or separating cattle—to use battery-power drills, put hay bales on bale elevators or use any equipment except if powered by hand or foot, said a statement from the Michigan Farm Bureau. The revisions, the first since 1970, would change the Fair Labor Standards Act that now restricts some young workers from certain professions, and will remove most current exceptions for young workers in agriculture.  Further, the proposed rule would eliminate working with 4-H or FFA animals, or the proper care or wellbeing of the animals as youth would be prohibited from “engaging, or assisting” in treating of sick or injured animals, Farm Bureau said.  DOL says there’s an exception for youth working on their parents’ farm, but does not extend that exception for any broader family partnership, e.g. parents’ and their siblings, or to a multi-generational farm, said Michigan Farm Bureau.   

House Passes EPA Reg Reproposal Bill, Tees Up a Second

A bill to halt EPA action to set air pollution limits for cement plants was approved by the full House this week, as debate continued on another bill to force the agency to repropose its industrial boiler regulations, with its floor vote set for next week.  Both actions would give EPA 15 months to rework and repropose their regulatory schemes, and are seen as lynchpins to the House Republican assault on what it considers to be onerous Obama Administration regulatory actions.  The President, however, has said he’ll veto any bill designed to restrict EPA’s authority.  Both bills are cast as necessary because the EPA rulemakings, particular the boiler emissions rule, require “maximum achievable control technology (MACT)”, a move business said will be prohibitively expensive and which will have a broad impact on industry.  Similar measures have been introduced in the Senate—a bill by Sen. Susan Collins (R-ME) is endorsed by over 300 businesses and associations—but it’s not expected Senate Majority Leader Harry Reid (D-NV) will allow them floor time, and this week Sen. Barbara Boxer (D-CA), chair of the Senate Environment & Public Works Committee, said one of her highest priorities is blocking legislation to limit EPA regulations. 

STB Looking at BNSF Purchase Impacts

A petition from the Western Coal Transport League has been granted by the Surface Transportation Board (STB) and the panel will begin public proceedings to examine the regulatory impacts of the purchase price Berkshire Hathaway paid for the Burlington Northern Santa Fe (BNSF) railroad in 2010.  The coal group challenged some inclusions by BNSF in the line’s Uniform Rail Costing System (URCS) costs, particularly the $7.6 billion premium paid by Berkshire Hathaway above the line’s book value, according to a report by the National Industrial Transportation League (NITLeague).