Washington Report for 3-2-12

By Steve Kopperud

Senate Ag Shooting for End-of-March Farm Bill Markup; House Sets Field Hearings

Sen. Debbie Stabenow (D-MI), chair of the Senate Agriculture Committee, accelerated her panel’s hearing schedule and said this week her committee may begin marking up the 2012 Farm Bill by the end of March. She said the Senate bill will be a new five-year package, not an extension of current law, a rewrite of last December’s deficit reduction package or a short-term bill. Stabenow stressed her March markup target is only a possibility, and House Agriculture Committee Chair Frank Lucas (R-OK), is not making predictions. However, Lucas did announce his first field hearings on the 2012 Farm Bill this week, to be held in March and April. The House Agriculture Committee last summer held 11 “audit hearings,” to examine the operation of existing USDA programs and how they can be made more cost-effective. The first hearing will be held March 9, in Saranac Lake, NY, followed by a March 23 hearing in Galesburg, IL, a March 30 hearing in State University, AR, and ending with an April 20 hearing in Dodge City, KS. At the 2012 Commodity Classic this week, the leaders of the national groups representing corn, soybeans, sorghum and wheat growers affirmed their desire for a bill this year, but admitted they share no consensus on how to rewrite farm payment programs. Lucas and Stabenow are awaiting Congressional Budget Office (CBO) baseline spending numbers, expected in mid to late-March, and Lucas is awaiting the final House Budget Committee numbers that will indicate what can be spent on reinventing farm programs. These numbers reflect the CBO formula of how much money is needed for a new Farm Bill based on how much was spent over the life of the 2008 bill. While the Obama Administration budget request included a $32-billion cut in spending over 10 years, and the deficit reduction package crafted last December by Lucas and Stabenow found $23 billion in cuts, a draft of the House budget resolution currently circulating for reaction would slash ag spending $40 billion over the next decade. And if the House ag spending baseline is too far out of sync with what the Senate contemplates, it may be impossible to reconcile the two bills for final passage, both chairs warned this week. Complicating the House effort is GOP leadership’s commitment to going after the mandatory spending portions of USDA’s budget, including a continued push to convert the existing food stamp program into a state block grant program. 

FDA Makes Case for New FSMA Registration User Fees at Hearing; Industry Opposes

Saying foodborne illness will increase and more tainted imported foods/ingredients will reach U.S. consumers without them, U.S. Food and Drug Administration (FDA) Commissioner Dr. Margaret Hamburg this week told the House Appropriations Committee subcommittee on ag/FDA, her agency must be given authority to impose $220 million in annual user fees for facility registrations under the Food Safety Modernization Act (FSMA). Several members of the subcommittee confronted Hamburg with a letter from 30 national food and agriculture groups – including the American Feed Industry Association (AFIA) – opposing any new user fees, calling them “a food safety tax on consumers,” and urging the subcommittee to “adequately fund FDA’s food safety responsibilities.” The groups offered to work with the FDA and the Hill in finding a funding solution. Hamburg faced bipartisan opposition to her user fee request even though many panel members agreed FDA is underfunded. Rep. Tom Latham (R-IA) told Hamburg user fees have nothing to do with food safety and everything to do with FDA “taxing industry” to stay in business. He said the Obama Administration should operate with “budget honesty” and ask for what it needs rather than offering a user fee alternative that’s twice been rejected by Congress. Issuing similar warnings to Hamburg – including the political “reality check” that even if user fees were approved by the subcommittee they’d never survive Senate or House floor action – were subcommittee chair Rep. Jack Kingston (R-GA), Rep. Sam Farr (D-CA), ranking member, and former subcommittee chair Rep. Rosa DeLauro (D-CT). DeLauro said Congress needs to fund FDA at levels that allow the agency to do its job rather than relying on user fees and increased dependence on regulated industry. “This is about the tail wagging the dog,” she said. Hamburg said the fees are necessary to provide the FDA with a “reliable and dependable source or revenue” to develop and enforce its new programs demanded by FSMA – including new safety standards for produce, comprehensive implementation of preventive controls across all food and feed facilities, new inspection frequencies, a new import inspection system, and creation of FDA overseas offices – and told the subcommittee other industries regulated by the FDA, including human and animal drug makers and medical device manufacturers, support user fees, so the food industry should as well. She said the FDA would negotiate the fees with industry if the agency is granted authority to levy them. Kingston said the agency needs to first find duplication of programs with other federal agencies, including the Centers for Disease Control (CDC) and U.S. Department of Agriculture (USDA). Savings from eliminating duplicative programs can be redirected to food safety, Kingston said.

IRS Help for MFG Victims Called for by Senate Ag Leaders

In joint letter to the Internal Revenue Service (IRS), Sen. Debbie Stabenow (D-MI), chair of the Senate Agriculture Committee, and Sen. Pat Roberts (R-KS), ranking member, called on the IRS to provide help and flexibility to the clients of bankrupt MF Global (MFG), specifically asking the agency to spell out “the specific rules that apply in the reporting of losses … so the firm’s former customers may be able to claim a loss on their missing funds …” The Senate ag leaders said many farmers and ranchers are still waiting for IRS Form 1099s, detailing their gains and/or losses with MFG. With no final accounting, Stabenow and Roberts said, “customers are faced with the possibility of having to use estimated or inaccurate information that may require them to file additional amended or supplemental tax filings – an unacceptable level of additional red tape and paperwork for the customers who are already suffering hardships because their money went missing. MFG trustees now estimate the amount of missing funds in the MFG bankruptcy tops $1.6 billion, up from $1.2 billion estimated in 2011. The trustees have paid out the equivalent of 72 percent on average of customer assets, but there’s no guarantee customers will be repaid in full. 

CFTC Chair Gensler Questioned at House Ag Committee Hearing

Commodity Futures Trading Commission (CFTC) Chair Gary Gensler this week was grilled by the House Agriculture Committee over everything from missing MF Global (MFG) assets to unwritten Dodd-Frank market rules to gas prices, and it was a bipartisan shooting match. In a committee hearing billed as a “review of the 2012 agenda of the CFTC,” member after member demanded to know the status of the MFG investigation, where nearly $1.6 billion in customer assets are, then zeroing in on how the commission intends to protect the assets of individual investors in the future. Because Gensler recused himself from the MFG issue – he worked with former MFG CEO John Corzine some years ago – he could provide little new information for the committee. Committee members also hammered Gensler on the status of CFTC rulemakings emanating from enactment of the Dodd-Frank Act. Committee Chair Frank Lucas (R-OK) told Gensler he was becoming anxious because while the commission has promulgated 28 new rules, more than 20 have yet to be finalized or published. Key among these pending rulemakings, he said, are the definitions of a “swap” or “swap dealer” or “major swap participant,” and this lack of clarity, Lucas said, is confusing the marketplace. A number of committee members from both sides of the aisle pressed Gensler on excessive institutional and non-hedger speculation in futures markets, with Rep. Joe Courtney (D-CT) and Rep. Peter Welch (D-VT) citing a Goldman Sachs report about the “speculative premium” built into the price of oil and gas – the equivalent of 26 cents per gallon of gasoline. Rep. Jeff Fortenberry (R-NE) also zeroed in on excessive speculation, telling the CFTC head that while futures markets are “designed to mitigate risk, we actually have a system creating risk now.” Gensler took the opportunity to put in a plea for greater FY2013 funding, warning that without “adequate funding,” he may be forced to take drastic steps including moving personnel from enforcement to registration.

Vilsack to Close 131 FSA Offices in 90 Days

Congress was informed this week the U.S. Department of Agriculture (USDA) will close 131 Farm Service Agency (FSA) offices in 90 days, Secretary of Agriculture Tom Vilsack said.  Vilsack said his actions are consistent with requirements laid out in the 2008 Farm Bill and are being implemented as part of USDA’s “Blueprint for a Stronger Future” initiative. Overall, USDA will shutter 259 domestic and foreign offices, facilities and laboratories. USDA held public meetings in every county where an FSA office is set to close, comments were collected and reviewed by the department. Offices set to close are located within 20 miles of another FSA facility and employ two or fewer full-time workers. Included in the number of offices set to close are FSA operations which currently “have zero employees, regardless of location,” the USDA said. 

Korea FTA Goes into Effect March 15

The Administration announced February 21 the effective date for the U.S.-South Korea free trade agreement is March 15, now that all technical and diplomatic hurdles have been overcome. On that date, almost 80 percent of U.S. industrial exports to Korea will move duty free, including agricultural equipment, chemicals and transport equipment. About two-thirds of agricultural goods will move duty free, including wheat, corn, soybeans for crushing, whey for feed use, hides and skins, cotton, cherries, pistachios, almonds, orange juice, grape juice and wine. The new trade treaty is expected to increase U.S. exports by $10 billion a year. Similar agreements with Colombia and Panama have not yet been implemented. 

President Obama Consolidates Some Trade Enforcement Functions in New Agency

Under executive order this week, President Obama moved to create a new federal trade enforcement agency which will investigate and “respond” to other countries’ violations of U.S. and global trade rules. The move is an extension of a proposal he made last January that several federal trade functions, including the Office of the Special Trade Representative, should be consolidated within the Department of Commerce (DOC.) The new Interagency Trade Enforcement Center (IETC) is an example of what the President called “a whole-of-government” approach to getting tougher on foreign trade violations that disadvantage U.S. products in international markets.  The new center will monitor and enforce U.S. rights under international and domestic trade rules and “counter” unfair trade subsidies. The White House announcement said the new center will bring together litigators, language-proficient researchers, analysts and overseas representatives, and will coordinate with companies, industries and the intelligence community to exchange information on alleged trade rule violations. Ambassador Ron Kirk, Special Trade Representatives, will name the director of the new agency, with the Secretary of Commerce naming the deputy director, along with providing some personnel. Additional support will come from the Department of Agriculture (USDA), the Department of Homeland Security (DHS), and the Departments of Justice and State.

House Passes California Water Bill; Texas Court Affirms Groundwater Ownership Rights

A bill to end “man-made drought” in the San Joaquin Valley of California was approved by the full House this week, designed to end California’s diversion of water from the valley to the San Francisco Bay area to protect the Delta smelt, a three-inch minnow. Meanwhile, a Texas state court affirmed farmers and ranchers own the groundwater below their land and it is subject to constitutional protection as a property right. The California water bill, introduced by Rep. Devin Nunes (R-CA), is seen by national agriculture groups as a victory over what the National Cattlemen’s Beef Association (NCBA) described as “radical environmental groups … who have trampled on private waters rights.” Supporters of the bill say the California water diversion effort has had little positive effect on the Delta smelt, but has left thousands of the state’s most valuable agricultural land fallow, exacerbating state unemployment by costing nearly 10,000 jobs. The bill’s fate in the Senate is unclear. The Texas case followed state legislative action to pass a groundwater ownership bill “that says a landowner’s interest in groundwater in place cannot be taken for public use without adequate compensation,” said the Texas Farm Bureau. 

Iowa Passes Nation’s First Farm Protection Law on Activist Fraud

Having failed in its last session to overcome constitutional questions, the Iowa legislature this week enacted and sent to Gov. Terry Branstad the nation’s first state law prohibiting anyone from gaining access to a farm under false pretenses. The new law is the first of several state bills being considered during the 2012 sessions aimed at making it a crime for anyone to fraudulently gain employment at a farm or ranch with the intent to film operations or interfere in the operation of the farm. The Humane Society of the U.S. (HSUS), the nation’s largest animal rights group, has led activist opposition to such state efforts, and immediately upon Senate passage of the Iowa bill sent Branstad a letter urging him to veto the new law. HSUS said the intent of the new law is to “shield animal agribusiness from public scrutiny by punishing whistleblowers and protecting animal abusers.” HSUS President Wayne Pacelle said the new law poses “serious threats to constitutional freedoms, food safety, animal welfare and workers.”  About 30 protesters with the animal rights group Mercy for Animals, which has been responsible for several undercover videos over the last few years, showed up at the capitol building in Des Moines yesterday, vowing to continue to secretly record operations across Iowa. Under the new law, violators face a first-offense aggravated misdemeanor, punishable by up to a year in jail and a fine of up to $6,250. A second violation is a class D felony, carrying up to five years in jail and a fine of up to $7,500. Some legal scholars believe the law will almost certainly face a constitutional court challenge. According to Bloomberg News, Montana, North Dakota and Kansas have enacted laws to thwart activist undercover activities, and bills similar to that enacted in Iowa are currently under consideration in New York, Indiana, Missouri, Nebraska and Utah.

Cargill, Monsanto, Walmart Targets of “Occupy our Food Supply” Effort

With the names of all the expected “foodie” players, along with several musicians and Hollywood types, the Rainforest Action Network, an environmental group, has launched “Occupy our Food Supply,” an effort aimed at “a shared sense of urgency to resist the corporate consolidation of food systems and create socially and environmentally just solutions.” The movement says it has supporters in Brazil, Hungary, Ireland, Argentina and “a dozen U.S. states,” and will seek to take over bank-owned vacant lots to create community gardens; host seed exchanges in front of stock exchanges; label products containing genetically enhanced ingredients; build community alliances to support local grocery stores and resist “Walmart megastores,” and protest “food giants” Cargill and Monsanto. The group has already posted a map of all Cargill locations to its website, and urged supporters to call Cargill headquarters and ask for company CEO Greg Page. The group claims more than 40,000 food items come from just 10 corporations and that 25 percent of national food spending is spent at Walmart. The group’s campaign can be found at http://occupyourfoodsupply.org.