Washington Report for 5-18-12

By Steve Kopperud

Farm Bill Update

House, Senate Spar Over Crop Producer Protections – In a he-said/she-said exchange this week, the chair of the House Agriculture Committee’s subcommittee on general farm commodities and risk management took shots at the Senate Agriculture Committee’s approved 2012 Farm Bill, while the Senate ag panel chair defended her bill and said she was confident differences with the House can be overcome. Rep. Mike Conaway (R-TX), at his subcommittee’s hearing this week on the crop protection and insurance components of omnibus farm programs, said the Senate crop title “creates a complicated new program so lopsided it actually locks in profits for some while denying any safety net at all to others … this leads me to conclude that what the Senate has before it cannot be called a farm bill at all,” escalating the North versus South crop war over direct payments and crop insurance first exposed in the Senate’s deliberations. While the Conaway subcommittee was hearing witnesses from just about every crop group in the country, as well as the crop insurance industry, Sen. Debbie Stabenow (D-MI), chair of the Senate committee, held a conference call with reporters to defend her bill and announce she and committee ranking member Sen. Pat Roberts (R-KS) are ready to move their bill to the floor. “This is real reform,” she said, echoing Roberts’ comments from the week before, “ … it is a fair bill for every crop. We know there are some differences … (but) I’m confident we can put this together.”

Lucas, Peterson Say Target Prices Will be Part of House Bill – Saying Congress should write a Farm Bill “for the bad times,” and in a nod to regional and crop differences that have emerged as the biggest stumbling block to getting a Farm Bill completed this year, House Agriculture Committee Chair Frank Lucas (R-OK) committed this week to some form of target price/countercyclical payment scheme to address the needs of southern cotton, rice and peanut producers, and asked all national crop production groups to bring him data to support their recommended target price. Lucas is not alone, as House ag panel ranking member Rep. Collin Peterson (D-MN) endorsed retaining crop target prices to backstop federal crop insurance. While southern producers, armed with new studies out of universities in Texas and Arkansas, argued the draft bill hammered together last fall by the respective chamber ag committees to meet deficit reduction targets set by Congress actually treats southerners better than the Senate Ag Committee’s bill, they pointed out that while they lost direct payments as part of an income safety net, retention of target prices at least factored in production costs as part of income protection. At the same time, southerners said the Agriculture Risk Coverage (ARC) shallow loss program – covering 11-21 percent of a producer’s loss with the rest covered by crop insurance – doesn’t work for southern crops, particularly rice, since some crops are irrigated and prices don’t fluctuate enough to trigger crop insurance payments. Lucas said ARC will only work well when prices are high, and that long periods of low prices demand a target price system. The ag panel chair, hit with criticism that target prices could skew planting decisions, dismissed the notion and pointed to recent shifts in corn acreage to account for ethanol production. It’s the market price that drives planting decisions, not target prices, he said.

Forty-Four Senators Urge Reid to Bring Up Farm Bill This Year – A letter from 44 Senators from both sides of the aisle urging quick Senate floor action on the Senate Agriculture Committee’s approved 2012 Farm Bill was delivered this week to Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY). The letter cites the ag panel’s $23-billion savings (though some say the actual savings is much lower) and the bill’s “strengthening and preserving farm risk management programs” as the major reasons for quick Senate action. While Reid told Sen. Debbie Stabenow (D-MI), chairwoman of the ag committee, he’d make floor time available if she was able to get a committee bill approved “with strong bipartisan support,” he’s been silent on when floor time might be scheduled. Insiders say Reid is looking at bringing up the bill in early June after Congress’ Memorial Day recess, about the same time House Agriculture Committee Chairman Frank Lucas (R-OK) says his committee will begin markup of its bill.

Roberts Moves to Educate Senators Taking Aim at Crop Insurance Cuts – Senate Agriculture Committee ranking member Sen. Pat Roberts (R-KS) this week moved to educate colleagues who are advocating further budget cuts to federally subsidized crop insurance, a program that’s emerged as the backbone of both House and Senate 2012 Farm Bill rewrites. The unlikely alliance of Sen. Tom Coburn (R-OK) and Senate Majority Whip Richard Durbin (D-IL) in calling for the insurance subsidy cuts makes Roberts’ job tougher. He said he’d talked with Coburn this week about Coburn’s notion of cutting crop insurance premium subsidies and administrative buy-downs to insurance companies “point(ing) out the value of crop insurance” and how it forestalls disaster payments in tough times. Coburn and Durbin base their call for “efficiencies and controlled costs” on a March Government Accountability Office (GAO) report Coburn asked for that says the U.S. Department of Agriculture could have saved more than $1 billion 2011 by capping insurance premium subsidies at $40,000 per person per year. GAO said without a cap, premium subsidies will cost the federal government $8.9 billion per fiscal year in 2013-2022. Roberts said, “Coburn is following the recommendations of GAO, any member of which I don’t think has been west of the Mississippi.”

Reports Indicate CFTC Considering Loosening Speculation Limits

A news report this week indicates the Commodity Futures Trading Commission (CFTC) is considering loosening Dodd-Frank-imposed speculative position limits on oil, natural gas, wheat and other commodities. Bloomberg News reported the CFTC commissioners may take a private vote on how companies combine trading positions when they have ownership stakes in other companies. The report said the commission is considering raising threshold limits from 10 percent to 50 percent when a company has an ownership stake and must aggregate trading positions. The CFTC had no comment. 

House Committee Approves EPA Limitation Bill

The House Energy & Commerce Committee this week approved a bill that will create a new task force to study the overall impact of three pending Environmental Protection Agency (EPA) rules, but not before Democrats on the committee called for more study of the bill’s impact. The three rules which would be required to be studied by the task force include delay of EPA’s proposal on new emissions and fuel standards and the agency’s ozone air quality standards. The bill would overturn a Supreme Court decision upholding EPA’s need to only consider health concerns when promulgating air quality rules, with the agency now having to consider economic costs and feasibility of its proposed air rules. Republicans said the new bill is necessary because the Supreme Court decision, while upholding EPA authority, said the agency’s authority on air quality regulations is ambiguous.

OSHA Setting Up Whistleblower Protection Committee

A whistleblower protection committee will be established by the Department of Labor’s Occupational Safety & Health Administration (OSHA), according to an announcement this week by the agency. “The new Whistleblower Protection Advisory Committee will help our agency sustain an open dialogue with stakeholders and experts, and will promote the transparency and accountability that the cornerstones of this Administration,” the department said. The purpose of the panel is to advise, consult and make recommendations to OSHA on how to “improve efficiency, effectiveness and transparency” in the agency’s whistleblower protection program. The committee will focus on advising OSHA on development and implementation of improved customer service models, improvements in investigation and enforcement processes, training and regulations on OSHA investigations.

Federal Court Tosses NLRB Law on Union Elections Due to Board Mistake

The controversial rule promulgated by the National Labor Relations Board (NLRB) that would speed up union elections in non-union workplaces was struck down this week by a U.S. District Court, not on the merits of the rule, but because the NLRB approved the regulation with only two members present when three are needed to approve any board action. “Because no quorum ever existed in the pivotal vote in question, the court must hold that the challenged rule in invalid,” the presiding judge said. The NLRB said it is “determined to move forward” on the rulemaking that shortcuts the current union election process, access to attorneys and other concerns.  

New Study Says E15 May Damage Car Engines; Bills to Protect Ethanol Makers Abound

A new study by the Auto Alliance and the Global Automakers, groups representing most of the cars manufactured around the world, released a study this week saying the Environmental Protection Agency (EPA) was premature in approving an 85-15 percent gas/ethanol blend, and that the new fuel blend could damage car engines. And on Capitol Hill bills to protect the ethanol industry against potential damage through liability protection are proliferating. Consumer groups, hunger organizations, agribusiness and farm groups, retail food organizations, trial lawyers and the National Council of State Legislatures are all shooting at the EPA increased blend rate and the legislation to protect the ethanol industry. Basically, the legislation would protect anyone in the fuel supply chain as long as that entity is in compliance with federal regulations in producing and distributing EPA-approved fuels. Other bills would allow suits only against the federal government. Car companies have long opposed an ethanol industry petition to EPA that successfully increased the federally mandated ethanol percentage from 10 perecnt to 15 percent. “Clearly, many vehicles on the road today are at risk of harm from E15. The unknowns concern us greatly, since only a fraction of vehicles have been tested to determine their tolerance to E15,” the groups said. Consumer costs could be significant, with most repairs being cylinder head replacements. Growth Energy, an ethanol trade group which filed the original E15 petition, dismissed the study, saying EPA relied on much more extensive and thorough research in deciding to raise the blend rate. Ethanol makers say the higher blend rate is critical to maintaining and increasing ethanol demand.

Corn Production Expected to Set Record, While Supply/Demand Figures Confuse Trade

Crop production and supply/demand numbers continue to confuse many analysts, as the U.S. Department of Agriculture (USDA) projects the 2012 corn crop at a record 14.8 billion bushels, up 2.4 billion from last year based on a 5.1-million-acre increase, a yield of 166 bushels per acre, and a bump in harvested area. Corn ending stocks for 2012-2013 are seen hitting 1.9 billion bushels, up 1 billion from the last USDA projection, and the department said 2011-2012 stocks should be 50 million bushels higher at 851 million bushels. Total corn use is expected to increase 9 percent from last year on higher feed and “residual disappearance,” increased sweetener use and large exports. Feed and residual use is seen expanding 900 million bushels based on a big crop and lower prices, USDA said. Projected uses for corn include ethanol at the same level as last year, while exports are expected to jump by 200 million bushels over a year ago. USDA said this means “abundant domestic supplies, lower prices and higher expected China demand.” Season average price for corn is projected to be $4.20-$5.00 per bushel, down sharply from a year before. Soybean production is expected to hit 3.205 billion bushels, higher than last year, with harvested acres set at about 73 million. The 2012-2013 soybean supplies are projected at 3.43 billion bushels, up 4 percent from last year. Exports are projected at 1.505 billion bushels, up 190 million from last year. Analysts continued to scratch their heads on how yields, etc. jumped as much as they did, with some questioning trend analysis and projections.