Washington Report for 7-13-12

By Steve Kopperud

Drought Continues to Take Toll; USDA Reduces Yield Estimates

This week the U.S. Department of Agriculture (USDA) lowered its projected corn production by 1.8 billion bushels to 12.97 billion bushels to be harvested off 88.9 million acres. Per-acre corn yields for the 2012 crop were cut by 20 bushels (or 12 percent), with USDA now expecting average yields around 146 bushels an acre. This is the largest one-month reduction in recent memory, according to several news reports. Just 40 percent of the crop is rated good to excellent this week, down from 48 percent last week and 69 percent at this time last year. The department also cut its corn-for-ethanol use projection by 100 million bushels to 4.9 billion. Cash and futures prices seesawed throughout the week, but generally moved higher as USDA announced it was reducing its projections on corn use  by 650 million bushels and slashed its projected corn stocks on September 1, 2013, from 1.9 billion bushels to 1.2 billion. Estimated corn prices were projected at $5.90 per bushel, up from the previous projection of $4.60 per bushel. 

USDA Announces Streamlined Drought/Disaster Designation, Emergency Financing

The U.S. Department of Agriculture (USDA) this week kicked off an immediate use of its disaster authority in the wake of the ongoing drought, announcing a package of “program improvements” and greater flexibility in getting disaster/drought aid to farmers. Among the changes are reduced rates for emergency loans and a payment reduction on Conservation Reserve Program (CRP) lands qualified for emergency haying and grazing from 25 percent to 10 percent. In a briefing conference call during which he repeatedly reminded reporters the U.S. is in line for its third largest corn crop in history, Secretary of Agriculture Tom Vilsack did not address action under his emergency authority to modify the Renewable Fuel Standard (RFS) mandates on blending of ethanol with gasoline, particularly corn-based ethanol. He said, “We’re not at that point,” when asked by a reporter if the RFS would be “dialed down” based on continuing crop deterioration, adding the RFS is important to rural communities. Vilsack said that based on a streamlined disaster designation system employed by USDA, as of July 12, 1,016 primary counties in 26 states are now “natural disaster areas,” qualifying farm operators  for low-interest emergency loans. To qualify, a county must show either a 30-percent loss of production of at least one crop countywide or a decision must be made by surveying producers to determine that other lending institutions are unable to provide funding. Vilsack reminded farmers to be in constant contact with their crop insurance companies, and to keep thorough records of losses, including additional expenses for such things as food purchased. The full listing of updated programs and disaster services can be found at www.usda.gov/disaster.

Peregrine Financial Group Charged with Fraud, Misappropriation of Funds: CFTC

Peregrine Financial Group (PFG) was hit with federal fraud charges this week by the Commodity Futures Trading Commission (CFTC), one day after it was put under emergency enforcement action by the National Futures Association (NFA). PFG is a target of what NFA calls its “member responsibility action” to protect customer money because it “failed to demonstrate that it meets capital requirements and segregated fund requirements.” Sen. Jerry Moran (R-KS) immediately called for the resignation of CFTC Chairman Gary Gensler after PFG formally filed for Chapter 7 liquidation on July 10, shortly after the CFTC charged the business with fraud and misappropriation of about $200 million in customer funds. “On two occasions, the most basic requirement to protect the sanctity of customer accounts has been neglected and hundreds of millions of dollars have been lost,” Moran said. “The ultimate responsibility to ensure market confidence rests at his door and I believe it is time for Mr. Gensler to resign.” A Senate Agriculture Committee hearing set for August 1, to review the CFTC’s investigation of the MF Global bankruptcy, should be expanded to include PFG, said Sen. Chuck Grassley (R-IA). The National Grain & Feed Association (NGFA) said it was “extremely alarmed” by the CFTC action amid reports of missing funds in the “latest incident of a futures commission merchant (FCM) insolvency.” No reports of where missing money went have been released. NGFA said the PFG case just bolsters its ongoing calls for serious reforms to protect customer money. “We now see that significant risk to supposedly segregated customer funds still exists,” NGFA said, adding the PFG episode demonstrates MF Global was “not a one-time problem.” NGFA said the NFA took its action on July 9, when the association determined an account that was supposed to contain $225 million held only $5 million. Further, NFA said a review of the company’s records found the firm has allegedly been “falsifying records as long ago as 2010, with one account found to contain just $10 million of the $218 million it was supposed to contain,” NGFA said.

Marathon Markup Yields 2012 House Farm Bill; Floor Action Uncertain, Vilsack Critical

Proof that House Agriculture Committee Chairman Frank Lucas (R-OK) and committee ranking member Rep. Colin Peterson (D-MN) are dedicated to moving a 2012 Farm Bill, the two drove a 15-hour committee markup July 11, protecting the key portions of the bill from substantive changes and winding up at midnight with a solid 35-11 vote to approve the committee bill. Lucas’ early-morning July 12 reaction to the final vote was to describe himself as “overjoyed the bill is done in committee at this moment,” with obvious relief at the “solid roll call vote” in favor of the bill. While Peterson said he sees no reason why House leadership wouldn’t bring the bill to the floor by August 3 – the beginning of the month-long summer recess – the big unknown remains whether House Speaker John Boehner (R-OH), a former ag committee member, will schedule floor time for the nearly $1-trillion package. Boehner said July 12, that while the committee “did an awful lot of good work,” he’s made no decision on floor time. In a press briefing the Speaker did not address an idea supported by some of bypassing the House floor and taking the bill straight to conference with the Senate-passed Farm Bill, a move employed by Boehner to get the federal highway re-authorization bill to the President’s desk before its extension expired. Peterson isn’t opposed to moving straight to conference, but said to skip floor action risks angering both GOP and Democrat House members who want a crack at carving back spending or re-instating cuts already in the committee-passed bill. However, given the size of the 10-year price tag, protecting the bill from amendments on the floor, particularly if Boehner allows an open rule where any and all amendments are in order, means at least two full days of floor action during a tight legislative calendar with no guarantee the bill would pass in a form acceptable to House ag interests. A separate strategy to delay consideration of the bill until the late-November lame duck session, rolling it into other must-pass tax/budget legislation, was opposed by Peterson because of the “quagmire” it would create, a scenario where “control of the bill gets taken away from us.” Boehner tempered his praise for the bill by saying the legislation contains “some good reforms,” but also called out the “the Soviet-style dairy program,” a reference to the Peterson-authored feed margin risk insurance component of the bill, which also carries milk production limits. Secretary of Agriculture Tom Vilsack slammed the bill for its 2 percent – or $16.1 billion – in cuts to the federal food stamp program, known as the Supplemental Nutrition Assistance Program (SNAP). Vilsack said the proposed cuts mean 280,000 children in low-income families will be denied access to school meals, while farm income is reduced and economic growth is “stunted.” He also criticized cuts to conservation and energy initiatives.

100-Plus House Ag Committee Farm Bill Amendments Cover the Waterfront

By the time House Agriculture Committee Chairman Frank Lucas (R-OK) gaveled the July 11 Farm Bill markup to order, the 46 members of the panel had filed more than 100 amendments – on everything from bedbug control to FSA office closings to interstate commerce – to modify the underlying committee draft bill. The draft taken up by the committee this week would cut $14 billion from the commodity title by re-inventing income safety provisions, but retaining target prices connected to countercyclical payments, a direction rejected by the Senate bill which creates an insurance-based Agriculture Risk Coverage (ARC) program opposed by southern farmers as favoring big corn and soybean producers in the Midwest. But thanks to strong pre-markup pressure from Lucas and Peterson, only a single minor amendment to the commodity title was offered and withdrawn, signaling the commodity title will be refined and reworked in conference. The majority of committee debate was taken up with amendments to either re-instate $16.1 billion in food stamp program cuts, or to cut the program even more. Rep. Jim McGovern’s (D-MA) amendment to restore the cuts lost 15-31 with five Democrats joining the GOP. After the markup, he said Democrats would do “everything in our power to defeat the bill.” An amendment to cut food stamps at the same $4.5 billion level the Senate bill contains failed, and an amendment by Rep. Tim Huelskamp (R-KS) to cut the program by $33 billion over 10 years also went down on a 13-33 vote. The committee did accept an amendment that takes $5 million allocated for advertising the food stamp program and shifted it to food purchasing for food banks. A second battle raged over the Peterson-authored dairy title that scraps a number of existing dairy income support programs in favor of a dairy margin insurance program that carries production controls. An amendment to dump the production controls language failed, pleasing the National Milk Producers Federation, but saddening the International Dairy Foods Association and some Upper Midwest producer groups. Also rejected was an amendment by Rep. Bob Goodlatte (R-VA) to roll back 2008 Farm Bill changes in the sugar program that he says drive prices artificially high. Peterson opposed the amendment, as did Lucas, citing the “no-cost” nature of the program to the federal budget. The committee accepted on voice vote an amendment by Rep. Leonard Boswell (D-IA) requiring the U.S. Department of Agriculture (USDA) to provide a “workload assessment” for public viewing prior to closing any Farm Service Agency (FSA) office, as well as an amendment by Rep. Dennis Cardoza (D-CA) to create a new USDA undersecretary for foreign agricultural services, modifying the current slot that combines foreign ag and farm services. The committee accepted an amendment by Rep. David Scott (D-GA) requiring USDA to report within 90 days of enactment what it’s doing to bring the U.S. into compliance with the recent World Trade Organization (WTO) country-of-origin meat labeling case wherein the U.S. was told to revise labels and the industry urged USDA to scrap the program. Accepted was a change that requires USDA to repeal rules now in effect through the Grain Inspection Packers & Stockyards Administration (GIPSA) on livestock/poultry producer/processor contracting. The committee rejected a move to shift catfish inspection from the Food and Drug Administration (FDA) back to USDA, a provision in the Senate Farm Bill that’s riled U.S. catfish producers. While the committee gave the Humane Society of the U.S. (HSUS) a minor win by accepting an amendment that would make it a felony to attend an animal fight or take a minor to an animal fight, the world’s largest animal rights group was knocked back on its heels when the committee accepted an amendment by Rep. Steve King (R-IA) that would effectively federally pre-empt state laws that have mandated changes to on-farm livestock and poultry production practices and prohibit product not raised in that manner from being sold in the state. King said the amendment simply enforces the federal Commerce Clause by prohibiting “a state or locality” from “imposing a standard or condition on the production or manufacture of any agricultural product sold or offered for sale in interstate commerce” if the production happens in another state and follows federal law. Rep. Kurt Schrader (D-OR), who has introduced the United Egg Producer (UEP)-HSUS agreement on cage sizes for laying hens, said the amendment was not within the jurisdiction of the ag committee, but was countered by Judiciary Committee member Goodlatte. Cardoza opposed the amendment saying that in the wake of Prop 2 in California mandating cage-free eggs – and subsequent legislation banning the sale of caged eggs – his producers would be a financial risk if other states don’t have to meet the same standards as his state. If the House bill reaches the floor, Schrader is expected to offer the UEP-HSUS agreement as an amendment. The Senate refused to consider a similar amendment by Sen. Dianne Feinstein (D-CA) when it debated its Farm Bill.

House Members Call on EPA to Explain Methyl Bromide Critical Use Plans

In a letter last week from the chairmen of the House Agriculture and Energy & Commerce Committees, the Environmental Protection Agency (EPA) was asked to provide by July 16, “the agency’s current plans for ensuring the continued availability of sufficient quantities of methyl bromide for critical agricultural uses.” Rep. Fred Upton, chairman of the Energy & Commerce Committee, and ag panel chairman Rep. Frank Lucas (R-OK) reminded EPA Administrator Lisa Jackson that the Montreal Protocol expressly allows the continued use of methyl bromide for critical uses, and since 2005 the “nominations” for critical uses have decreased and the nomination for 2013 is a 93-percent reduction from the 2005 level. The two chairmen told Jackson the use of methyl bromide is particularly critical for controlling pests, fumigation in food warehouses and processing facilities, and to control pests in stored grains and other foods. Specifically the two senior House members asked Jackson to provide information on what actions are currently being taken to ensure sufficient uses in 2013; what actions are being taken to ensure enough methyl bromide for use in 2014, 2015 and beyond; will the agency continue to seek critical use exemptions for methyl bromide; what assurances will EPA provide it will increase its critical use nominations if methyl bromide becomes unavailable; and what assurances can the agency provide that going forward requests for critical use exemptions will be “vigorously pursued” by the U.S. under the Montreal Protocol. Reps. Ed Whitfield (R-KY) and Brian Bilbray (R-CA) also signed the letter.

House GOP Want to Modify Process for EPA Settlements with Enviro Groups

A legislative move to change the system and limit legal settlements between the Environmental Protection Agency (EPA) and environmental groups that lead the agency to impose new and stricter regulations will be undertaken later this month by the House GOP. Referred to as “sue and settle,” some allege the agency works with environmental groups to create stronger legal foundations for rulemaking through group legal action against the agency. “What EPA claims the law requires them to do is nothing more than what EPA has agreed to do in a collusive arrangement with special interest allies,” alleged Rep. Jim Lankford (R-OK) at a recent hearing on the impact of consent decrees on environmental regulation. In addition to changing the process, the bill will likely limit attorney fees awarded in these cases. The bill is also expected to allow third participation through public comment in settlement discussion between the group suing the agency and the agency.