Washington Report for 10-5-12

By Steve Kopperud

2008 Farm Bill Expires; New Bill in Limbo, Political Football

September 30 marked the expiration of the 2008 Farm Bill, and on October 1 the political rhetoric ramped up, the failure of Congress to enact a new omnibus farm program package becoming a campaign issue for GOP congressional incumbents and challengers. Secretary of Agriculture Tom Vilsack issued a statement October 1, pointing out the “many programs and policies” at the U.S. Department of Agriculture (USDA) that expired and/or lost funding, “impacting millions of Americans, including farm commodity and price supports, conservation, research, nutrition, food safety and agricultural trade.” He said without action by the House on a multi-year Farm Bill, the “uncertainty and burden” on rural communities during tough times are multiplied. Several of the nation’s largest general farm and crop producer groups issued a joint statement on Monday pointing out both House and Senate Agriculture Committees did their job in passing a new Farm Bill, the Senate approved its version, but the House has “bottled up” its committee’s package. House Speaker John Boehner (R-OH), contending there weren’t enough votes to pass the House ag committee’s farm bill or an extension of current programs during the regular House session, has said the House will “deal with farm programs” in the post-election lame duck session in November. Particular focus of critics of congressional inaction, particularly by House members facing re-election throughout the Midwest, focused on dairy supports. The joint letter from producer groups points out the Milk Income Loss Contract (MILC) is one of the programs that expired last Sunday, and now dairy farmers are “left without adequate assistance.” The National Milk Producers Federation (NMPF), in a separate statement, said it was confident had the House leadership brought the bill to the floor, its new Dairy Security Act would be in place, but now “we are in uncharted waters and one of our life rafts has disappeared.” USDA explained because milk receives subsidies, the department cannot use emergency funding – as it has with the livestock industry – because those funds cannot be used on “supported commodities.” The groups also decried the suspension of the Foreign Market Development (FMD) program, a cost-sharing export promotion partnership between industry and the federal government, and said USDA dollars to keep the program operational and pay personnel will run out at the end of this month. About 6.5 million acres come out of the Conservation Reserve Program (CRP), and without a new Farm Bill no new signups will be allowed for CRP or the Conservation Reserve Enhancement Program (CREP). Disaster assistance is now limited to lack of forage or if animals die, they said. The farm groups were also quick to point out that federal food stamps and other nutrition programs won’t be affected by the lapse of the 2008 programs, nor will federal crop insurance programs expire, and most commodity-specific support programs will continue as they’re pegged to the 2012 crop year. Democrats across the country took the opportunity to shoot at House GOP leadership for failure to pass a 2012 Farm Bill House. Minority Leader Nancy Pelosi (D-CA) issued a statement deploring the expiration of farm programs and expressing concern for farmers and ranchers who can’t access disaster assistance, and Sen. Debbie Stabenow (D-MI), chairwoman of the Senate Agriculture Committee, demanded the House take up the bill “the first day of the November lame duck session.” Sen. Mike Johanns (R-NE) told one reporter Pelosi and the Democrats are dodging any blame for failure to pass a House Farm Bill, allowing the GOP to take the heat as a re-election strategy. GOP candidates in key Senate races in Wisconsin, North Dakota, Montana, Nevada, Ohio and Missouri are seeing their races tighten, in part because of a lack of action on the Farm Bill, observers said.

RFS Waiver Comments Due October 11

Public comments on whether the Environmental Protection Agency (EPA) should temporarily waive the Renewable Fuel Standard (RFS) on ethanol, a federal mandate on how much corn-based ethanol gasoline refiners must blend with their fuels, are due October 11, and groups favoring the waiver have pulled out all the stops to get as many comments on their side of the ledger as possible. While the EPA’s August 30 Federal Register call for public comments focuses on formal petitions filed by the governors of Arkansas and North Carolina, six other state executives – Maryland, Virginia, Delaware, Georgia, Texas and New Mexico – have asked for relief, and a petition under the Administrative Procedures Act (APA) was filed with EPA by 19 national livestock, poultry, feed and meat processing organizations in July. In addition, several national consumer, environmental and hunger groups, have made public statements supporting the RFS waiver, and the head of the Food & Agriculture Organization (FAO) of the United Nations has publicly stated the U.S. should waive the ethanol mandate based on the 2012 drought, depleted domestic stocks reducing export and food aid availability and skyrocketing corn prices – the same basic arguments made by industry – lest these conditions contribute to a global food crisis. Livestock and poultry producer groups are asking their individual member companies to file comments as well, and in the integrated industry, contract growers and their employees are also filing comments supporting the RFS waiver petition.

USDA Announces 2011-Crop SURE Sign-up; Drought Effects Lingering: AP

The U.S. Department of Agriculture (USDA) announced it will open sign-up for its Supplemental Revenue Assistance Payments Program (SURE) for the 2011 crop year on October 22, as the worst drought in nearly 80 years continues to wrack the Midwest and farmers are concerned late-planted corn harvest may be threatened along with winter crops. SURE covers crop losses caused by natural disasters occurring through September 30, 2011. The Associated Press (AP) published a story this week, reporting that the federal U.S. Drought Monitor showed drought conditions in the lower 48 states for the previous week showed 20 percent of the country continues to be in extreme or exception drought. The wire service quoted sources saying conditions worsened in Kansas and Iowa, and almost all of Nebraska was considered to be in the two worst drought categories.

Judge Sends CFTC Position Limits Rule Back to the Drawing Board

Challengers hoping to kill off a new Commodity Futures Trading Commission (CFTC) rule on position limits on derivatives related to 28 commodities – slated to go into effect in two weeks – won a partial victory late last week when a federal judge told the CFTC to rework the rule.  The new rule, promulgated under the Dodd-Frank law on financial market reregulation, was challenged by the International Swaps & Derivatives Association (ISDA) and the Securities Industry & Financial Markets Association (SIFMA), who contended the commission misinterpreted the Dodd-Frank mandate and imposed the position limits without regard to whether they were “appropriate or necessary.” The federal judge concurred, saying the new authority under Dodd-Frank was ambiguous and the CFTC did not recognize the ambiguity when publishing the new rule. He also said the commission failed to follow congressional instructions that the position limits rule be “necessary to diminish, eliminate or prevent” excessive speculation. The commission said the new rule “addresses Congress’ concern that no single trader is permitted to obtain too large a share of the market, and that derivatives markets remain fair and competitive.”

National Academy of Science Report Says U.S. Waterways in Bad Shape

“Degraded performance and the consequences of gradual or sudden failure of infrastructure components” was the description and warning about U.S. waterways transportation in a report released this week by the National Academy of Sciences (NAS) in Washington, D.C. The NAS report says the culprit is priorities – federal dollars spent in recent years have gone almost exclusively to new construction of locks and dams, with little attention paid to modernizing the existing infrastructure. “We now have a scenario where the water infrastructure is wearing out faster than it is being replaced or rehabilitated,” said David Dzombak, chairman of the NAS committee which wrote the report and chair of the Steinbrenner Institute for Environmental Education & Research at Carnegie Mellon University in Pittsburgh. Dzombak said some parts of the waterway system could be divested or decommissioned, but the Army Corps of Engineers lacks the authority to take those steps.

Farmer-Owned Cooperatives Set Sales, Income Records

The U.S. Department of Agriculture (USDA) reported this week that farmer, rancher and fishery cooperatives posted record sales and income for 2011, with net income for all agricultural cooperatives at $5.4 billion, compared with the previous record of $4.9 billion set in 2008. Sales totaled $213 billion, topping the year before by more than $10 billion, USDA said. Patronage refunds fell by more than 11 percent, to $613 million, down from $674 million in 2010. Employment remains strong at 184,000 full-time, part-time and seasonal employees, up slightly from 2010. The top three U.S. farmer-owned cooperatives based on revenues are CHS Inc. in St. Paul, MN ($36.9 billion); Dairy Farmers of America in Kansas City, MO ($12.9 billion); and Land O’Lakes Inc. in St. Paul, MN ($12.8 billion).