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Washington Report for 11-18-13

By Steve Kopperud

Farm Bill “Progressing,” Say Conferees; Increasingly Key to Budget Talks

Principals in the ongoing 2013 Farm Bill conference committee continue to plug along, with reports of there is “good, solid progress,” and there actually may be at least the framework of a broad deal that will get overall congressional approval.

However, is the $20-30 billion in savings included in the pending 2013 Farm Bill a key to getting an overall federal budget deal? Yes, say the Democrats, including Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.), who sits as a conferee on both conference committees, her sentiment echoed by Secretary of Agriculture Tom Vilsack. House Speaker John Boehner (R-Ohio) surprised many by saying “no,” Farm Bill savings are not deficit reduction fodder just to get a budget deal, but “a separate issue.” He’s made sure House Budget Committee Chairman Paul Ryan (R-Wis.), who chairs the House-Senate budget resolution conference committee, understands the fact.

Rep. Frank Lucas (R-Okla.) shed light on commodity title negotiations when he told an Oklahoma radio station Senate negotiators have finally agreed “you have to a safety net that works not just for the Midwest, but for everybody else.” This, he said, is a signal both sides of the conference table will agree to a shallow loss program as an option to replace direct payments – the government covers losses not paid by crop insurance – but there will be target prices and countercyclical payments offered on some crops. Lucas said he favors farmers choosing an income protection option and sticking to that choice for five years. The Senate wants to allow farmers to move among program options during that time. Outstanding issues that remain include how participation is calculated – choice v. “all inclusive,” and how acres are calculated – but Lucas said he was feeling “upbeat” about progress. Also, under active discussion is a requirement in the Senate bill to require cross compliance between conservation programs and crop insurance.

Rep. Collin Peterson (D-Minn.), ranking member of the House Agriculture Committee, said good progress is being made on a deal, and that he, House ag panel chairman Rep. Frank Lucas (R-Okla.), Stabenow and Senate ag committee ranking member Sen. Thad Cochran (R-Miss.) “have been left alone” by their respective chamber leadership. Ag staff told reporters they’re not talking much to the media about discussions because “negotiating in the press” slows the process.

Vilsack told a Washington, D.C., meeting Congress will pass a Farm Bill by the end of the year, because “if you don’t have a Farm Bill, you don’t have a budget.” He referred to attempts by budget resolution negotiators to temper the impact of sequestration’s mandatory spending cuts using Farm Bill savings rather than going after entitlement programs like Medicare or Social Security.

Ag leaders said they’d hoped to make quicker work of reconciling the two bills, but waiting for the Congressional Budget Office to provide them formal cost projections was slowing the process. 

 

Farm Bill Insights

Obama Calls Farm Bill “No. 1” Economic Priority – At a Nov. 8 speech in New Orleans, President Obama said that in the context of overall job growth and economic recovery, the Farm Bill must be Congress’ first step in growing the economy. He called for passage of a “Farm bill that helps rural communities grow and protects vulnerable Americans … so let’s do the right thing,” he said, “(And) pass a Farm Bill. We can start selling more products, and that’s more business (for the Port of New Orleans), and that means more jobs right here.” 

CBO Says 10-year, $130-Billion Ag Savings Possible – A regular Congressional Budget Office report on how the overall federal budget can be trimmed to save money included six options in the ag sector, changes that could save $130 billion over 10 years. The areas targeted by CBO include conservation by prohibiting new enrollment and re-enrollment in the Conservation Reserve Program, saving $5 billion; crop insurance by reducing premium subsidies to 40 percent, saving $27 billion; limiting reimbursement of company administrative costs to 9.25 percent of premiums, and limiting the return on company investment subsidy to 12 percent; eliminating direct payments and saving $25 billion; food stamps could be changed to save $50 billion by requiring standard asset/income eligibility standards, lowering the income limit on households generally not eligible and eliminating energy cost subsidies; eliminating federal subsidies for school lunches for students from high income families, saving $10 billion; and several changes to the Forestry Service to save $5 billion over the next decade.

Reports Say Food Stamp Deal may be $10-Billion Cut – Farm Bill negotiators are looking at a compromise on federal food stamp cuts that would trim the program by $10 billion over 10 years, but seeks to placate critics by incorporating changes in how the program works, according to a National Journal story. The cuts to the Supplemental Nutrition Assistance Program are seen as a major hurdle to achieving a final Farm Bill as the Senate wants to cut $4.1 billion over a decade, but the House bill would cut $40 billion over the same period. The extra $6 billion the Senate is expected to accept would be paid for by changing how benefits are calculated using a formula in the Senate bill. It would also tinker with the low-income energy assistance program loophole that allows participants to get more foods stamps if they qualify for energy assistance. Critics of the $10-billion figure say it represents budget tricks, as the program already took an $11-billion reduction when the recession-inspired food stamp expansion program expired on Nov. 1.

NMPF Says No Production Control Equals Milk Surplus – The Senate reinvention of dairy price support programs – margin insurance coupled with production controls – continues to generate angst among Farm Bill conferees because the House version eliminated its production control language during floor consideration. The National Milk Producers Federation said if production controls aren’t part of the final package then the U.S. Department of Agriculture will “spend billions of dollars” on milk price supports due to overproduction. The production control language – opposed by dairy processors and some independent dairy producers – is necessary to signal farmers to cut production when margins narrow. NMPF says supply controls equal “market stabilization,” a move to “encourage a faster rebound in healthy margins and reducing costs.”

King Amendment Chances “Even” – Language in the House Farm Bill by Rep. Steve King (R-Iowa) to pre-empt state laws dictating farm animal production practices that interfere in interstate commerce has an “even” chance of being part of the final package, the Iowa lawmaker said. He told a forum in Washington, D.C., that the conference hasn’t taken up his language, but “if the Constitution and rationale thought prevail” it will stay. Critics – including animal rights groups, governors and several of his fellow conferees – contend his language, which is designed to stop states from blocking the sale of animal products not produced under state criteria, has a much broader impact on unrelated state laws and programs.

 

Immigration Reform Dead this Year

The House has walked away from its plans to begin floor consideration of a series of individual immigration reform bills before the end of 2013. House Speaker John Boehner (R-Ohio) said he will not let the House conference on the Senate-approved comprehensive immigration reform bill. This effectively means election year political wrangling will wait until 2014. “Frankly, I have no intention of ever going to conference with the Senate … bill, even if Republicans pass one of their own,” he told reporters. The Senate approved a comprehensive package of federal immigration law changes, many sections negotiated between affected stakeholders before the bill was introduced. The bill passed by a strong bipartisan majority. The House has opted to take up individual bills dealing with specific areas of federal immigration law, and the House Judiciary Committee has taken the lead on moving nearly 10 bills. Boehner says the House approach is the “common sense, step-by-step way” to achieve federal immigration reform.

 

Obama Taps Treasury’s Massad to be CFTC Chairman; Aggies Ask for Ag Commissioner

U.S. Treasury Assistant Secretary for Financial Stability Timothy Massad is President Obama’s nomination to be chairman of the Commodity Futures Trading Commission, replacing Gary Gensler, who will step down at the end of the year.

In a related development, 19 national agriculture stakeholders in CFTC operations, including the American Feed Industry Association and the National Grain and Feed Association, sent a letter to President Obama asking him to ensure future nominees to replace retiring commissioners will include at least one nominee who understands agricultural futures markets. The letter was inspired by the announced departure of ag expert Commissioner Bart Chilton “in the not too distant future.”

The Commodity Markets Oversight Coalition, in which AFIA and NGFA are active as market end-user members, said of the Massad nomination, “… we hope that Mr. Massad will be as committed as Chairman Gensler to positive reforms that will ensure more stable, accountable and transparent commodity derivative markets that free of fraud, manipulation and excessive speculation. Unfortunately, we have not previously had the opportunity to work with Mr. Massad. We hope to learn more about his views on these matters as the vetting process moves forward.”

Sen. Sherrod Brown (D-Ohio) said he’s concerned Massad may not be as “committed a regulator” as Gensler was, while several consumer groups are urging the Senate Agriculture Committee, which will consider the Massad nomination, to elicit commitments from him that he’ll force strong rules and regulations under the agency’s new Dodd-Frank Act authority. 

On the departure of Chilton and the need for an ag expert as a CFTC member, the national groups wrote, “Commissioner Chilton has an extensive agricultural background having worked on agricultural policy issues in the Senate and at the United States Department of Agriculture.” 

“His departure leaves the agricultural industry without a commissioner with background in our market sector. We believe it is critically important to nominate, and the Senate confirm, at least one of the vacant commissioner seats to an individual with a working understanding of agriculture futures markets and our industry,” the letter said.

With Chilton’s departure, there may be only two CFTC commissioners in place by year’s end and work could stall. Obama has nominated J. Christopher Giancarlo to fill one of the Republican slots, but the Senate ag panel has not acted on the nomination. 

 

FSMA Impact on Farmers Worrisome; FDA Extends Comment Period

A bipartisan Senate letter to Federal Drug Administration Commissioner Margaret Hamburg, Md., says the agency must be sensitive to the Food Safety Modernization Act’s impact on farmers and ranchers, and called on the agency to grant a longer comment period on the proposed rule related to produce production.

The four senators got some of what they’re asking for when FDA announced on Nov. 15 – the original deadline for produce proposed rule comments – that it was extending the comment period for the “Notice of Intent to Prepare an Environmental Impact Statement for the Proposed Rule: Standards for Growing, Harvesting, Packing and Holding of Produce for Human Consumption” until March 15, 2014.

The senators said they’re concerned with the ambiguity of the proposed regulation, and asked the agency to republish a second proposed rule after it has digested comments received on the first proposal. High costs of compliance and the potential loss of grower operations are also concerns, they wrote, and “the rules as currently proposed would result in a multitude of unintended consequences that would be severely detrimental to national, regional and local agriculture. A longer comment period can help obviate that impact,” they said.

 

FDA to hold Nov. 21 FSMA Feed Rule Public Meeting in Maryland

The first of three Federal Drug Administration public meetings on the recently proposed performance standards rule for animal feed and pet food required by the Food Safety Modernization Act will be held Nov. 21 at the Harvey W. Riley Federal Building in College Park, Md. Presentations are expected from Michael Taylor, FDA deputy commissioner for foods and veterinary medicine; Dr. Dan McChesney, FDA Center for Veterinary Medicine director of surveillance and compliance; Kim  Young, deputy director, CVM division of compliance; and Dr. Linda Tollefson, FDA associate commissioner, Office of Foods and Veterinary Medicine. The agency will take public comments and questions throughout the meeting. The meeting will be from 8:30 a.m. to 2:30 p.m. More information is available at www.fda.gov/fsma.

 

OSHA Sets New Program for Some Midwest Chemical Users

Kansas, Missouri and Nebraska are the targets of a new Occupation Safety and Health Administration “local emphasis program” designed to set up programmed health inspections for industries using hazardous chemicals. The program is focusing on companies that reported chemical releases to Environmental Protection Agency, and is intended to provide education for company management and to strengthen protections for employees, OSHA said. 

A local emphasis program is a focused enforcement strategy OSHA uses at the regional or area level. The chemicals reported to EPA as having been released include ammonia, barium, chromium and copper compounds, hydrochloric acid, hydrogen fluoride, lead and manganese compounds, N-hexane; styrene, sulfuric acid, and nitrate, vanadium and zinc compounds, according to a report in meatingplace.com, a meat industry e-newsletter.

 

FSA Advises Producers to Anticipate Payment Reductions Due to Mandated Sequester

U.S. Department of Agriculture’s Farm Service Agency is reminding farmers and ranchers who participate in FSA programs to plan accordingly in FY2014 for automatic spending reductions known as sequestration. The Budget Control Act of 2011 mandates that federal agencies implement automatic, annual reductions to discretionary and mandatory spending limits. For mandatory programs, the sequestration rate for FY2014 is 7.2 percent. Accordingly, FSA is implementing sequestration for the following programs: Dairy Indemnity Payment Program; Marketing Assistance Loans; Loan Deficiency Payments; Sugar Loans; Noninsured Crop Disaster Assistance Program; Tobacco Transition Payment Program; 2013 Direct and Counter-Cyclical Payments; 2013 Average Crop Revenue Election Program; 2011 and 2012 Supplemental Revenue Assistance Program; Storage, handling; and Economic Adjustment Assistance for Upland Cotton. Conservation Reserve Program payments are specifically exempt by statute from sequestration, thus these payments will not be reduced.

“These sequester percentages reflect current law estimates; however with the continuing budget uncertainty, Congress still may adjust the exact percentage reduction. This announcement is intended to help producers plan for the impact of sequestration cuts in FY2014,” said FSA Administrator Juan M. Garcia. “At this time, FSA is required to implement the sequester reductions. Due to the expiration of the Farm Bill on Sept. 30, FSA does not have the flexibility to cover these payment reductions in the same manner as in FY2013. FSA will provide notification as early as practicable on the specific payment reductions. ”

 

EPA Proposes to Cut 2014 RFS Mandate on All Renewable Fuels; AP Story on Enviro Impact Denounced

The Environmental Protection Agency finally released on Nov. 15 its long-awaited proposal on 2014 Renewable Fuels Standard biofuels blend mandates, and as hoped for by the petroleum industry and animal agriculture, the numbers reflect the first-ever reduction in the so-called “renewable volume obligation” (RVO) for corn ethanol blended with gasoline under the RFS. The proposal will be open for comments for 60 days, and can be found at http://www.epa.gov/.

The agency said it took the unprecedented action because of the so-called “E10 blend wall,” the point when the petroleum industry, facing reduced gasoline demand, would have to blend biofuels with gasoline at higher percentages than the currently legal 10 percent in order to meet its RFS obligation. “If gasoline demand continues to decline, as currently forecasted, continuing growth of ethanol will require greater use of higher ethanol blends such as E15 and E85,” the agency said in announcing the proposed 2014 RVO. 

“We’re thankful for EPA’s action; it’s long overdue,” said Joel Brandenberger, president of the National Turkey Federation, who – along with other ag groups, the petroleum, marine engine industries and chain restaurants – held a press briefing just after EPA’s announcement. 

“This is a step in the right direction. For too long the RFS has disrupted the feed supply and the pricing of feed, but now it’s time to urge Congress to develop a permanent fix for this problem.”  He said his industry’s production this year is off 2-5 percent from 2012, in large part because of RFS and competition in the corn market from ethanol producers.

Both sides of the biofuels RFS wars are considering litigation over the EPA proposal. The petroleum industry may sue the agency because the numbers will not be finalized until sometime in the first quarter of 2014, yet the industry is supposed to comply with the RFS immediately upon EPA final action, a point well into the new production year. The renewable fuels industry could litigate because it says EPA overstepped its authority in reducing the RVO numbers. 

“EPA does not have the statutory authority to lower the total requirement by more than the total reduction in advanced and cellulosic,” the Renewable Fuels Association said. “The specific conditions needed to effectuate a ‘general waiver’ – severe economic harm or inadequate domestic supply of renewable fuel – are not present.”

“By rewriting the statute and redefining the conditions upon which a waiver from the RFS can be granted, EPA is proposing to place the nation’s renewable energy policy in the hands of the oil companies,” RFA President Bob Dineen said. “That would be the death of innovation and evolution in our motor fuel markets, increasing consumer cost at the pump and the environmental cost of energy production. This proposal cannot stand.”

The total RFS proposal for all renewable fuels is 15.21 billion gallons, based on a range of options from 15-15.52 billion gallons. This compares with the statutory requirement of 18.15 billion gallons for the coming year. A breakdown of the fuels number reveals the conventional biofuel volumetric mandate – the category that includes corn ethanol – is proposed at 13 billion gallons, down from the statutory level of 14.4 billion gallons. 

The total for cellulosic ethanol was proposed at 17 million gallons based on a range of 7-30 million gallons. The RVO for advanced biofuels was proposed at 2.2 billion gallons, based on a studied range of 2-2.51 billion; for biomass-based diesel (plant and animal-based biodiesels), the total proposed was 1.28 billion gallons.

The EPA announcement was expected, with livestock and poultry producers, allied with the petroleum industry, hoping for a more drastic cut – to 2012 levels at least – for all biofuels, but especially for the corn ethanol. The renewable fuels industry has lobbied hard for the last several weeks hoping to blunt the drastic reduction in the 2014 blend mandate proposal, urging the White House to hold the blend rate at 2013 levels at least. 

Sen. Barbara Boxer (D-Calif.), chairwoman of the Environment and Public Works Committee, said earlier once EPA has proposed its 2014 RFS mandate, she’ll schedule a “big” hearing on the RFS for conventional (corn ethanol) and cellulosic fuels before the end of the congressional year. 

An AP story (http://bigstory.ap.org/topic/ethanol) ran nationally Nov. 12 is drawing immediate and strong rejection from corn growers, biofuels manufacturers and Secretary of Agriculture Tom Vilsack. 

The story’s headline tells the tale: “The secret, dirty cost of Obama’s green power push.” Vilsack called the story “unfortunate” and full of “lots of mistakes and half-truths.” He said his department tried to work with the AP reporters, but they were focused on land leaving the Conservation Reserve Program as evidence of acres going to corn and other feedstock crops for biofuels. “It’s not fair to the industry not to take into consideration all the innovation in the industry,” Vilsack said.

The Renewable Fuels Association issued a fact sheet refuting several points in the story, and Tom Buis, president of Growth Energy, an ethanol association, said, “This so-called ‘investigative report’ is nothing more than a one-sided piece with explicit misinformation used in attempts to discredit the renewable fuels industry. The single take-away from this piece is that the authors need to get a fact-checker; even the simplest facts were misconstrued. The absence of rudimentary fact checking is truly astounding.”

National Farmers Union President Roger Johnson said that for the reporters to blame ethanol production for the reduction in CRP acres is wrong. “What it neglects to mention is that Congress reduced the CRP by roughly 7 million acres in the 2008 Farm Bill and is poised to reduce acreage by another 7-8 million acres,” he said. The National Corn Growers Association said it is “discouraging that the Associated Press is following a political agenda.”

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