Washington Report for 12-16-13

By Steve Kopperud

Final Farm Bill Now Officially a January, 2014 Vote

Apparently a final farm bill deal was close but not close enough. House/Senate conferees were not able to get a compromise bill packaged and back to their respective chamber floors before the House recessed for the holidays.

The House had passed an extension of current programs but the Senate said the extension was unnecessary and would not take it up. Senate leaders do not support a Farm Bill extension because it could trigger automatic direct payments to grain, cotton and soybean farmers but they also cited U.S. Department of Agriculture assurances that commodity and other program changes would not take place during January if it’s assured a final farm bill is coming. During House floor debate on the spending bill, several Democrat members of the House ag panel also argued against the extension.

At issue is the impact of so-called “permanent law,” a collection of 1930s and 1940s federal laws forming the foundation of today’s omnibus farm program authority. Technically without an extension of current authority, several current programs will cease operation; some, like dairy price supports, will revert to formulas used in the 1950s, supporting milk prices at $38 per hundredweight, potentially hiking retail milk prices to $7 to $8 a gallon.

However, Senate Majority Leader Harry Reid (D-Nev.) and Senate Agriculture Committee Chair Debbie Stabenow (D-Mich.) don’t support an extension of current authority because, they say, it’s unnecessary. Stabenow asked the House to stay in session through Friday so a deal could be finalized. She talked with Secretary of Agriculture Tom Vilsack who assured her there will be no outrageous spikes in milk prices during January if only because of the time it would take the department to reinvent the old milk program. Rep. Frank Lucas (R-Okla.), chair of the House ag panel, said much the same thing, namely that USDA can withhold implementation of permanent law to allow a final 2014 Farm Bill to be finalized next month.

It’s now officially the 2014 Farm Bill. It was supposed to be the 2012 Farm Bill – and the Senate did its job – but House leadership said the votes weren’t there to pass its version, so they punted it into 2013. The Senate repassed its bill, the House fussed over food stamps, stripped out the nutrition title, passed a “farm bill,” passed a separate “nutrition bill,” remarried the bills on the House floor and finally the full chamber approved the measure. House leadership then delayed naming conferees, limiting the conference committee’s time to get a final farm bill to the president’s desk by the end of 2013.

Farm Bill Deal Awaits CBO Numbers

Reportedly 90 percent of the now 2014 Farm Bill “framework” is on paper with the holdouts continuing to be commodity title details, dairy production controls and food stamp cuts. Once the Congressional Budget Office confirms the cost and savings of the package and the U.S. Department of Agriculture gives it a final review, it will be ready for a final vote of the 41-member conference committee and will head to the floors of both chambers for the last vote.

Senate Agriculture Committee Chair Debbie Stabenow (D-Mich.) said the top four conferees met to continue reviewing changes agreed to thus far and any numbers CBO has generated. Reports indicate the early CBO estimates “look good,” according to one Senate staffer. House Agriculture Committee Chair Frank Lucas (R-Okla.) and committee ranking member Rep. Collin Peterson (D-Minn.) are optimistic and said they planned to return to Washington while the rest of the House was in recess to continue talks so Stabenow could get the framework drafted into legislative language.

On the commodity title, the debate has been between basing farmer payments on a planted acreage “base” or an historical acreage base. Reports indicate the final framework will give producers a choice of using their current base acres or an average of what’s been planted over the previous five years. Producers will also get a choice between the Senate’s shallow loss approach to risk management – the government pays what crop insurance doesn’t – and the House’s more generous version of an insurance-based approach with some crops enjoying versions of current price supports.

The controversy over food stamp cuts is more political than substantive. Cuts are coming; it’s simply a matter of how deeply will Congress cut the Supplemental Nutrition Assistance Program. The House’s figure is an unrealistic $40 billion over 10 years; the Senate’s number is an equally unrealistic $4 billion over a decade. Reports indicate the magic number is now $8 billion. Lucas and Stabenow have refused to confirm the number to reporters.

On dairy, the debate is over production controls. A new margin insurance program forged by Peterson and dairy cooperatives and included in the House Agriculture Committee bill included language that would require production limits to participate in the margin insurance program. That language was removed during floor consideration by an amendment offered by Rep. Bob Goodlatte (R-Va.). However, while refusing to give details, Peterson said the final bill will have “a dairy title that works” – indicating the production control language is back in the final bill – because the Goodlatte amendment “doesn’t work.”

House Passes FY2014 Budget Deal; USDA Spending Hit, Fees Set

In a move to take federal budgeting off the table for at least the next year, the House and Senate budget committees struck a controversial deal, and the House overwhelmingly approved the budget package just before it recessed for the holidays. The Senate is expected to take up the bill this week, but there’s growing opposition to the “grand bargain,” which ends about $64 billion in mandatory sequestration cuts. Critics contend it doesn’t cut spending enough, nor contribute to deficit reduction in a meaningful way.

The budget deal sets the ceiling on how much discretionary spending is available to the government. The House and Senate appropriations committees will not have a number that can be parceled out to the various appropriations accounts as it seeks to pass an omnibus FY2014 spending package.

Under the budget deal, some sequestration spending cuts would remain in place for two years, reducing mandatory program spending by about $28 billion, with most of the reduction not seen until 2022-23. The bill also creates new revenue streams through fees for government assistance.

The bill cuts about $600 million from the U.S. Department of Agriculture's mandatory conservation program by extending the sequestration cuts. The farm bill would cut conservation program spending by about $3 billion, and appropriators are looking to shave hundreds of millions of dollars off conservation spending.

The new budget creates a first-ever fee of up to $150 for farmers and ranchers who seek conservation technical assistance through USDA’s Natural Resources Conservation Service. Exemptions are provided for beginning, limited resource and “socially disadvantaged” farmers, as well as farmers needing assistance to qualify for compliance exemptions and those producers who need assistance with conservation plans to meet federal, state or local regulations.

The National Association of Conservation Districts said it opposes the fees, joining others who contend the new fee will discourage conservation compliance. NACD said the exemption or waiver process will also create more work for an already overburdened agency. The National Farmers Union said the fees are counterproductive and make conservation compliance more difficult.

FDA Releases Guidance on Company Antibiotics Claims, Proposed VFD Rewrite

The U.S. Food and Drug Administration's Center for Veterinary Medicine has released two documents as part of a government-industry “cooperative” effort to limit feed/water use of antibiotics on farm to “judicious” uses only. The first is a guidance document for animal drug companies giving them 90 days to drop feed efficiency/growth promotion label claims, and the second is a proposed rewrite of the existing Veterinary Feed Directive, a vet-issued order that will be required to use antibiotics in feed and water.

Animal health, feed and livestock and poultry production groups have been working with FDA on the two documents for more than two years and generally support the agency’s action. While several media reports indicated the FDA move was designed to restrict or curb on-farm antibiotics use because of criticism from activist groups, the changes proposed by FDA will likely have little impact on overall use.

“The American Feed Industry Association is very supportive of FDA’s proposed VFD rule,” said Richard Sellers, senior vice president for legislative and regulatory affairs. “(FDA) proposes to ease the administrative burden for feed mills accepting VFDs. However, we’re concerned about the lack of veterinarians trained to complete VFDs, as well as the lack of large animal veterinarians in general. There are some 15 or so chemical entities approved as animal drugs and over 120 different uses that will be affected by changes FDA is proposing. We are working closely with our customer organizations and our membership to review and implement these changes in a timely manner.”

The goal of the FDA program is to try and reduce any contribution on-farm antibiotic use may make to bacterial resistance in humans. The use of antimicrobials to fight bacteria triggers a mutation in those target germs, and over time they become resistant to the drugs. This can lead to complications in treating human and animal diseases with antibiotics.

Under the drug company guidance, the current label claim for feed efficiency will disappear. Companies that have antibiotics in the marketplace for which the only claim is feed efficiency now have three months to voluntarily tell FDA they’re going to drop those label claims. This limits antibiotic use to treatment, control and prevention label claims. The prevention claim is being rewritten.

Those label indications will move under veterinary oversight through the use of the VFD. The proposed rule includes several important rewrites of the VFD administrative process to make it easier, require less paperwork and ensure farmers and feed companies are on the same page with the licensed veterinarian when it comes to mixing antibiotics in feeds. Comments on the VFD proposal are due by mid-March, FDA said.

Senate RFS Hearing Yields Little New Information; Ethanol RFS Repeal Bill Introduced

A recent hearing on whether the Renewable Fuel Standard is working as Congress intended or is simply creating arbitrary markets for biofuels yielded little if any new information on the issue, as biofuels manufacturers praised the system and petroleum companies condemned it.

In a related move, Sens. Dianne Feinstein (D-Calif.) and Tom Coburn (R-Okla.) introduced a bill to repeal the corn ethanol RFS. They were joined by a bipartisan group of eight senators. Feinstein and Coburn led the successful repeal of the ethanol blenders’ tax credit and import protections three years ago.

In opening statements, Senate Environment & Public Works Committee Chair Barbara Boxer (D-Calif.) praised the RFS overall, saying it contributes directly to a reduction in greenhouse gas emissions and lowers U.S. dependence on foreign oil. Her ranking member, Sen. David Vitter (R-La.) said the RFS is flawed, only benefits a small portion of the biofuels industry and has increased food prices.

EPA explained its recent proposal to lower the FY2014 RFS, citing the “blend wall” challenge. The blend wall is that point at which consumer demand for gasoline has dropped to the point petroleum refiners must blend biofuels with gas at higher rates to meet their RFS obligations. As the agency said at the hearing, “companies would be forced to blend at rates cars and trucks can’t use.”

Retired Gen. Wesley Clark, co-chair of Growth Energy’s board of directors, said the RFS contributes directly to a 33 percent reduction in oil imports and told the committee the industry now needs infrastructure investment. He also said repeal or significant changes to the RFS would curtail investment in the biofuels industry. He was countered by James Drevna, president of the American Fuel & Petrochemical Manufacturers, who called for repeal of the RFS, saying the annually escalating RFS contributes to fuel shortages and engine damage at higher than 10 percent blend rates. The Environmental Working Group broadened the debate, saying the current RFS needs to be “fixed” but that Congress and industry should be concentrating on second generation biofuels that don’t rely on food crops as a feedstock.

The Feinstein-Coburn bill, praised by livestock and poultry producers and the oil companies, would repeal outright the RFS for corn ethanol, while maintaining the RFS for cellulosic ethanol and “advanced biofuels” – biodiesel, renewable diesel and some non-food crop-based ethanols – so that there is no longer a food vs. fuel debate surrounding ethanol. Feinstein said she introduced the bill because up to 44 percent of the nation’s corn crop is “diverted” to ethanol production. She said she supports “low-carbon advanced biofuels, including biodiesel, cellulosic ethanol and other revolutionary fuels, but the corn mandate is simply bad policy.”

Missouri AG Says He’ll Sue California over Egg Rules

California has a law that says eggs raised in production systems not in compliance with California regulations on hen welfare can’t be sold in California. The attorney general for Missouri says his office is getting ready to sue the state of California because that regulation violates the federal Commerce Clause regulating trade among and between states.

Missouri Attorney General Chris Koster said his office plans to file the action early in 2014, explaining, “I don’t believe voters in California should be able to set agricultural policy in Missouri.” Koster announced the action during a speech to the annual meeting of the Missouri Farm Bureau. Koster said the California law goes beyond hen welfare and is designed to “advantage” California egg producers. If restricted to true welfare, he said, Missouri egg farmers should be able to sell their eggs in California at lower prices.

The California regulation was spawned by voter approval of Prop 2 in 2010, a ballot initiative requiring egg producers in the state to provide – depending on to whom you speak – more room, no cages or open production systems for egg laying hens. The state legislature passed the bill mandating the egg “import” restriction the following year.

The law restricting the sale of eggs is the target of the so-called “King amendment” to the farm bill that would allow the federal government to preempt such state laws. Groups such as the Humane Society of the United States, the driving force behind Prop 2, say the King language is overbroad and would overturn 170-plus state welfare and environmental laws.

No Pacific Rim Trade Deal in 2013

Despite optimism last fall by the 12 nations negotiating the Trans-Pacific Partnership trade deal that a final treaty would be in hand by the new year, it’s apparent now it will be well into the first quarter of 2014 before a deal is done. Ag products and intellectual property remain hurdles for the trade negotiators to overcome.

Japan slowed down the talks’ progress when, despite assurances it would be cooperative in the negotiations, it brought forward last-minute demands on automobile imports, insurance and non-tariff issues surrounding agriculture imports.

Critics of the trade deal in Washington, D.C., contend it’s just another mechanism for U.S. companies to shift jobs overseas. Generally, agriculture supports the deal because it will force open Asian markets now closed to U.S. farmers, including Singapore. Also in question is whether Congress will give President Obama “fast track” treaty negotiating authority that would limit congressional oversight to a straight up or down vote on any deal.

USDA Cuts Corn, Soybean Supply Estimates

U.S. corn stocks on hand going into 2014 harvest will total about 1.8 billion bushels, down 5 percent from a month ago, the U.S. Department of Agriculture said in its monthly supply/demand report. Increased ethanol use and a jump in exports are responsible for the decrease, the department said. Ending stocks, however, will still be more than twice last year’s total based on the predicted record 2013 corn crop of nearly 14 billion bushels. Prices at the farm will average about $4.40 a bushel, down from $6.89 a bushel last year.

Soybean supplies before harvesting begins in 2014 were dropped 20 million bushels from the November forecast to 150 million this month. Exports for the marketing year were set at 1.475 billion bushels, up from 1.45 billion last month and 1.32 billion last year. The total crop is estimated at 3.258 billion bushels for 2013.