Washington Report for 2-3-14

By Steve Kopperud

Farm bill passed easily by House, Senate to vote now

It took nearly three years to get to enactment, but the House easily passed the five-year 2014 Farm Bill on a 251-166 vote. After the Senate vote, the Farm Bill conference report will be ready for President Obama’s signature later this week. Obama said he’ll sign it.

The conference report is about 960 pages, carries a price tag just under $1 trillion and saves $16.6 billion over a decade, says the Congressional Budget Office. If the sequester savings are added in, the grand total saved is about $23 billion over 10 years.

The Senate set today for the first procedural vote to clear the way for the final vote tomorrow or Wednesday. So far, two serious opponents to the hard-fought package are Sens. Pat Roberts (R-Kan.), former ranking member of the Senate Agriculture Committee, and Chuck Grassley (R-Iowa), a long-term member of the panel. Roberts said the bill takes farm policy “in the wrong direction,” a reference to his disappointment both House and Senate negotiators didn’t embrace the original farm payment reforms in both bills. Grassley finds the bill deficient in several areas. “There are few things this bill does that are good,” he said, frustrated he didn't get all of his payment limitation language in the bill.

In the end, House and Senate conferees refused to repeal mandatory country-of-origin (mCOOL) for meat and meat products, a move that drew strong 11^th hour opposition to the entire bill from the nation’s livestock and poultry producers, as well as the meat processing industry. Both House Agriculture Committee Chair Frank Lucas (R-Okla.) and Senate ag panel chair Sen. Debbie Stabenow (D-Mich.) said the conference committee votes and support on the floor weren’t there. Stabenow said the World Trade Organization is expected to rule on the Canada/Mexico complaint against U.S. mCOOL, and Congress will act at that time if necessary. Lucas added the producer/processor opposition came to the table too late.

Conferees dumped language by Rep. Steve King (R-Iowa) authorizing federal ag production standards to preempt state laws, much to the delight of activist groups. Gone also is language requiring the U.S. Department of Agriculture to dump Grain Inspection Packers & Stockyards Administration rulemakings on new regulations on how the poultry industry contracts with private growers.

How the 2014 Farm Bill commodity title works

For federal program crops, the headline is repeal of direct payments, limiting farmers to government support based on risk management options when suffering “significant losses.” Repealed are direct payments, counter-cyclical payments, the Average Crop Revenue Election program and the Supplemental Revenue Assistance Payments program.

Farmers get a choice of House and Senate approaches to income protection through risk management. Once chosen, farmers stay with their decision for the life of the five-year life of the farm bill. If farmers miss the not-yet-announced sign up deadline, they are frozen out of all 2014 payments and limited to the Price Loss Coverage option through the end of the farm bill term or 2018.

A condition of participation is compliance with conservation and wetlands programs requirements. Producers eligible for marketing loans remain at the same repayment terms, except for cotton farmers. An eligible producer chooses between the following options:

• The PLC option is designed to handle heavy losses over multiple years and works in tandem with year-to-year federal crop insurance coverage. The program uses updated yield figures and an index of cost-of-production pricing to set a price-based risk basis for insurance. This option allows farmers to choose a new crop insurance product – the Supplemental Coverage Option – beginning with 2015 crops. SCO covers a portion of the insured farmer’s deductible. Payments cover a maximum of 85 percent of base acres.

• Agriculture Risk Coverage is a more traditional insurance approach. It's what’s known as a “shallow loss” program, i.e. the government pays on losses that crop insurance doesn’t cover. ARC says a producer has to suffer at least a 14 percent loss based on historic average revenues or the resulting “reference price.” Farmers can then pick either individual farm or a county-wide loss base and receive payments on 85 percent of base acres if the country option is taken, and 65 percent if they choose the farm option, according to an analysis released this week by Informa Economics. Payments are set at a maximum 10 percent of historic income to top up crop insurance payments.

Farmers can keep their current base acre calculation for loss determination. Those acres are based on actual crops being grown on the farm, i.e. historic base acres decoupled from production. However, under either ARC or PLC, if producers go with the county option, they can choose which program covers which crops.

The overall payment limitation is set at $125,000/individual or $250,000/couple. This is the total in federal cash from the above programs a farmer can receive but does not include federal crop insurance payments. A new individual/entity cap prohibits producers with an adjusted gross income of $900,000 a year or more from receiving any payment from the U.S. Department of Agriculture except privately contracted crop insurance. A new definition of an “actively engaged” non-crop producer eligible for other program payments will be written by USDA.

For dairy, current “outdated and ineffective” dairy price support programs – Dairy Product Price Support Program, the Milk Income Loss Contract program, the Dairy Export Incentive Program and the Federal Milk Marketing Order Review Commission – are repealed, replaced by a Margin Protection Program. This is a risk insurance product built on a farmer’s individual feed/cost-of-production calculation. The bill contains no milk production controls.

Under MPP, farmers pay a $100 annual registration fee to buy insurance covering between 25 percent to 90 percent of their formally established production history and buy coverage in 50-cent increments between $4 and $8. This allows a small producer to set production history at the highest production year during 2011, 2012 or 2013. USDA is authorized to adjust the indemnity payment based on production over the set base – set at 4 million pounds a year – and over a certain production level, payments are ended. This is to discourage overproduction of milk without formally ordering supply controls. There’s a so-called “donation” program for milk that triggers when a farm’s margins are below $4 for two consecutive months. USDA could then buy dairy products for up to three months or until margins go back over $4. USDA could buy any dairy product for which “there is an immediate use and need” and must distribute/donate the purchases and cannot store them. USDA cannot resell products it buys.

Reauthorized are the Dairy Forward Pricing Program, the Dairy Indemnity Program and the Dairy Promotion & Research Program, aka, “the checkoff.”

House GOP releases immigration reform ‘standards’; ‘legal status’ versus citizenship

Keenly aware immigrant voters abandoned most Republican candidates in the 2012 election, House Speaker John Boehner (R-Ohio) last week had House Republicans hear the six “standards” for House action on immigration reform legislation. These standards, he said, are “as far as we’re willing to go.”

The draft one-page “standards” outline – referred in the document as “guiding principles” – was leaked to most news outlets before the meeting ended. Its preamble begins with a list of what’s wrong with the current federal immigration system, pledges to work in a bipartisan manner, but then restates why a “single, massive piece of legislation that few have read and even fewer understand” – as passed by the Senate last year – is not the way to proceed. The House GOP restates its focus on “a step-by-step, common sense approach that starts with securing our country’s borders, enforcing our laws and implementing robust enforcement measures.”

“There will be no special path to citizenship for those who broke our nation’s immigration laws,” and no action on legal status occurs until specific border enforcement targets are met, according to the standards document. However, House Minority Leader Nancy Pelosi (D-Calif.), after praising the Republican effort as “acting in good faith,” said a pathway to citizenship “is an all or nothing position.”

As to timing of political action this year, it is up in the air. House Republican conservative members do not think the party should move immigration reform this year; other more moderate Republicans are skeptical the House can get its legislation completed, passed, conferenced with the Senate’s 1,200-page bill and through Congress before it adjourns in October, just before the November election.

The six principles are as follows: 1. Securing the border and verifying enforcement with “zero tolerance” for those who enter the United States illegally or overstay their visas; 2. implement a “fully functioning” entry-exist visa tracking system, one that is biometric to prevent fraud; 3. a “workable” electronic employment verification system; 4. reforming the legal employment-based immigration system – including temporary workers – by having visa and green card systems reflect workplace needs and let talented individuals stay in the United States; 5. the temporary visa system, with special emphasis on agricultural needs, must reflect economic needs and national security; 6. the children of illegal immigrants should be treated differently if born in the United States or if they entered as minors, and how to handle “individuals living outside the law.”

On how to handle those undocumented workers, the Republican document says they need to come forward and “get right with the law.”

The Republican standards discuss how undocumented workers should be able to “live legally and without fear in the U.S.” Eligibility for this legal status includes admitting to breaking the law, passing a “rigorous” background check, paying “significant” fines and back taxes, learning to speak English, studying American civics and demonstrating they’re able to support themselves and their families without government benefits. Gang members, sex offenders and other “criminal aliens” would not be eligible.

Dueling congressional letters on RFS continue; industry asks for legislative fix

The Environmental Protection Agency continues to be inundated with congressional letters either praising or condemning the agency for effectively freezing the 2014 Renewable Fuel Standard for biofuels.

Public comments on the EPA's RFS proposal were due last week. EPA proposes cutting the RFS from 18.5 billion collective gallons to 15.21 billion gallons. Of that, the corn ethanol RFS would be dropped from 14.4 billion gallons to just over 13 billion, much less than called for in the 2007 law creating the RFS.

In a related development, 30 industry groups led by the National Council of Chair Restaurants wrote to the chair and ranking member of the House Energy & Commerce Committee asking for a stronger push to reform the RFS.

The latest congressional action is a letter from 13 House members supporting the food/ag/petroleum industry position that the lower RFS proposal is a good first step and advanced biofuels should be refined from non-food feedstocks only. A separate communication from 10 senators agreed with their House colleagues, while 30 senators signed on to a letter telling EPA Administrator Gina McCarthy the RFS must be increased, not reduced.

On Jan. 28, four senators – Sens. Ben Cardin (D-Md.), Susan Collins (R-Maine), Dianne Feinstein (D-Calif.) and Bill Nelson (D-Fla.) – told McCarthy she needs to rethink her RFS reduction proposal to ensure continued growth and investment in the broad biofuels sector. “Maintaining a robust target for advanced biofuels will help protect a collective $14-billion investment in the development of advanced and cellulosic biofuels,” they wrote.

The NCCR letter to Reps. Fred Upton (R-Mich.) and Henry Waxman (D-Calif.) said the proposed RFS action is only a 6 percent reduction in the corn ethanol RFS, insufficient to lower ethanol’s demand on the available U.S. corn supply, estimated by the U.S. Department of Agriculture in 2013 at more than 40 percent of corn production, calling it a “perverse incentive” to overplant corn.

NRDC: Some feed antibiotic use 'high risk' to humans, FDA says no way

The Food and Drug Administration's ongoing cooperative effort with industry to curb use of human-use antibiotics in livestock and poultry feed doesn’t meet agency safety standards, the Natural Resources Defense Council said. But the FDA said it’s confident that’s not the case.

NRDC, based on FDA internal information obtained under the Freedom of Information Act, says none of the 30 antibiotic products reviewed by the agency in 2001-2010 would be approved for nontherapeutic use in feed if submitted under today’s FDA safety guidelines. Of those 30 drugs, 18 were called “high risk” for exposing humans to antibiotic resistant bacteria, and 12 were approved without sufficient safety data from drug sponsors. Twenty-six would have failed 1973 FDA safety standards, the activist group said.

FDA said it began its review of older penicillin and tetracycline drugs in 2001 and sent letters to drug companies asking for additional safety data, part of an overall effort to assess available information on antimicrobial resistance associated with the feed use of the two human-use antibiotics.

This review, and additional information it did not disclose, was the reason FDA opted to follow a broader regulatory strategy on on-farm antibiotic use. The current FDA strategy – removal of growth promotion/feed efficiency label approvals and increased veterinary involvement through an expanded use of the Veterinary Feed Directive – is the “most efficient and effective way to change the use of these products in animal agriculture.” FDA added that nothing in its current effort precludes regulatory action in the future.

Reid, House Democrats are roadblock to Obama trade authority push

When it comes to free trade agreements and the president’s authority to negotiate deals without fear of congressional rewrite, President Obama enjoys growing Republican support, while his biggest roadblock is Senate Majority Leader Harry Reid (D-Nev.). This means, insiders say, no trade promotion authority (TPA) for Obama this year.

The president pushed hard for expanding U.S. exports as a revenue source during his State of the Union speech last week and called specifically for TPA. TPA allows the White House to negotiate trade pacts, but Congress can only approve or disapprove the final product – no amendments allowed. TPA expired in 2007.

Reid is a long-time skeptic of bilateral and free trade agreements, a position he’s made abundantly clear to the White House and to Sen. Max Baucus (D-Mont.), author of a TPA bill and chair of the Senate Finance Committee, the panel that must formally review all treaties. Reid said he’s supported by several Senate colleagues, 12 of whom wrote to him opposing TPA for Obama and calling on Reid to push for greater congressional oversight of all trade treaties.

In the House, Rep. Rosa DeLauro (D-Conn.) said that while she supports most of the president's proposals, the TPA and the Trans-Pacific Partnership trade pact under discussion “are non-starters.” Rep. Keith Ellison (D-Minn.) agreed, saying he’s looking for bipartisan House and Senate opposition to the TPA bill introduced by House Ways & Means Committee Chair Dave Camp (R-Mich.), Baucus and his committee ranking member Sen. Orrin Hatch (R-Utah).

AFBF appeals Chesapeake Bay EPA/TMDL ruling

The American Farm Bureau Federation is seeking reversal of a federal court ruling upholding the Environmental Protection Agency's total maximum daily load (TMDL) for the Chesapeake Bay watershed.

AFBF is asking the U.S. Court of Appeals for the Third District to decide whether EPA exceeded its legal authority under the Clean Water Act by mandating how nitrogen, phosphorus and sediment are to be allocated among farms, construction sites, homes and towns in the 64,000-square-mile watershed.

AFBF says the authority cited by EPA is specifically reserved by law to state and local authorities. Such decisions are unique and this is why Congress withheld the authority from EPA.

The goal of this litigation, says AFBF, is to maintain the balance of power under the CWA that leaves states “in charge of the land and water resources within their borders.” The action is being watched closely as it sets precedent for how EPA may act in other major watersheds around the country.

EPA seeks comments on pesticide registration fees paperwork

The Environmental Protection Agency said it’s looking for more public comment on the paperwork and “regulatory burden” associated with a proposed rule on annual registration maintenance fees collected under its Federal Insecticide, Fungicide and Rodenticide Act authority. The law was amended in 2004 to create the fee system for applications on pesticide registrations, amended registrations and tolerance actions. It also wants to know how the system and paperwork affect the ability to seek a waiver from the system. The notice was published in the Jan. 29 Federal Register and the notice can be found at www.epa.gov.

FDA publishes clean truck/rail rule on food, feed; all major FSMA rules now published

A “clean truck” law enacted in 1990, for which rules were never written, was rolled into the Food Safety Modernization Act, updated to include rail transport, with the Food and Drug Administration publishing the implementing proposed rule Jan. 31. The publication completes FDA’s rollout of the seven major proposed FSMA implementation regulations.

The proposed rule covers truck and rail transport of both livestock, poultry and pet foods/ingredients, as well as human foods and ingredients. It covers certain shippers and receivers and carriers that transport food within the United States. That transport is covered whether or not the food or ingredients are offered in or enter interstate commerce, meaning even if a shipper moves covered food articles from cross-country, county to county or just a few blocks away, the transport must meet the new sanitation standards. On the other end of the transport spectrum, the proposed rule also applies to exporters who ship food or ingredients to the United States in cargo containers by ship or airplane and arrange for the transfer of that food to rail or motor carrier, if the food is consumed or distributed in the United States.

The rule contemplates requirements for vehicles and transport equipment, including proposing new requirements for the design and maintenance of vehicles/transport equipment to ensure “it does not cause the food … it transports to become contaminated”; measures to be taken to ensure food is not contaminated, including temperature controls and separation of food from non-food goods in the same load; sharing/exchanging information on prior cargoes, cleaning of equipment and temperature controls among the shipper, carrier and receiver to ensure the vehicles that have previously hauled milk will not introduce allergens into non-dairy foods through cross-contact; training of personnel in sanitary transportation practices and documentation of the training; maintenance of written procedures and records by carriers and shippers on equipment cleaning, prior cargoes and temperature control, and how and when FDA will waive the requirements if it decides the waiver won’t create a situation that could lead to food contamination.

Exempt from the proposed clean truck/rail rule are shippers, receivers or carriers with less than $500,000 in total annual sales; raw ag commodity transport done by a farm; food transshipped through the United States to another country; food imported for future export, but not distributed or consumed in the United States; transport of shelf-stable food that is completely enclosed in a container; transport of compressed food gases, and transport of live food animals.

Comments are due by May 31. Following publication of a final rule, small businesses – “businesses other than motor carriers who are not also shippers and/or receivers employing fewer than 500 persons and motor carriers with less than $25.5 million in annual receipts” – will have two years to comply; all other businesses not defined as “small” or not exempted from the rule, would have one year to comply.