Washington Report for 4-7-14

By Steve Kopperud

Vilsack Grilled by House Ag Committee; Releases Farm Bill Progress Report

Telling the House Agriculture Committee this week his department has made “important progress on every title of the Farm Bill,” Secretary of Agriculture Tom Vilsack’s department released its “progress on implementation” report to back up the department head.

House ag panel members quizzed Vilsack on when he expects to publish the new definition of “actively engaged” farmers, key to payment limitations. He said the process was difficult, but reiterated earlier statements the proposed definition would be published, USDA will take public comment and the definition finalized by the end of the year.

Here are some highlights of the report, which can be found at http://www.usda.gov/ by clicking the “Farm Bill” icon.

In the commodity title, Vilsack said USDA will publish the final rule implementing the permanent livestock disaster assistance programs and begin sign-up by April 15; country and regional loan rates were announced March 28, and USDA has published notices on the extension of the Marketing Assistance Loan program; Milk Income Loss Contract (MILC); Dairy Indemnity Payment Program; non-insured Crop “Disaster Assistance Program”, and the sugar program.  The Dairy Forward Pricing Program was also re-established.

Under the conservation title, USDA is taking applications for the Conservation Stewardship Program (CSP) and the Environmental Quality Incentives Program (EQIP).  However, Vilsack said he’s not made a decision on whether he will reopen the Conservation Reserve Program (CRP) for farmer sign-up given the new Farm Bill lowered the cap on enrolled acres from 32 million to 27.5 million this year, 26 million in 2015, 25 million acres in 2016, and 24 million through 2018. He said the lower caps means USDA must be pickier about acreage allowed in to the CRP.

USDA will announce, under its trade title authority, new funding levels for the Market Access Program (MAP) and the Foreign Market Develop (FMD) program next week.

The crop insurance title will produce this month new documents to revise premium rates for catastrophic coverage (CAT) based upon “the average historical ‘loss ratio’” plus a “reasonable reserve.” However, even as USDA tries to get its arms around the myriad changes in the federal crop insurance program, Sen. Jeanne Shaheen (D-Vt.) and Tom Coburn (R-Okla.) introduced legislation to limit crop insurance premium subsidies to farmers at a maximum $70,000 per farm. The two Senators said they introduced the bill because the Farm Bill is failing to produce the savings promised.  They pointed to a Government Accountability Office (GAO) report that says their bill would only affect 1.3 percent of crop insurance policy holders.

Detailed Comments on FSMA ‘Feed Rule’ Filed by AFIA, NGFA

“Highly prescriptive” comments on FDA’s proposed rule on how the feed and pet food industries will comply with the new Food Safety Modernization Act (FSMA) were filed this week by the American Feed Industry Assn. (AFIA) and the National Grain & Feed Assn. (NGFA). Nearly 20 state feed and grain organizations signed on to the formal filings, which totaled over 100 pages each.

Both groups focused on FSMA statutory language instructing FDA to ensure the rules on how the feed industry must comply with new risk-identification and mitigation requirements are significantly different than the human food rule.

“AFIA is concerned that FDA has failed to clearly delineate the human food rules from the animal food rules as Congress intended,” the feed group’s comments said.  AFIA went on to say while there may two different rules, both “are philosophically driven by the human food approach.”

NGFA took the agency to task for repealing the word “contamination” throughout the rule. NGFA said FDA’s regulations can’t “rightfully focus on preventing ‘contamination,’” and recommended the agency replace it with the world “adulteration,” which has legal meaning within FDA’s authority.

FSMA calls for Current Good Manufacturing Practices (CGMPs), which currently only exist for medicated feed mills.  AFIA, pointing out the proposed feed rule bases new CGMPs on the human food rule equivalent, wants FDA to go back and rewrite its animal food requirements to be “more practical and less prescriptive,” allowing members to be more innovative and give companies which have never operated under CGMPs a better understanding of the system.

NGFA pointed out the feed rule contains what looks a lot like a formal prescribed Hazard Analysis Critical Control Points (HACCP) program requirement, something Congress explicitly rejected.  “While the NGFA supports the use of prudent, appropriate and risk-based practices to assure the safety of animal feed and pet food, we strongly believe FDA’s proposed preventive controls regulation is clearly not aligned with the intent of Congress,” the group said.

Both groups called on FDA to adjust the compliance dates so CGMPs can be phased in, and preventive controls can follow.

Beer, Liquor Makers want FSMA Exemption over DDGs

The “centuries-old” practice by beer makers and liquor distillers of giving away or selling at a very low price the “spent grains” from their manufacturing process should be exempted from the animal feed rule proposed by FDA under the Food Safety Modernization Act (FSMA).  The alcohol refiners said this week that by giving away or selling cheaply the spent grains, they’re helping farmers by providing the byproduct as animal feed. The product does not present a food safety risk, they said.

The beer and liquor industries put a full court lobbying press on Congress, seeking support for the exemption demand. They contend FDA is trying to get at ethanol refiners when it includes dried distillers grains (DDGs) in the FSMA proposed rule because some ethanol makers use antibiotics to assist the distilling process.

Commissioner Margaret Hamburg, M.D., was hit full bore by members of the Senate Appropriations Committee subcommittee on ag/FDA during her testimony this week.  She said she was unaware of the spent grains practice and would go back to the agency and discuss it with the Center for Veterinary Medicine (CVM) which regulates the feed industry. She added the feed rule is under “evaluation” and a publication later this spring of a revised rule is planned.

Senate Finance OKs Tax Extenders; Ag Committee to hold Advanced Fuels Hearing

Over 55 “temporary” federal tax credits and deductions benefitting industry and individuals broadly and which expired at the end of last year were re-extended this week by the Senate Finance Committee. These “extenders” have a history of one-year extensions, but the committee opted to give most of them a two-year renewal, setting them up as part of the next Congress’ battle over comprehensive federal tax reform.

The bill also includes a “deadwood” provision which eliminated several obsolete or inactive tax programs.  There’s no word on when the bill will be on the Senate floor.

Included in the package are several tax credits designed to support the growing biofuels industry.  Extended for two years are the $1-per-gallon biodiesel and renewable diesel blenders’ tax credits; “second generation” tax breaks for process and infrastructure for cellulosic ethanol producers, and the alternative fuel mixture tax credit, which give companies a 50-cent-a-gallon excise tax liability break for burning their own byproducts in lieu of diesel.

In a related development, Sen. Debbie Stabenow (D-Mich.), chairwoman of the Senate Agriculture Committee, announced her panel will an April 8 hearing on advanced biofuels, entitled “Advanced Biofuels: Creating Jobs and Lower Prices at the Pump.” Witnesses scheduled include Dupont Industrial Biosciences; the Advanced Ethanol Council; Strategic Biomass Solutions, and Airlines for America.

Finance Committee Chair Ron Wyden (D-Ore.) said this bill “was the last tax extenders bill we’ll take up, at least as long as I sit in this chair.” He said passing the extenders package “puts an expiration date on the status quo (and) builds a bridge to tax reform.” His counterpart in the House, Rep. Dave Camp (R-Mich.), plans to hold hearings on his extenders package next week. Camp’s plan is try and make the extenders permanent, but his goal is the same – comprehensive tax reform.

The biggest battle during the markup came when supporters of wind energy tax breaks tried to get wind and solar power included in the production tax credit (PTC) and ultimately failed. Sen. Patrick Toomey (R-Pa.) offered an amendment to kill the PTC for wind and solar and eliminating other tax credits for various energy products, including biofuels. He argued – as several others on both sides of the Hill have argued – the package unfairly gives some energy producers assistance while ignoring others. Sen. Chuck Grassley (R-Iowa) called the Toomey amendment “intellectually dishonest” because the “100-year-old oil and gas industry continues to benefit from (tax) preferences that benefit only their industry.”

Ag groups whose members are involved in biofuels production, including the American Soybean Assn. (ASA) and the National Renderers Assn. (NRA), thanked Wyden and committee ranking member Sen. Orrin Hatch (R-Utah) for their bipartisan support for the biofuels industry based on their inclusion of the energy extenders.

EPA “Waters of the U.S.” Proposal Targeted by AFBF

EPA’s proposed expansion of authority to regulate water under the Clean Water Act (CWA) definition of “waters of the U.S.,” is running into the predictable push-back from agriculture, with the American Farm Bureau Federation (AFBF) this week announcing it will fight the rule going final.

In a related development, EPA announced this week its Science Advisory Board (SAB) will hold two teleconferences – April 28 and May 2 – on the proposed authority expansion. The SAB, made up of independent third party experts, will discuss and take questions on the draft advisory report – and the underlying science – provided to EPA on the proposed rule. The likely reason the SAB is holding the calls is because critics of the proposed jurisdiction rule contend the SAB had not completed the evaluation of all relevant science before EPA published its proposal. Details on how to participate in these calls can be found at http://www.epa.gov/.

AFBF said its analysis of the EPA proposal found the rule “dismaying,” and if finalized would “be an end run around the limits set by Congress and the Supreme Court.” AFBF President Bob Stallman called the rulemaking a “serious threat to farmers, ranchers and other landowners.”

“Under EPA’s proposed new rule, waters – even ditches – are regulated even if they are miles from the nearest ‘navigable’ waters. Indeed, so-called ‘waters’ are regulated even if they aren’t wet most of the time,” Stallman said in a statement.

Secretary of Agriculture Tom Vilsack, appearing before the House Agriculture Committee this week, was grilled on the EPA action. Rep. David Scott (D-Ga.) questioned the lack of certainty farmers have in running their farms, not knowing what eventually may be a “navigable water” under EPA authority. Vilsack repeated last week’s talking points when EPA published its proposal, saying the agency reaffirms several permitting exemptions for agriculture.

CME Wins Grain Settlement Case

The CME Group’s rule that includes factoring in electronic trading when settling end-of-day grain futures contracts can stand, according to a judge on the Cook County Circuit Court in Illinois. Some traders, mostly those who trade in open-outcry pits at the Chicago Board of Trade (CBOT) – owned by CME Group – challenged the rule to force CME to revise end-of-day calculation of settlement prices on grain contracts. Before CME included electronic trading in its calculations, the contract price was settled based on trading in the various commodity pits. Electronic trading, open-outcry traders allege, has cost them business and made the pits “largely irrelevant.”

USDA Will Speed Up GM Approvals

USDA’s Animal & Plant Health Inspection Service (APHIS) will reduce the backlog of genetically modified plant traits awaiting deregulation at the agency, the department said this week.

Ed Avalos, undersecretary for marketing and regulatory programs, told the House ag/FDA appropriations subcommittee he’s working to reduce the backlog, but does not want to move too fast. Kevin Shea, head of APHIS supported his boss, saying APHIS is committed to reducing approval times, but “we don’t want to deregulate too soon and then get sued. We want to be careful. We need to get this right.”

APHIS has cut the backlog from 23 pending applications to 16 by changing its petition and approval process, Shea said, reducing the review time from 36 to 22 months per application.

Corn Acres at Five-Year Low, Stock Up; Soybean Acres Record High, Stocks Down

USDA reported this week acreage planted to corn this season sits at 91.7 million acres, down 4 percentfrom last year. If realized, this acreage represents a five-year low, but the fifth largest area planted to corn since 1944.

Soybeans, on the other hand, have been planted on 81.5 million acres, a record and 6 percent higher than last year. With the exception of Missouri and Oklahoma, all states reported higher soybean acreage.

Corn stocks in all positions as of March 1, were set by the department at 7.01 billion bushels, up a whopping 30 percent from last year’s March 1 report. Soybeans in all positions were reported at 992 million bushels, down 1 percent from last year on March 1.