It looked like all was good heading into last week’s creation of a new framework on what the direct farm payment portions of the budget would look like going into the 2012 Farm Bill, but the effort ground to a halt again this week over regional differences, a new wave of “save-the-program” voices, and growing criticism the process is creating a “secret farm bill.” The rewrite of direct farm program payments—direct payments, subsidies, countercyclical, ACRE, loans, etc. —is part of back-and-forth negotiations among the top four members of the respective ag committees—Senate Ag Committee Chair Debbie Stabenow (D-MI), Sen. Pat Roberts (R-KS), ranking member, House Ag Committee Chair Frank Lucas (R-OK) and ranking member Rep. Collin Peterson (D-MN). Their challenge is to make good on their collective commitment to the Joint Special Committee on Deficit Reduction, aka the “super committee,” on how to cut a proposed $23 billion from ag spending over the next decade. Critics contend this is “back-door” drafting of a five-year Farm Bill avoids open process. Rep. Ron Kind (D-WI), who has introduced his own version of comprehensive farm bills over time, is leading the House charge to open the process and was a vocal critic of the this week, saying, “This is a horrible process. It keeps Congress and the whole nation in the dark.” Details of the House and Senate ag panel plans were supposed to be made public this week, but the committees have not yet released the written documents; the new deadline is sometime the week of November 14. New approaches—almost all tied to some form of new federal revenue protection insurance – proposed by national commodity groups to rework the farm income safety net, are being sidelined for now. There will likely be two “Farm Bills;” the first written as part of the deficit reduction package and concentrating on direct farm program payments, but not effective until the 2008 Farm Bill expires on September 30, 2012, along with rewrites of conservation and crop insurance titles. The second Farm Bill will be written next year and will incorporate at least the framework of whatever’s agreed to in the deficit reduction package, but “refining” the income safety net alternative, tracking the needs of individual commodities and regions, as well as fixing whatever mistakes are made in the first reinvention. The rest of the Farm Bill titles – research, disaster assistance, export, energy, etc.—will be written next year and within the budget confines of the deficit reduction agreement. Stabenow and Lucas continue to look favorably on “shallow loss” federal revenue insurance. Under this program, a farmer absorbs only the first 5-10% of income loss, with the federal government picking up the next 20-25% of the loss before federal revenue insurance kicks in. Critics, including the American Farm Bureau Federation (AFBF), say this could entice farmers to take greater risks than they might otherwise. Others contend the base “income” figures that would be used to set the bar on payments would likely be based on 2010-11 net on-farm income, the highest since 1974, when adjusted for inflation, and this would essentially negate any savings over 10 years. Further, if a county-wide revenue calculation is used—similar to the current ACRE mechanism—lawmakers from westerns and southern states contend that with their relatively larger counties, the benefit will be spotty based on the broad income averages. The super committee’s deadline for producing a bill—including the $23 billion in ag spending cuts—is November 23; if it fails, $1.2 trillion in across-the-board federal spending cuts kick in, with ag likely taking a hit well below the $23 billion promised by the two ag committees.
Sen. Charles Schumer (D-NY) says the effort is doomed to failure, while the GOP says the Democrats have walked away from the process, but despite the public pot shots, the Joint Special Committee on Deficit Reduction continues to work out a broad-based, bipartisan agreement to cut at least $1.2-1.5 trillion out of federal spending over the next decade, and package it so it will pass muster with both chambers. The committee has until November 23 to come up with legislation and Congress has until December 23 to pass the bill. If the process fails, then the federal government is hit with about $1.2 trillion in across-the-board spending/budget cuts, with some accounts protected. This week both political sides of the committee traded recommendations that included concessions to traditional political positions. Republicans came forward for the first time with a plan that includes revenue raisers—mostly through tax code fixes and fees—that will complement the spending cuts already recommended. The GOP plan would cut spending $750 billion, generate about $500 billion in revenue and get to about $200 billion in interest savings. It would reduce all income tax rates by 20% and pay for the tax cuts through adjustments or elimination of tax loopholes. The Democrats put forth a combination of cuts and tax hikes totaling about $2.3 trillion. The plan includes $400 billion in cuts from Medicare and Medicaid, as well as monies saved from the reduction of troops and spending on wars in Iraq and Afghanistan. Overall, $1 trillion comes from spending cuts, $1 trillion from new tax revenues and $300 billion through reduced interest payments. Most insiders are ignoring the verbal onslaught from non-committee members, citing information out of the committee that individual members are meeting, as well as smaller groups. Sen. Richard Durbin (D-IL) called the GOP offer of revenue enhancers “a breakthrough,” while others continue to call for at least $4 trillion in cuts.
Two long-pending citizen petitions filed with FDA to end the use of low level antibiotics in livestock/poultry feed and water were rejected by the agency this week, saying the goal of the petitions is too costly and the agency has other plans for dealing with the use of the products in feed and water. FDA’s action also effectively ends a law suit by the Natural Resources Defense Council (NRDC) that sought to force the agency to act on the petitions; however, it’s expected NRDC will refile the suit with the broader goal of ending the feed/water uses for most human use antibiotics. The longest-pending petition was filed in 1999 by the Center for Science in the Public Interest (CSPI) and asked FDA to rescind the use of non-therapeutic antibiotics in feed and water. A similar petition was filed by a number of activist groups in 2005. While acknowledging the sensitivity of the issues surrounding low-level antibiotic use in food animals, FDA said too much agency time, money and manpower would be needed to withdraw all of the products’ approvals. The agency said its working with industry and imposing programs and guidance that encourage judicious use of the products, as well as seeking greater veterinarian involvement in the use of the products for non-therapeutic uses. The consumer and activist groups said they were disappointed by the action.
The Senate this week rejected a “resolution of disapproval” designed to block EPA from imposing a 2008 court-ordered rule on air pollution affecting areas downwind from power plants in 28 states. In related developments, the Senate contemplates taking up an amendment to the FY2012 energy/water appropriations bill to bar the U.S. Army Corps of Engineers from implementing an EPA “guidance” that dramatically expands the definition of “navigable waters” covered by the Clean Water Act. (CWA). The resolution of disapproval, brought forward by Sen. Rand Paul (R-KY), would save $100 million in compliance costs over a decade Paul said. The White House opposed the Paul bill, saying it would “cause substantial harm to public health and undermine our country’s longstanding commitment to clean up pollution from power plants.” In the water action, EPA has wrestled to clarify its jurisdiction over wetlands and other waters not considered to be “navigable” as are lakes, rivers, streams, etc. A May, 2011 guidance document further confused the issue, already complicated by 2003 and 2008 court decisions, and was attacked by regulated industry as a significant regulatory overreach, with ag interests concerned the guidance would give EPA authority to regulate farm ponds and streams. The National Association of Conservation Districts backs the effort block the EPA guidance.
The first victory in a much longer battle over a 2008 Farm Bill instruction to USDA to beef up its contract grower and antitrust protections, as well as enforcement actions by the Grain Inspection Packers & Stockyards Administration (GIPSA) was achieved this week when USDA sent to the Office of Management & Budget (OMB) a major rewrite of its existing controversial proposed GIPSA rulemaking strongly opposed by livestock and poultry interests. The intent of the USDA rulemaking goes to ensuring farmers and ranchers who privately contract with meat processors, as well as processors who own their own animals, are subject to adequate oversight by GIPSA. The new version of the GIPSA rule, subject to a 45-day OMB review, has generated muted applause from industry as most groups continue to study the draft rulemaking for potential impacts. Gone from the proposal is USDA’s attempt to define “competitive injury” in contract disputes as “conduct that distorts competition in the market channel or marketplace.” This definition was attacked by the meat and poultry industries as far broader than that accepted by most courts. The new draft proposed rule is a stripped-down version of the old proposal, industry sources said, and omits several sections in the old proposal strongly opposed by industry. The new proposal omits onerous language that went to “undue or unreasonable preference or advantage” in the sale of livestock, includes a section on poultry production, provides sample contracts for poultry and swine sales, and also includes sections covering suspension of delivery of birds, additional capital investment criteria, breach of contract and arbitration. Also separated from the rulemaking is a section on so-called “tournament” compensation under which poultry producers are paid according to certain criteria and achievement of a certain ranking based on those criteria. This section will be dealt with separately in contemplated interim final rule allowing for additional public comment, USDA said. Also removed from the rulemaking are sections banning packer-to-packer sales, restrictions on price premiums based on standards of product quality and limits on contract terms based on the number of animals sold. Various activist groups condemned USDA’s actions, as did the National Farmers Union (NFU), who said that parts of the original rulemaking now included in the reworked version provide only a “degree of protection” from abuse by integrators and processors. NFU pointed out USDA has not completed the new rulemaking or conveyed all of its proposed rules to OMB, including a new definition of “competitive injury.”
The Senate Committee on Environment & Public Works this week approved a two-year federal highway program reauthorization—money to states for highways, bridges and local commuter networks—worth about $85 billion, and as lawmakers scurry trying to find the funds to pay for the two-year bill, the odds of a full six-year reauthorization appear to be fading. The Senate bill faces a $12-billion gap between monies generated from use and fuel taxes in the Highway Trust Fund and authorized spending levels. The GOP members of the committee were generally okay with the policy issues covered by the bill, but swore the bill will not advance unless offsets are found for the $12 billion. House Transportation & Infrastructure Committee Chair John Mica (R-FL) favors a six-year bill, but the price tag on that bill is closer to $200 billion and the offset challenge remains. House Speaker John Boehner (R-OH) has suggested the highway package could be paid for by tying it to new revenues from oil and gas industry leases and user fees as part of an expansion of drilling and exploration, but Democrats balk at the notion of allowing energy exploration to pay for the highway package, particularly if it means expanding drilling to public lands and in federal waters. Under the Senate committee’s approved bill, states would get more leeway in how to spending federal dollars on “enhancements,” including biking and hiking trails, and the definition of eligible projects is expanded to include design and construction of new roads, including “activities to reduce road network congestion.” This was a peace offering to the panel’s GOP members who last week floated a draft bill that would have killed the enhancements funding, equal to about 10% of the federal monies sent annually to the states.
It was agriculture’s week in the U.S. Supreme Court, as the high court heard arguments in a case challenging a California law on downed animals moving to slaughter, while refusing to hear a case that would kill the Renewable Fuels Standard (RFS). The downed animal case deals with a California legislative change to its state animal cruelty law that to prohibit the slaughter of any animal—particularly swine—which refused to stand or move under its own power for any reason. The state legislature acted in the wake of an HSUS slaughter house video showing alleged abuse of downed animals at a Southern California slaughter plant. The state law was challenged by the National Meat Assn. (NMA), with several national agriculture groups filing as friends of the court in the action. HSUS and four other animal rights groups intervened in the case on the side of California. According to observers who were in the chamber when the case was heard, eight of the nine justices engaged actively in the case, the second animal rights case in two sessions of the court, with most of the tough questioning going to the California attorney. The industry argued federal laws regulating meat inspection—including the handling of animals—preempts the California statute. The industry’s position was strongly supported by the Solicitor General of the U.S., the Administration’s highest ranking litigator; however, the Solicitor General broadened his argument, arguing the states have no jurisdiction in related areas such as state laws banning horse slaughter. HSUS is concerned that if the court decides in favor of industry, it could gut not only the California downer law, but would “shoot down” anti-horse slaughter laws in California, Illinois and Texas. The case has now been taken under advisement and industry awaits the final decision. In the RFS case, the court was asked in July to hear a case brought by the National Petrochemical & Refiners Assn. and the American Petroleum Institute challenging the RFS on the basis federal agencies missed statutory deadlines for regulation writing, but imposed retroactive regulations based on “implied, rather than express, authorization from Congress.” Lower courts had ruled against the two associations, and the high court denied the industry petition allowing the lower court rulings to stand.
Distillers dried grains with solubles (DDGs) is the second most frequently used feed ingredient, bumping soybean meal out of second place, according to a report by USDA’s Economic Research Service (ERS). DDGs, including corn gluten feed and corn gluten meal, are second only to corn in livestock and poultry rations, the department said. From September, 2010 through August, 2011, ERS said 127,006,000 metric tons of corn were used for feed, and combined “grain protein feeds”, including corn gluten feed, corn gluten meal, and distillers grains, totaled 38,600,000 tons or 17.5% of “total feeds fed.” Soybean meal use was set at 27,896,000 tons.
USDA announced this week that agriculture exports in fiscal 2011 hit a record value of $137.4 billion, exceeding the previous record by $22.5 billion. The record exports contributed to a trade surplus of $42.7 billion, another record. Secretary of Agriculture Tom Vilsack said President Obama’s signing of free trade agreements with Korea, Colombia and Panama means next year’s exports should surge even higher.