USDA’s overall spending would be reduced $32 billion, including a cut in crop insurance of $7.4 billion, over the next 10 years under the FY2013 budget sent to Capitol Hill this week by President Obama. FDA would see an increase in its overall budget of about $11.5 billion, but nearly all of the actual spending increase – 98 percent – is predicated upon $654 million in new user fees for agency programs, including new fees for all companies required to register with FDA under the new Food Safety Modernization Act (FSMA). FDA Commissioner Margaret Hamburg said this week if the President’s budget is enacted, nearly 45 percent of FDA’s overall spending would be based on user fee collection by 2013. For the Center for Veterinary Medicine, which regulates the feed industry and animal drugs, overall spending is reduced by about $4 million over FY2012 levels, but the FY2013 Administration proposal would seek collection of $15.09 million in user fees, including a new “food establishment registration fee” – strongly opposed by the feed, grain and other industries regulated by FDA – that is estimated to generate about $5.072 million dollars a year based on the more than 410,000 establishments likely to register, including feed mills, under FSMA. The other fees collected by CVM include $7.7 million in animal drug approval user fees (negotiated with industry as part of the Animal Drug User Fee Act (ADUFA)), $1.6 million in generic animal drug fees, and $24,000 annually in recall fees. The Administration is also targeting about $10 million in new spending to increase agency presence in China to improve the safety of imported foods, ingredients and drug components. At USDA, the Administration stopped short of recommending major user fee increases, with minor increases to cover the cost of inspecting meat processing plants after recalls linked to an illness outbreak, and $4 million to be collected from biotech crop applicants to cover department costs.
While 82 national agriculture, food, conservation and research organizations told Capitol Hill this week a Farm Bill enacted in 2012 is a necessity, the chair and ranking member of the Senate Agriculture Committee – just before their kickoff Farm Bill hearing this week – told crop insurance companies they continue to view federally supported insurance as the
core of risk management and income protection, the push for a 2012 bill is on and Memorial Day may be the drop dead date for getting a bill done this year. Complicating the formula, however, was the release this week of President Obama’s FY2013 budget recommendations. Sen. Debbie Stabenow (D, MI) said the White House 10-year budget as envisioned in the Administration plan makes it even more important to do a bill this year. The Obama budget wants to cut $32 billion out of mandatory farm spending, and coupled with election year politics, skeptics doubt if Congress will fully reauthorize a four-year omnibus farm bill. Stabenow was joined by House Agriculture Committee Chair Frank Lucas (R-OK) in her displeasure with Obama’s recommendation that $7.4 billion be cut from crop insurance over the next decade. The White House wants to cut premiums for catastrophic coverage and the federally subsidized reimbursement to crop insurance companies to cover administrative costs. Stabenow countered the White House by saying she and Lucas were able to slash $23 billion over 10 years in their deficit reduction package developed last fall without touching crop insurance, which has sustained well over $6 billion in reductions in the last three years. Lucas said the President’s proposal reveals yet again a fundamental lack of “perspective and understanding” of how agriculture can contribute to overall federal spending cuts. Sen. Pat Roberts (R-KS), ranking member of the Senate agriculture panel, said the White House is ignoring farm state members of Congress and their constituents, and said several billion in cuts could have been taken out of nutrition programs through mandatory efficiencies without causing recipient pain.
Saying he’s head of a department facing major “challenges,” Secretary of Agriculture Tom Vilsack this week told the kickoff Farm Bill hearing before the Senate Agriculture Committee lawmakers need to give USDA the authority to set priorities and direct federal dollars where they’re needed. The flexibility push was part of USDA’s recommendations on how to reinvent federal farm programs, and included a call for consolidating and streamlining programs and allowing the department to adjust programs to reflect regional differences. However, he also layered over these more progressive recommendations the oft-repeated calls by the Obama Administration for renewable on-farm energy programs, broadband internet access and off-farm employment opportunities. Vilsack said USDA has absorbed more than $3 billion in operating cost reductions since 2010, his workforce has been cut through buyouts and he expects worker ranks will be reduced more over the next several years.
A Bloomberg survey of 36 analysts forecasts 94.329 million acres will be planted to corn next season, up 2.6 percent over last year. At the same time, USDA said this week that corn prices should average about $6.70 a bushel in 2011-2012, but drop below $5 per bushel for the next several years. The 2012-2013 corn price will average about $5, the department said, but bounce between $4.30 and $4.65 through 2022. The price decline is based on an assumption the 45-cent-per-gallon corn-based ethanol blenders’ tax credit, the 54-cent import tariff and the $1-per-gallon biodiesel tax credit will not be reinstated. USDA said corn used for ethanol will be about 36 percent of production, but levels will drop below recent-year figures of closer to 40 percent, and corn for feed use will increase as prices drop and supplies increase.
Having watched corn-based ethanol lose it blenders’ tax credit and import protections, the cellulosic ethanol industry this week sent Senate Agriculture Committee Chair Debbie Stabenow (D-MI) and ranking member Sen. Pat Roberts (R-KS) a letter urging the committee to include extension of two “critical tax incentives” for non-corn ethanol production. The tax breaks – the cellulosic biofuels producer tax credit (PPT) authorized in the 2008 Farm Bill and the special depreciation allowance for cellulosic biofuel plant property – were emphasized by the Advanced Ethanol Council as key to development of advanced ethanol made from feedstocks that don’t compete with feed and food industries. The council said the industry is making significant investment in advanced biofuels with the “expectation Congress will stay the course with regard to its commitment to the industry.” In addition to the tax credit extensions, the council said it wants Congress to extend the USDA loan guarantee program for biorefinery projects but fix the program so it’s easier for lenders to participate; support a USDA effort to “build out” the refueling infrastructure – more flexfuel gas pumps, etc. – and reform the Biomass Crop Assistance Program to encourage greater participation while reducing the risk of planting crops for advanced biofuels feedstocks.
With GOP House and Senate members saying their just doing the right thing by American workers and Democrats on both sides of the Hill saying the Republicans “caved,” Congress this week is set to enact an extension of federal payroll tax reductions through the end of 2012. At issue was a GOP leadership decision to move forward with the extension without finding cuts in other programs to pay for the $100-billion cost, a move many feared would inspire insurrection among budget hawks in the House. The overall cost of the bill, including items unrelated to the payroll tax extension, is about $150 billion, with $50 billion of that offset through other cuts or revenue increases. The GOP scored a concession from Democrats by creating a tiered approach to limiting unemployment benefits. In states where unemployment is 9 percent or above, benefits would be available for up to 99 weeks, but would scale back to 73 weeks by the end of the year. Most states would see unemployment insurance limited to about 63 weeks. Other provisions of the bill include a Medicare physician reimbursement extension through 2012, and an extension of certain Medicare programs, and an extension of the Temporary Assistance for Needy Families program.
Facing more than 300 proposed amendments on its committee-approved package, House leadership this week split the federal highway reauthorization package into three separate bills. Meanwhile, the Senate grapples with how to pay for its package, and Congress this week decided to punt any votes on reauthorization of the federal highway infrastructure and urban commuter programs until after it returns from the week-long President’s Day recess. The House is looking at a five-year bill, while the Senate is working on a two-year package, and while historically this package has been paid for by federal gasoline and highway use taxes – the so-called Highway Trust Fund – revenues from those sources have dropped, so the fight is on to figure out how to pay for the ambitious programs envisioned in both bills. The House took a small step forward this week when it approved a package of energy-related measures as part of the broader highway program effort. This package takes revenue from future fees paid by companies to develop oil and gas deposits as partial payment for the House highway bill. Among the amendments filed on the House bill is one to extend federal biodiesel tax credits for two years and another to guarantee funding for river/port dredging and port maintenance. Meanwhile, in the Senate, Majority Leader Harry Reid (D-NV) riled both Republicans and Democrats by deciding to call for a February 17 vote to cut off debate on amendments to the Senate’s highway bill. Reid moved to cut off debate to force a deal on a “national freight policy” provision that’s designed to encourage “multi-modal transport investments,” by Sen. Frank Lautenberg (D-NJ). It’s most likely Reid will wait until after next week’s recess to hold a final vote on the package.
A bill – HR 3527, the Protecting Main Street End-Users from Excessive Regulation Act – introduced by Rep. Randy Hultgren (R-IL) and approved by the House Agriculture Committee, would ensure legitimate commodity market “end-users,” including farmers, ranchers and bona fide hedgers, that Commodity Futures Trading Commission (CFTC) rulemakings aimed at restricting market manipulation by Wall Street banks, will not fall on them. Hultgren’s target is a pending CFTC rule requiring financial institutions to register under a new designation.
Thirty-one Senators this week asked the Obama Administration to finalize its long-pending rulemaking that would loosen restriction on imported beef that they say will help trade negotiations. The group was led by Sen. Ben Nelson (D-NE) and Sen. Charles Grassley (R-IA). The bipartisan group sent a letter to the Office of Management & Budget (OMB) urging release of a rulemaking first proposed by USDA in 2004. Grassley said it’s tough for U.S. negotiators to talk to trading partners about following the science, “yet we fail to lead by example by adopting a comprehensive rule.”