Despite a continuing deadlock among national farm and commodity groups over how to replace federal direct payment programs, the Senate Agriculture Committee this week wrapped up its last Washington farm bill hearing (see story below), still dedicated to begin marking up a Farm Bill by the first week of April. However, the political challenge of getting a Farm Bill through House and Senate floor battles during an election year looms over both committees, prompting Sen. Pat Roberts (R-KS), ranking member of the Senate ag panel, to mention that if it looks iffy as to whether a stand-alone bill can survive floor action, the omnibus farm package could be attached to another “must-pass” bill. The release this week by the Congressional Budget Office (CBO) of its calculations on how much money can be spent on a 2012 Farm Bill – and with the frenzied calculations still underway – doesn’t seem to have deterred the House or Senate ag panels from their agreed-to $23-billion target for cutting ag program spending, with some committee members reminding industry that if a bill isn’t done in 2012, the cuts will likely be much deeper in 2013. It’s also clear the Senate committee, and to an increasing degree, the House ag panel, appear to be starting at a “shallow loss” program approach, a three-tier program under which the federal government steps in to pay losses of less than 10-20 percent, those not covered by federal crop insurance or other disaster aid, and continues some subsidies based on target prices. Most national commodity groups favor the shallow loss approach, but the American Farm Bureau Federation (AFBF) argues any new federal program should be geared toward the rare, but expensive, catastrophic loss situation. The AFBF plan – which president Bob Stallman admitted is “revolutionary” – would create a new federally subsidized form of crop insurance to cover losses of at least 20-30 percent, with payments based on historical levels and not current season prices as with conventional insurance. The plan would embrace several specialty crops for the first time, along with soybeans, corn, cotton, rice and wheat. AFBF says the good news is federal payments would be made less frequently; the bad new is the federal government assumes a greater share of the risk than it does under conventional crop insurance. Stallman acknowledged that Louisiana, Mississippi and Arkansas Farm Bureaus don’t support the catastrophic approach based on regional and producer needs, but these state haven’t proposed an alternative. He said AFBF is willing to look at other proposals in the interest of keeping the program development process moving forward. For his part, House Ag Committee Chair Frank Lucas (R-OK) is moving away from a universal commodity program approach, acknowledging any income safety net reinvention “must … work for all regions and all commodities, but we’ve heard repeatedly a one-size-fits-all program will not work.” He said the commodity title of the new Farm Bill “must give producers options so that they can choose the program that works best for them.” Lucas has field hearings set for Illinois, Arkansas and Kansas through April 20. It’s also known Lucas has instructed his staff to draft a one-year extension of the current Farm Bill if the 2012 effort goes off the rails.
At her last Farm Bill hearing this week before embarking on committee mark-up of a 2012 Farm Bill, Senate Agriculture Committee Chair Debbie Stabenow (D-MI) declared “the era of direct farm payment is dead,” but also said the challenge is finding “the right mix” of program replacements to satisfy commodity groups. Commodity group witnesses told the committee that whatever it does, it cannot impose programs that interfere with a farmer’s ability to decide what to grow and how much, that the new Farm Bill has to pave the way for younger farmers to get into business and that new programs can’t create trade problems that trigger formal international actions. Producer group and government witnesses appeared to talk about the need for program reform, with farm witnesses declaring federal crop insurance must be the lynchpin for program reinvention, and the U.S. Department of Agriculture’s (USDA) witness, Michael Scuse, acting undersecretary for farm and foreign ag services, urged the committee to make only “simple and workable” changes to existing programs. Given Stabenow’s declaration and the efforts so far this year by the various commodity interests in rewriting farm programs, that request likely fell on deaf ears. The farm group witnesses opposed any spending cuts on crop insurance, reminding the lawmakers once again that the federal crop insurance program has absorbed $6 billion in budget reductions over the last 10 years. The rice industry witness, however, departed from the groupspeak on crop insurance, urging the committee to consider the damage that will be done to his industry if target prices and direct payments end. He told the committee rice growers don’t benefit from insurance to the degree midwestern crop growers do, explaining production is irrigated and able to withstand drought, but not the added costs of pumping water into fields. Sen. John Boozman (R-AR) urged his committee colleagues to not write off target prices altogether, but was challenged by Sen. Mike Johanns (R-NE) who called the pricing scheme a bad idea, the exchange illustrating the regional differences that are the biggest challenge to rewriting direct payment programs. Another contentious issue raised during the hearing was a proposal that conservation compliance program benefits be tied to crop insurance purchases, a move opposed by the American Soybean Association and others. Roberts said the notion that ending direct payments ends conservation compliance is a “myth,” but added a crop insurance hook could be added to other program eligibility.
Bankrupt MF Global (MFG) executive employment contracts calling for bonuses as part of total compensation should be ignored and no executive bonuses be paid while the federal government continues to try and find upwards of $1.6 billion in missing assets from the former futures trading company, the Senate Agriculture Committee told MFG trustees in a letter this week. The ag panel told former Federal Bureau of Investigation (FBI) Director Louis Freeh, now the trustee for MFG’s holding company, it would be “outrageous” to even contemplate paying bonuses in the wake of the eighth largest bankruptcy in U.S. history. Freeh is reportedly considering a request to the MFG bankruptcy judge that the MFG chief operating officer, finance chief and general counsel receive “hundreds of thousands of dollars each” in bonuses. Meanwhile, Commodity Futures Trading Commission (CFTC) Commissioner Jill Sommers, who heads the CFTC investigation of MFG’s downfall, told one newspaper “there will definitely be statutory changes as regards customer protection,” referring to calls for Capitol Hill to step in and create new segregated fund rules. The CFTC said it plans to increase daily monitoring of futures trading, particularly by high-speed computerized trading firms that are an increasing factor in the markets.
The Senate this week approved a two-year, $109-billion highway reauthorization bill, and Senate Majority Leader Harry Reid (D-NV) called on House Speaker John Boehner (R-OH), who continues to struggle with getting his chamber’s highway bill to the finish line, to bring the Senate-passed legislation to the House floor. The Senate bill is a political compromise in an election year between a conventional, high-priced five-year reauthorization of federal highway, infrastructure and urban commuter system programs and another continuance for few months or a year. The House is wrestling with a five-year, $260-billion bill, but cannot get House budget hawks to go along with the bill’s funding mechanism. Boehner said his chamber will take up the Senate bill or something similar if he cannot get agreement on the committee-approved bill with offset provisions. And with the House on a district work break this week and the current highway program temporary extension expiring at the end of March, if Boehner doesn’t act quickly, Congress may need to pass yet another short-term extension of current programs. The Senate, during its final floor action on the bill, rejected an amendment by Sen. Debbie Stabenow (D-MI) that would have extended 19 expired renewable energy tax credits, including those for biodiesel and renewable diesel, along with a similar amendment by Sen. Pat Roberts (R-KS) that would have eliminated tax credits for renewable energy, expedited the Keystone pipeline, expanded domestic energy exploration and frozen federal employee wages through 2013. Roberts’ amendment would have used the savings from his amendment to fund college tuition programs and other non-energy programs. Also successfully included in the Senate bill is language expanding the current hours-of-service exemption for farm trucks operating during planting and harvest and within 100 miles of their origin, as well as a separate action to allow farm vehicles to move across state lines without commercial drivers’ licenses and other permits.
Increasing bipartisan political opposition to granting Russia permanent normal trade relations (PNTR) prior to that nation’s entry into the World Trade Organization (WTO) this summer is running counter to agriculture’s calls to stabilize the U.S.-Russian trade relationship. Sen. Orrin Hatch (R-UT), ranking member of the Senate Finance Committee, has already warned about rushing to grant Russia PNTR status with the U.S., and Sen. John Kyl (R-AZ), Senate minority whip, said during a Finance Committee hearing this week on Russia’s trade status that foreign policy concerns, human rights violations and corruption in Russia argue against a quick decision on its trade status. Kyl supports a bill by Sen. Ben Cardin (D-MD) that would sanction human rights violations in Russia, and reminded the committee that Russia has not ratified a bilateral investment treaty with the U.S., and placing blind trust in Russian trade orthodoxy is unwise at this point. U.S. livestock and crop organizations have called for the U.S. to grant PNTR, with the American Soybean Association saying, “The (U.S.) pork and poultry industries, which use soybean meal in animal feed, are poised to see great success in Russia as income levels rise and demand for meat increases. What benefits these industries, benefits soybean farmers,” adding trade with Russia must be expanded to realize the net benefits. Sen. Max Baucus (D-MT), chair of the finance panel which must approve legislation to grant PNTR to the world’s sixth largest economy, acknowledged corruption is a serious issue in Russia, but joined the Obama Administration, high-tech companies, farm equipment companies and agriculture groups in calling for the change in Russia’s trade status with the U.S.
Saying they were writing “in support of … over 400 organizations and businesses ...” pushing for federal labeling of “genetically engineered foods,” 55 members of Congress this week sent a letter to U.S. Food and Drug Administration (FDA) Commissioner Margaret Hamburg saying it’s time to end FDA’s use of “19th century concepts to regulate 21st century food technologies.” The letter calls into question FDA’s genetically engineered (GE) foods policies, programs and approval processes, and scolds the agency for adhering to “an outdated GE food labeling policy by extending it to GE animals without revisiting the scientific or legal merits of the standard.” The lawmakers say it is a “fundamental right consumers have to make informed choices … (and) labeling foods doesn’t imply a product is unsafe or will be confusing to consumers.” The politicians also argue that because 50 other countries require labeling of GE foods, the U.S. should as well. Opponents argue an agreement among federal agencies called “the coordinated framework” holds that foods are not labeled based on how they are made, but whether they present a “material difference” from a conventional product, or pose an allergenicity issue or other food safety challenge. Further, they say, given that nearly 85 percent of the U.S. corn crop and over 90 percent of the U.S. soybean crop is grown from genetically enhanced varieties – with more being adopted regularly – theoretically every food product with corn or soy ingredients would have to be labeled.
After more than four years of development, court challenges and rewrites, the U.S. Department of Agriculture (USDA) this week proposed its new rules to bring U.S. bovine spongiform encephalopathy (BSE) import/export regulations into line with the rest of the beef trading world. The new rule will bring U.S. rules into agreement with recommendations by the OIE, the world animal health organization, adopting the same criteria and categories for trading partner designations based on the BSE risk status of the trading country. It would allow USDA to begin trade negotiations on beef and beef byproducts, rendered products and related products with countries classified by OIE as controlled and negligible risk BSE status. The U.S. enjoys “controlled risk” status. The Animal & Plant Health Inspection Service (APHIS) can apply the OIE recommendations or conduct its own evaluation, and some low-risk products, such as boneless beef, would be allowed into the U.S. regardless of the other country’s status. No other changes are expected in current BSE programs, said Dr. John Clifford, USDA’s chief veterinarian and deputy administrator of the APHIS during a conference call with industry stakeholders. “This rule brings our regulations in line with the most current scientific data and harmonizes (U.S., rules) with OIE guidelines,” Clifford said. He said the new rule will strengthen the U.S.’s hand when negotiating new trade agreements on beef with other nations. However, during the stakeholder call, the Ranchers-Cattlemen Action Legal Fund reiterated its strong opposition to the action taken by USDA, saying it was placing the U.S. cattle herd at risk. The rule is available for public comment for 60 days, and can be viewed at www.aphis.usda.gov.
The new U.S.-Korea Free Trade Agreement went into force March 15, and immediately agricultural equipment and two-thirds of U.S. ag exports to Korea were classified duty-free. Supporters of the new agreement contend it’s the only way the U.S. can improve its trading relationship with Korea. The U.S. Department of Agriculture (USDA) estimates that as other trade barriers are eliminated over time, U.S. ag exports to Korea should grow by $1.9 billion a year. The U.S. is now the fourth largest Korean trade partner behind China, the European Union and Japan. USDA’s ag trade office in Seoul, South Korea has launched a website with details for U.S. exporters, and can be accessed at http://www.atoseoul.com/fta/fta_page2_final.asp.