FarmPolicy

September 23, 2019

Farm Bill; Trade; and Biofuels

Categories: Audio /Budget /Ethanol /Farm Bill

Farm Bill Issues

DTN Ag Policy Editor Chris Clayton reported yesterday that, “USDA’s chief economist found himself on the spot Tuesday trying to defend USDA’s controversial livestock marketing rule, which senators argued oversteps USDA’s authority and will cost the livestock industry dearly.

Three major issues were raised repeatedly at a hearing on livestock held by the Senate Agriculture Committee: the USDA livestock marketing rule, ethanol subsidies and trade agreements.”

The article stated that, “Agriculture Committee Ranking Member Pat Roberts, R-Kan., set the tone early, lashing out at EPA and USDA for a regulatory attack on animal agriculture, particularly with the GIPSA rule. Roberts was the first of several senators to quiz [USDA Chief Economist Joe Glauber].

“‘The exact proposals in the proposed rule were debated in the 2008 farm bill and we rejected them all, in some cases by a very substantial vote margin,’ Roberts said. ‘So much for Congressional intent.’”

(FarmPolicy Note: An audio replay of a portion of this discussion between Sen. Roberts and Dr. Glauber is available here (MP3- 2:19).  Also, in a second round of questioning later in yesterday’s hearing, Sen. Roberts elaborated on the scope of authority and Congressional intent in fostering the development of the GIPSA rule; these more forceful remarks can be heard here (MP3- 2:06)).

Mr. Clayton explained that, “One of the early problems in releasing the GIPSA rule was that it was not designated as ‘economically significant’ to the industry by the Obama administration. Yet, several privately-funded studies by opponents of the rule cite hundreds of millions, if not billions, of dollars in lost revenue. One study by the packing industry stated potentially 104,000 lost jobs. Glauber said USDA has changed its view and does consider the GIPSA rule economically significant to the industry.

“‘There is no doubt, particularly with the comments that were raised, (it) would suggest that the rule has a larger impact’ than previously thought, Glauber said.

“Sen. Mike Johanns, R-Neb., a former agriculture secretary, followed up that line of questioning, saying Glauber and him had several conversations in the past about the need for solid economic analysis of proposed rules.

“‘From my standpoint, certainly looking at the costs, we certainly see this in the comments, in particular that have been raised by the people who have written, show significant costs on the order of billions of dollars, so I think there is no question the designation on this rule will change to be economically significant.’”

Yesterday’s article added that, “Most of the industry witnesses were opposed to the rule as well. Steven Hunt, CEO of U.S. Premium Beef LLC, which owns National Beef, said the rule increases the risks to packers that they will be sued, so premiums and various marketing arrangements will go by the wayside as a result…[S]till, Dennis Jones, a pork producer from the South Dakota Farmers Union, told senators the rule will help farmers and ranchers ensure transparency and bargaining rights. Jones said the rule was a vastly-needed upgrade to the eight-decade-old Packers and Stockyards Act.”

Mr. Clayton noted that, “Ethanol was also raised at the hearing, as livestock producers said corn prices hinge on the ethanol blenders’ credit, import tariff and the Renewable Fuels Standard. Those have combined to hurt margins for producers who can’t afford the high-priced grain. Still, ethanol had its defenders at the hearing as Sen. Charles Grassley, R-Iowa, told the livestock panel they were misinformed and no one can afford to produce corn at $2.50 a bushel.

Livestock producers also cited the importance of getting pending free-trade agreements passed to expand markets.”

Dr. Glauber elaborated on issues associated with ethanol and feed costs in response to a question from Sen. Thad Cochran (R-Miss.), related audio (MP3- 0:41), and also from Sen. John Boozman (R-Ark.)- who specifically asked, “How much does ethanol affect the price of corn?” (audio clip here– MP3- 2:08).

And Sen. Amy Klobuchar (D-Minn.) brought up budget issues and specifically asked Dr. Glauber about the House passed budget and its implications on farm spending.  A portion of this discussion, which also included remarks from Natural Resources Conservation Service chief Dave White, is available here (MP3- 1:32).

With respect to the budgetary issues and the Farm Bill, Eliza Newlin Carney reported today at Roll Call Online that, “Federal belt-tightening has worried Washington lobbyists across the board, but perhaps no sector is more nervous these days than the agriculture industry.

“Several factors have thrown farmers and their Washington representatives into a defensive crouch. Bipartisan talks on a budget deal to cut spending and raise the debt ceiling have specifically targeted agricultural subsidies. The budget for the soon-to-expire farm bill, which funds an array of nutrition, energy and agriculture programs, has already been slashed. And growing public concern over commodity prices, nutrition and food safety seems to make agriculture a prime target.

“‘The mood or sense of Congress right now is: Cut now, ask questions later,’ said Alan Kemper, president of the American Soybean Association. Kemper’s group is rounding up farmers to help deliver to Capitol Hill the message that the nation’s farmers are already hurting from natural disasters and should not be disproportionately singled out.”

The Roll Call article stated that, “Several farm-related skirmishes are unfolding on Capitol Hill, fueled in part by the tea party movement and GOP determination to cut spending at all costs. Particularly vulnerable are the billions in direct cash subsidies that farmers receive every year, which are based on formulas rather than need… [I]n a signal of lawmakers’ growing distaste for direct subsidies, Rep. Jeff Flake (R-Ariz.) will introduce legislation next week that would end direct payments to farmers outright. Flake’s move comes on the heels of a mid-June vote by a majority of Senators to cancel billions in ethanol tax credits — a strong message but not the supermajority required to kill the tax credit.

“Cuts in agriculture subsidies will almost inevitably be part of whatever budget deal comes out of bipartisan negotiations between Vice President Joseph Biden and Congressional leaders to raise the debt ceiling. Cuts to commodity and crop insurance payments could total $34 billion over 10 years, agriculture lobbyists say.”

(Recall that Sen. Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) expressed similar concerns about debt negotiations and farm spending last week on the AgriTalk radio program with Mike Adams.)

Today’s Roll Call article added that, “Agriculture lobbyists also fret that budget talks could complicate reauthorization of the farm bill, slated for next year. The budget deal could simply cap subsidies overall and leave it up to the Congressional Agriculture committees to work out the details. But negotiators could also spell out specific subsidy cuts, effectively beginning the process of the farm bill rewrite.

“‘We have some real concerns that a group like that is actually determining the legislation,’ said Mary Kay Thatcher, senior director of Congressional relations for the American Farm Bureau Federation, a leading agriculture industry group.”

More broadly on the budget negotiations, Sam Youngman, Erik Wasson and Alicia M. Cohn reported yesterday at The Hill Online that, “Speaker John Boehner (R-Ohio) insisted Tuesday that an Aug. 2 deadline to reach a debt-ceiling deal is artificial, while another GOP leader said it would likely be extended.

“The GOP maneuver — playing it cool as the deadline hurtles closer — appears to mirror that of the White House, which has taken pains to seem unhurried despite its warnings of imminent calamity.”

The article noted that, “Separately, Senate Minority Whip Jon Kyl (R-Ariz.) said he understood that the deadline would be moved back, to later in August. ‘I have simply heard that they may be announcing that they can expand this to a later time in August. As I said, that wouldn’t be surprising to me,’ Kyl said.”

The Hill writers added that, “President Obama will meet with Senate Democratic leaders on Wednesday in the White House, but his press secretary emphasized that the meeting had been scheduled before debt talks led by Vice President Biden stalled last week over GOP demands that higher taxes be left out of a deal.

“Press secretary Jay Carney told reporters flying with Obama on Air Force One to Iowa that he did not have ‘a structure to provide to you’ on how the talks would proceed and that he did not want to ‘predict a schedule’ for talks.”

With respect to the House Agriculture Appropriations bill that passed June 16, recent articles have highlighted aspects of the measure relating to nutrition (“WIC funds threatened in budget fight.” The Detroit News- 6.28) and conservation (“Groups Push Back on Conservation Cuts.” DTN Ag Policy Blog- 6.28).

In other Farm Bill developments, the U.S. Government Accountability Office (GAO) recently released a Statement for the Record To the Committee on Agriculture, Nutrition, and Forestry, U.S. Senate titled, “U.S. Department of Agriculture: More Effective Management and Performance Can Help Implementation of the Farm Bill.”

 

Trade

Richard E. Cohen reported yesterday at Politico that, “Senate Finance Committee Chairman Max Baucus (D-Mont.) announced a breakthrough Tuesday on long-delayed trade agreements with South Korea, Colombia and Panama, scheduling a key Thursday committee markup on a major trade package.

The trade bill will also include an extension of the trade adjustment assistance program for unemployed workers, which the Obama Administration negotiated with Baucus and House Republicans. Key House Democrats have rejected those benefits as inadequate and continue to oppose the agreement with Colombia.”

Elizabeth Williamson reported in today’s Wall Street Journal that, “The White House and congressional leaders said Tuesday they would push for votes on three long-delayed free-trade deals and government aid to displaced workers, a risky maneuver that could determine the fate of the trade agenda for the rest of President Barack Obama’s term.

“Mr. Obama is gambling that he can overcome Republican opposition to his proposal to tie approval of the long-stalled treaties with South Korea, Colombia and Panama to the renewal in scaled-back form of the longtime Trade Adjustment Assistance program for workers hurt by foreign competition. Senior administration officials say that if the TAA program fails, Mr. Obama won’t send the agreements to Congress for ratification.”

The Journal article added that, “It’s not clear yet that the president and his allies—including some major business groups—have garnered the votes to win passage before Congress leaves Washington for its August recess. After that, 2012 campaign politics could sideline the trade pacts until 2013 or beyond.

“House Speaker John Boehner (R., Ohio) and Senate Republican Leader Mitch McConnell (R., Ky.) said through aides Tuesday they wouldn’t support linking the trade treaties to the TAA program, which they oppose as costly at a time of large budget deficits. In the House, Republicans could try to separate the three treaties and the worker aid into separate bills. In the Senate, Republicans launched a move to separate the measures.”

Kevin Bogardus and Vicki Needham reported yesterday at The Hill’s On the Money Blog that, “Baucus said he had secured an agreement with the White House and Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, to renew the expanded version of Trade Adjustment Assistance (TAA). The program, which funds job-training programs and healthcare benefits for workers hurt by trade, will be extended until the end of 2013.”

The Hill update added that, “Baucus said he would hold a mock markup on Thursday for all three pending trade agreements. Once lawmakers’ amendments are reviewed by the Obama administration, final versions of the trade deals’ implementing bills will be sent to Congress for up-or-down votes under Trade Promotion authority, often called ‘fast-track.’

“Not everyone, however, was on board with the deal to renew TAA.

“In a statement Tuesday, Sen. Orrin Hatch (R-Utah), ranking member of the Finance Committee, said it was ‘a highly partisan decision to include TAA in the South Korean FTA implementing bill’ and that doing so ‘risks support for this critical job-creating trade pact in the name of a welfare program of questionable benefit at a time when our nation is broke.’”

Felicia Sonmez reported in today’s Washington Post that, “If the deals are agreed to by both committees, any proposed amendments would then have to be reviewed by the Obama administration, and the final versions of the deals would be sent to Congress for an up-or-down vote in each chamber.

“But given the lukewarm response from Republican leaders Tuesday — as well as the potential for the House to try to separate TAA from the South Korea deal — it was unclear whether the trade pacts would make it through both chambers before the congressional recess in August.

“A senior administration official acknowledged that the negotiators had ‘agreed on the underlying substance’ of the trade deals but not on the process for moving the pacts through Congress.”

U.S. Trade Representative Ron Kirk, as well as the American Soybean Association welcomed the news yesterday that Senate Finance Committee will holding a “mock” markup of the draft implementing bills for the South Korea, Colombia, and Panama Free Trade Agreements.

 

Biofuels

James R. Healey reported yesterday at USA Today Online that, “The government has settled on a label for gas stations selling a blend of gasoline and ethanol called E15, which contains more ethanol — grain alcohol — than the E10 blend that’s replaced pure gasoline at most stations.

“The Environmental Protection Agency previously approved E15 — 85% gasoline and 15% ethanol — for use in vehicles back to 2001 models. The approved label is part of the EPA’s final rule spelling out about how E15 can be sold and what standards it must meet.

E15 isn’t available yet. EPA says sellers have to first register their blends with the agency to be sure they meet a number of standards. Probably nothing at stations until late this year, ethanol interests say.”

More news on this development can be found at EPA Online here and here.

Meanwhile, Reuters writers Charles Abbott and Timothy Gardner reported yesterday that, “Three senators are working on a legislative framework to replace the $6 billion a year U.S. ethanol tax credit with far less costly incentives such as helping retailers pay for so-called blender pumps.

“The package could terminate the excise tax credit as early as July 1, an industry insider said on Tuesday. He said the challenge for biofuels is how to expand sales and a key way is to introduce pumps that would allow drivers to choose blends from 10 to 85 percent ethanol.”

The Reuters article explained that, “Because the retooling of the incentives would save money this year, savings could be written into an agreement on reducing the federal debt. An agreement on the debt is needed by late summer.

“‘All sides continue to talk but … no deal has been reached,’ said a spokesman for John Thune of South Dakota. The other senators in ethanol discussions are Amy Klobuchar of Minnesota and Dianne Feinstein of California.”

Javier Blas reported yesterday at The Financial Times Online that, “The new head of the UN’s Food and Agriculture Organisation has warned against ‘demonising’ biofuels, in a reversal of the traditional position of the organisation that has in the past blamed them for contributing to high food prices.

José Graziano da Silva used his first press conference after his election as the new director-general of the FAO to defend his home country Brazil’s biofuel industry, which transforms sugar cane into fuel. The FAO estimates that the world consumes around a fifth of the global sugar cane crop into biofuels, most of it in Brazil.”

Keith Good

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