February 21, 2020

Budget and Farm Bill; Regulations; Trade; and MF Global

Budget and Farm Bill Issues

Janet Hook reported in today’s Wall Street Journal that, “Congress lurched toward another round of political brinksmanship, as haggling over payroll-tax relief has slowed approval of a year-end budget bill needed to keep the government open beyond Friday.

“The House, on a largely party-line vote, Tuesday passed its version of legislation to extend a payroll-tax break, renew extended unemployment benefits and offset the revenue loss with a package of spending cuts.

President Barack Obama promised to veto the bill because Democrats would rather pay for the tax break and jobless benefits with a tax increase on the wealthy than with spending cuts to health care and other domestic programs.”

The Journal article added that, “Senate Majority Leader Harry Reid of Nevada said the bill was dead in the Democratic-controlled Senate because House Speaker John Boehner (R., Ohio) added unrelated provisions designed to win support from reluctant conservatives—including support for constructing an oil pipeline that Mr. Obama has delayed, citing environmental concerns.”

The Journal article noted that, “In a gambit to ramp up pressure on Republicans, Democratic leaders and Mr. Obama decided to hold off on closing a deal on the government-funding bill until Republicans make concessions on the payroll-tax bill, Democratic officials said.

“The logjam is the latest demonstration of how hard it is for Congress to resist picking a political fight—even over the need to keep the government operating and the desire to avoid raising taxes amid a weak economy.”

Rosalind S. Helderman reported in today’s Washington Post that, “Prospects for a year-end congressional compromise on key tax and spending legislation grew more complicated Tuesday, as the Republican House passed a controversial version of a payroll tax cut extension despite a veto threat from the White House.

“The increasingly contentious tax dispute threatens to derail what had been an emerging compromise on separate legislation to fund the government through next September, raising the specter of a possible government shutdown this weekend if the conflict is not resolved by Friday.”

Robert Pear and Jennifer Steinhauer reported in today’s New York Times that, “Defying a veto threat from President Obama, the House on Tuesday passed a bill extending a cut in Social Security payroll taxes for 160 million Americans for another year. But the Democratic majority in the Senate vowed to reject the measure because of objections to other provisions, including one to speed construction of an oil pipeline from Canada to the Gulf Coast.

The 234-to-193 vote set the stage for negotiations between the House and the Senate that were likely to continue into the weekend.”

And Meredith Shiner and Daniel Newhauser reported today at Roll Call Online that, “With only three days left before a government shutdown, Democrats took a gamble Tuesday, strategically linking a package to extend the payroll tax holiday and unemployment benefits to an all-but-agreed-upon bill that wraps up fiscal 2012 appropriations.

“The White House and Senate Democrats are delaying action on the omnibus spending package because they worry that approving it would remove the incentive for House Republicans to stay in town and reach a compromise on the payroll tax cut extension. But in the process, they’ve made themselves vulnerable to the attack they’ve been using all year against Republicans: that they’re holding the government hostage until they get what they want.”

Meanwhile, in Farm Bill related developments, Hembree Brandon reported yesterday at the Delta Farm Press Online that, “Writing the new farm bill with a Republican House, a Democrat Senate, and the 2012 presidential election hanging over everything that goes on in Washington ‘is going to be a little crazy,’ says Dale W. Moore.

“‘It’s going to have a lot of folks scratching their heads, trying to see where things are headed,’ he said at the annual meeting of the Mississippi Farm Bureau Federation at Jackson.

“Then, once the new law is in place, ‘We’ll have to follow through on the regulations that are written to make sure the administration doesn’t come up with some creative ways to implement them that would not be in agriculture’s best interests.’”

The article noted that, “When the ‘Super Committee’ on debt reduction failed to come up with its assigned task of developing at least $1.2 trillion in federal spending cuts, Moore says, ‘the question then became what would happen to the proposed $23 billion in cuts that the leadership of the House and Senate Agriculture Committees had put on the table to try and protect the baseline budget for agriculture and serve as a starting point for the discussions of the new farm bill.

“‘More important to some was the question: Can we get back to square one and start the process over?

“‘The ag committee chairs quietly indicated they wanted to go back to ‘regular order’ — to sit down and determine what’s the budget baseline, what’s the policy bottom line they’re going to start from in the farm bill discussions?’”

And, an update posted yesterday at the Oklahoma Farm Report Online indicated that, “Pond Creek, OK farmer Jeff Scott, President of the Great Plains Canola Association (GPCA), led a delegation of winter canola farmers to Washington DC to meet with House Agriculture Committee Chairman Frank Lucas (OK-R) and other members of Congress and staff to discuss the ongoing development of the 2012 farm bill.”

Yesterday’s update noted that, “The Plains winter canola delegation made the trip to DC to voice their concerns and opposition to a new updated target price program under which deficiency payments would be ‘recoupled’ to production on planted acres up to the total aggregate crop base acres of a farm, effectively reversing the planting flexibility that has been in place since the 1996 farm bill. The target price program was reportedly a component of the legislation that the agriculture committees had intended to submit to the Super Committee as agriculture’s $23 billion contribution to deficit reduction before those efforts failed on November 23rd.

“‘Based on what we experienced back in the 1980s and 90s, it’s nearly impossible to set target prices in a way that accurately reflect the value of crops over time.’ Jeff Scott told those he visited with on Capitol Hill. ‘And if prices were to decline to near or below these support levels, they would inevitably impact planting decisions.’”



A news release yesterday from USDA stated in part that, “Agriculture Secretary Tom Vilsack today announced that the U.S. Department of Agriculture has revised its national conservation practice standard on nutrient management to help producers better manage the application of nutrients on agricultural land. Proper application of nitrogen and phosphorus offers tremendous benefits to producers and the public, including cost savings to the producer and the protection or improvement of ground and surface water, air quality, soil quality and agricultural sustainability.”

“NRCS’s [Natural Resources Conservation Service] nutrient management experts worked with universities, non-government organizations, industry and others to revise the standard to ensure it is scientifically sound. Key changes in the standard include expanding the use of technology to streamline the nutrient management process and allowing states more flexibility in providing site-specific nutrient management planning using local information when working with producers. NRCS staff offices will have until Jan. 1, 2013 to comply with erosion, nitrogen and phosphorus criteria for their state nutrient management standard.”

In an Op-Ed from earlier this week posted at The Baltimore Sun Online, Agriculture Secretary Tom Vilsack indicated that, “Whether it was on my ‘rural tour’ of states throughout the country or at workshops with the Department of Justice to discuss competition in agriculture, time and again, livestock and poultry producers have emphasized the need for a fair and competitive industry and workable, common-sense rules to address bad actors. The U.S. Department of Agriculture recently finalized a rule to implement the 2008 Farm Bill to help remedy some of these concerns.”

The item added that, “Our new rule, while smaller in scope than we had initially anticipated, does provide real and meaningful improvements. It will set new criteria to determine whether a poultry dealer has provided reasonable notice to growers when delivery of birds is suspended, when requiring additional capital investments is a violation of the Packers and Stockyards Act and when determining if a packer, swine contractor, or live poultry dealer has provided a grower reasonable time to remedy a breach of contract. Finally, the rule allows growers to decline arbitration and provides criteria for considering if the arbitration process is fair for the producer.”

Meanwhile, in an update posted yesterday at the USDA Blog, Agriculture Secretary Tom Vilsack indicated that, “The Environmental Protection Agency (EPA) constantly battles false and misleading information about its rules and regulations.  No better example exists than the myth that EPA proposed to ‘regulate’ dust on farm fields.  Simply not true! EPA is not now, nor has it ever proposed regulating dust.

“The House of Representatives sought to perpetuate this myth when it passed legislation to stop the EPA from tightening national standards for coarse particles—or dust.  The Obama Administration has repeatedly explained it has no intention of doing any such thing, raising the legitimate question of why the House spent time debating a non-issue.”

Nonetheless, on the issue of regulations, The Wall Street Journal editorial board stated today that, “The evidence is overwhelming that the Obama regulatory surge is one reason the current economic recovery has been so lackluster by historical standards. Rather than nurture an economy trying to rebuild confidence after a financial heart attack, the Administration pushed through its now-famous blitz of liberal policies on health care, financial services, energy, housing, education and student loans, telecom, labor relations, transportation and probably some other industries we’ve forgotten. Anyone who thinks this has only minimal impact on business has never been in business.”



DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “If you’re interested in free trade, forget about the Doha round — at least for a while — and learn the expression ‘TPP.’

“As trade ministers prepare to gather in Geneva this week to discuss the Doha round and the House Ways and Means Trade Subcommittee holds a hearing Wednesday on the Trans-Pacific Partnership, a panel of trade experts has declared the TPP as more exciting to American business, while a coalition of 60 agriculture groups urged the Obama administration to include Japan in the TPP group.”

Mr. Hagstrom added that, “Negotiations started in 2009 and the country leaders announced in Hawaii in November that they had reached consensus on broad outlines of an agreement. Trade analysts had initially played down the importance of the agreement because several of the countries are small, but Obama administration officials have made it their signature initiative and Japan, Canada and Mexico have shown an interest in joining.”


MF Global- Senate Agriculture Committee Hearing

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Six hours into a Senate Agriculture Committee hearing on the MF Global bankruptcy, the executive chairman of the CME Group dropped a bombshell.

Terrence Duffy, chairman of the CME Group, told senators at the hearing in Washington, D.C., that an auditor for the CME had participated in a phone call with MF Global employees, in which an employee from an MF Global affiliate in Europe indicated that MF Global CEO Jon Corzine knew about a loan from customer segregated accounts to the company’s own funds. The phone conversation took place over the first weekend when auditors from the CME were trying to find out what had happened to funds in the segregated accounts.

“‘We were told by MF Global they transferred money from customer segregated accounts to the broker dealer and stop looking for the accounting error,’ Duffy told a senator, reiterating his testimony. ‘We were also told that one of our employees was on a call with one of their employees when they said Mr. Corzine was aware of the loans being made from segregated accounts.’”

Mr. Clayton noted that, “Prior to Duffy’s testimony on Tuesday, no one in congressional hearings or public statements had offered proof to what many had suspected: That MF Global employees took money from customer accounts to manage shortfalls in the company’s own accounts.

“This conversation took place on Oct. 31, around 2 a.m., after a weekend of CME and Commodity Futures Trading Commission auditors trying to find an accounting error in MF Global’s books.

When asked for more details, Duffy said the phone conversation was specifically regarding a $175 million loan made to a foreign affiliate of MF Global.”

Yesterday’s DTN article indicated that, “Agriculture Committee Ranking Member Pat Roberts, R-Kan., told Duffy: ‘You have sort of tossed a bomb here right in the middle of what we are trying to find out in who is responsible’ for the lost customer funds. Roberts pressed for more information on what Corzine knew.

“‘All I was told was that Mr. Corzine was aware of the loans that were made,’ Duffy said.

Duffy’s statement contradicted testimony from Corzine earlier in the day-long hearing in which he repeatedly stated he did not know what had happened to the customer funds. Corzine opened his testimony earlier in the day by telling senators he never gave anyone instructions to misuse customer funds. However, Corzine left open the door that a staffer at MF Global could have misinterpreted instructions.”

Mr. Clayton also pointed out that, “Farmers and commodity users testified early Tuesday that the MF Global bankruptcy, and the 38,000 futures accounts frozen in the process, had affected their ability to protect their farms from market risks. They stressed a need for customer accounts to be made whole in the process.”

Bloomberg writer Tiffany Kary reported yesterday that, “Jon Corzine, the former chief executive officer of MF Global Holdings Ltd., knew that the company made a loan out of segregated customer accounts before it went bankrupt, CME Group Inc. chairman Terrence Duffy told the U.S. Senate.

“Duffy, whose company is MF Global’s regulator and principal exchange, faced questions about a shortfall of some $1.2 billion in missing customer funds. CME and Commodity Futures Trading Commission staff had been told a discrepancy existed in the customer funds, which by law are required to be kept separate from company funds.”

The Bloomberg article stated that, “On Oct. 31, the day MF Global filed the eighth-largest bankruptcy in U.S. history, ‘a CME auditor also participated in a phone call with senior MF Global employees, wherein one employee indicated that Mr. Corzine knew about the loans that it had made for the customer — from the customer segregated accounts,’ Duffy said yesterday.

Corzine in earlier testimony said that he couldn’t explain why money was missing from customer accounts, and that he had been surprised to find out that money was missing from customer accounts on the night of Sunday Oct. 30.

“The loan may have been for $175 million to a European affiliate of MF Global, Duffy said. He said he believed the loan was made from customer segregated accounts in the last few days before the bankruptcy filing. Duffy didn’t say whether Corzine learned of the loans in advance of the funds being moved. He also didn’t say whether the loans were a legitimate use of customer accounts.”

Keith Good

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