UPDATED - Policy Issue Updates: April 3, 2014

April 3, 2014 03:44 AM

via a special arrangement with Informa Economics, Inc.

Ukraine, Russia | House budget resolution | Tax incentive extenders | 2014, 2015 RFS | Keystone pipeline | Farm policy | Food safety | Poultry inspection rule | Dairy concerns re: methane strategy | Trade policy| Biotechnology | Ag equipment

Washington has been relatively active this week, especially in events on tap today, so the following is an update on some important policy issues of interest to Pro Farmer members:

FOREIGN POLICY: Obama to meet with congressional leaders today on Ukraine, Russia. The White House said President Obama would host House Speaker John Boehner (R-Ohio), House Minority Leader Nancy Pelosi (D-Calif.), Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.) for a meeting in the Oval Office, largely on his recent trip to Europe and in particular a discussion about Ukraine and Russia. Earlier this week, the White House said Secretary of State John Kerry and Russian Foreign Minister Sergey Lavrov have agreed to meet again in hopes of brokering a deal to deescalate the situation — although no firm date has been set. Over the weekend, Kerry and Lavrov met in Paris for nearly four hours in a bid to lower tensions in the region. On Wednesday, the pair spoke by phone in what the State Department described as a "brief" conversation. State Department spokeswoman Marie Harf said that the US remained "very concerned about the Russian troops amassed on the border" and could not confirm reports that a small number had been pulled back. But, she said that the US had not "seen further escalation by Russia," which she described as "a good thing," adding that, "We’ve been working very closely directly with Foreign Minister Lavrov to see if there’s a diplomatic path forward here. So that process continues. It’s a difficult one, but it does continue." Meanwhile, Russia has "no restrictions" on troop movements within its own territory, Foreign Minister Sergei Lavrov told reporters in Moscow. President Vladimir Putin made no promise to German Chancellor Angela Merkel on immediate troop withdrawal, and said troops would return to bases as exercises finish.

US lawmaker concerned that sanctions on Russia could hurt US livestock exports. Rep. Sanford Bishop (D-Ga.) noted concern that proposed US, EU and United Nations sanctions against Russia for its annexation of Crimea could hurt US livestock exports. "The sanctions are really a two-edged sword. It hurts us as much as it hurts them," Bishop said at a House Agriculture Appropriations Subcommittee hearing Wednesday. Kevin Shea, administrator of the Animal and Plant Health Inspection Service, said USDA was not aware of any specific fallout from proposed sanctions. "We’ve sent thousands of live cattle to that region in the last few years. It’s a booming new market for us. We will stay on top of it," Shea said. He said APHIS would work with the State Department on the sanctions.

Payment procedures for steel and grain trade deals involving Russia have been tightened by Western banks, with "pre-financing" reduced and payments are now being issued only upon proof of materials being loaded on a vessel for shipping, according to Reuters. The combination of unrest and impacts of sanctions are behind the shifts, according to the report. Previously, banks had been allowing the transfer of some funds while materials were still in Russia and Ukraine, the reported noted. As for grains, Reuters quoted Swithun Still, director of Solaris Commodities, as saying that banks were cutting down on "pre-financing" and were making payments only when grain was loaded on a vessel. "A lot of the Swiss and Western banks have been withdrawing their finance until the bill of lading. The shadow banking sector is having a bit of a field day, because they are able to charge 8-10 percent (interest), if not more. Before the crisis the rate was roughly 3-3.5 percent," Still said. Despite the situation, there has not yet been an impact on Russian and Ukraine steel and grain exports so far, but some raised the prospect that the coming spring seeding campaign in Ukraine could be impacted. "One thing to watch is the crop being seeded this year," Still stated. "Fifty percent is seeded from imported seeds. You could see the Ukrainian grains crop being reduced this year." However, that runs counter to a report in February from USDA which addressed the 2014/15 grain crop situation. "Access to the standard sources of agricultural credit for Ukrainian agricultural enterprises has not been impeded," the report noted, adding, "Agricultural producers in most cases either rely on their own resources or sign forward-sale contracts with grain trading companies in exchange for inputs. Producers can purchase seed and plant-protection chemicals from large importers on credit." The USDA report also pointed out that access to credit for these purchases "has not been reduced; seed companies report that sales are proceeding as usual, and fertilizer and fuel are being delivered on time as well."

 BUDGET POLICY: House budget plan expected to pass next week. The House Budget Committee approved Chairman Paul Ryan’s (R-Wis.) Fiscal 2015 budget plan, sending it to the floor for a vote next week. The panel backed the proposal, 22-16. Republicans defeated 24 Democratic amendments that would restore spending for domestic programs and endorse immigration, minimum wage and unemployment insurance proposals. House GOP leaders expect the budget resolution to pass on the House floor. The resolution would call for $5.1 trillion in cuts to federal spending over the next decade, and would adhere to the outlines of the budget deal struck last year by Ryan and Senate Budget Chairwoman Patty Murray (D-Wash.). Sixty-two House Republicans voted against that compromise in December. The House budget plan will not be considered in the Senate. Still, the House budget plan proposes $125 billion cut in five years to food stamps, also known as the Supplemental Nutrition Assistance Program. The resolution also recommends turning SNAP into a state-run block grant program. The proposal calls for an expansion of SNAP work and job training requirements to receive aid from the Temporary Assistance to Needy Families Program. Republicans defended the plan's attempt to block-grant SNAP and turn it over to the states to run. "The best way to get people off of food stamps is to get them a good job," said Vicky Hartzler (R-Mo.). "So I hope my colleagues will support this budget, which provides tax reform and repeals the president’s health care law, which is killing jobs."

Brady to challenge Ryan for leadership of House Ways & Means panel. Joint Economic Committee Chairman Kevin Brady (R-Texas) plans to challenge to Budget Chairman Paul Ryan o(R-Wis.) to become the top GOP tax writer next year. Both Republican lawmakers on Wednesday praised retiring Ways and Means Chairman Dave Camp (R-Mich.) and made clear they hoped to succeed him. Brady currently handles economic oversight, chairs the Ways and Means Health Care Subcommittee, and leads several tax coalitions. Ryan has made his work as Budget chairman central to the House Republicans’ public policy priorities.

TAX POLICY: Senate Finance panel today to markup tax extenders measure. New Senate Finance Chairman Ron Wyden (D-Ore.) today leads a markup of legislation to end the impasse over temporary tax breaks that expired at the start of the year, but the draft measure would leave behind 10 of the 55 provisions. Included in the retroactively, two-year extension (through 2015) is the lapsed biodiesel tax incentive, and Section 179 expensing so important to farmers. The Finance Committee will approve the extenders, but the key will be when the full Senate and especially the House takes up the topic. Most sources continue to signal the end zone on this issue will not come until after the Nov. elections, during a lame-duck session of Congress. Not included initially is the renewable electricity production tax credit, prized by the wind energy industry — and supported by Wyden. Sen. Chuck Grassley (R-Iowa) will offer the credit as an amendment to the bill (some 100 amendments have already been filed – Link to amendments). Many of the extra measures won't reach a vote, based on rules Wyden outlined to decide which will be considered germane to tax extenders. Sen. Debbie Stabenow (D-Mich.) offered a measure to establish new tax-exempt agricultural research organizations modeled off legislation (S 1280) she introduced with Sen. John Thune (R-S.D.).

Bonus depreciation would be renewed through 2015 at a significant up front cost of $74 billion in Fiscal 2015 under Wyden’s initial draft. Anticipated revenue in later years would reduce the net cost to $2.9 billion over a decade. The deduction allows companies to immediately expense an extra 50 percent of the cost of qualifying property, such as equipment and computer software, instead of depreciating the value over time. Companies could also continue to claim additional alternative minimum tax credits instead of bonus depreciation. Section 179 previously allowed farmers and other businesses to deduct up to $500,000 of new or used equipment purchased during the tax year. On Dec. 31, 2013, however, the limit was restored to $25,000, its original limit, plus a small adjustment for inflation, for the 2014 tax season.

Cost impacts. A Joint Committee on Taxation estimate released April 1 indicated that Wyden's first proposal would cost the government $67.4 billion in forgone revenue for the 10-year period ending with the 2024 federal fiscal year, and an estimate provided by the committee's majority staff on another dozen provisions that could get added back in a modified chairman's mark tacked on $19.5 billion more. Most of that cost would come from just one of those 12 additional provisions, a tax credit for producing energy from wind. Estimated to cost $13.5 billion over the decade ahead, it will be part of the revised extenders mark, said Grassley. Of note, the initial draft released by Wyden on April 1 did not include any offsets to pay for the tax extenders. This is standard for previous temporary tax extensions. However, Wyden said that if any tax provisions are broadened beyond simple extension of the expired tax law, additional revenue would be required as an offset.

Outlook: The Senate Finance Committee will clear an extenders package. Unclear is when the matter will come before the full Senate and even more important how and when the House will consider the topic. Congressional sources continue to signal this matter will not be finalized until later in the year, likely after November elections during a lame-duck session of Congress.

UPDATE -  Senate Finance Panel Clears Tax Incentive Extenders Bill. The Senate Finance Committee today cleared by voice vote a bill on expired tax incentives, including biodiesel. The panel's approval was widely anticipated. Before the final vote, the panel voted to voted to extend a tax credit for displaced workers. The package tax extenders would revive and extend for two years popular business tax preferences such as the credit for research and exploration and individual breaks for mortgage interest and mortgage debt relief, as well as the biodiesel tax incentive. The panel also approved by voice vote another draft measure that would make technical corrections to existing recent tax laws and repeal "deadwood" provisions. In all, the legislation includes about $22 billion in energy tax provisions over 10 years, including $3.7 billion in credits for alternative fuels and vehicles, such as the $1 per-gallon credit for biodiesel and a 50 cents per-gallon credit for other kinds of alternative fuels, including liquefied natural gas and hydrogen. The bill must further be considered by the full Senate and the House (see box below). It would extend tax breaks retroactively through Dec. 31, 2015. Congressional contacts signal the House may not take up the matter until after November elections, during a lame-duck session of Congress.

 ENERGY POLICY: McCarthy promises 2014 RFS final rule by June, perhaps sooner. During congressional testimony April 2, Environmental Protection Agency Administrator Gina McCarthy promised a final renewable fuel standard (RFS) for 2014 by June. Testifying before two House Energy and Commerce subcommittees, McCarthy also promised that a final regulation on the management of coal ash would be completed on time in December and reiterated that President Barack Obama wanted to promote natural gas exploration through hydraulic fracturing as long as it was shown to be safe to human health and the environment. Asked about the RFS, McCarthy told the subcommittees she hopes to finalize the 2014 renewable fuel standard by June. "If I can do it more quickly, I'd like to," McCarthy said. In November 2013, the EPA proposed requiring petroleum refiners and importers to blend 15.21 billion gallons of renewable fuels in 2014, substantially less than the 18.15 billion gallons Congress mandated under the 2007 Energy Independence and Security Act. The corn-ethanol mandate was initially set at 13.01 billion gallons, much to the dismay of ethanol proponents. Also, asked about the 2015 RFS, McCarthy said she hopes the agency can propose the annual renewable fuel standards earlier in hopes of reducing uncertainty that could limit investment in the renewable fuel industry.

Keystone proponents eye May as final approval announcement. Senate Republican supporters of the Keystone XL pipeline are looking to the upcoming end of the 90-day public comment period on whether the project is in the national interest as they weigh trying to force a vote on the topic. "First part of May, OK, let’s go," said Sen. John Hoeven (R-N.D.), for a mid-May vote on legislation to hasten a decision. The three legislative options remain a nonbinding resolution decreeing congressional sentiment that Keystone is in the national interest; a bill establishing a timeline for a decision; or a bill outright approving the presidential permit needed to cross the US-Canadian border. Hoeven conceded that Majority Leader Harry Reid (D-Nev.) was unlikely to allow votes on any of the energy-related amendments to the jobless aid extension before the Senate, including one that would approve Keystone XL and expedite LNG exports to the Ukraine, Japan and NATO members.

FARM POLICY: Vilsack appears today before House Ag Committee. USDA Secretary Tom Vilsack will be the key witness during a House Ag panel hearing to review the "State of the Rural Economy." He will likely again update on the progress of implementing the 2014 farm bill, likely beginning with the coming signup for the livestock disaster programs. USDA's next major task is to help communicate the new farm bill options and provisions to farmers. Included in that educational effort is some $3 million being made available to educational institutions. USDA is reviewing which land grant colleges and other places will get that funding, but it is widely expected to go to the Univ. of Illinois, Ohio State Univ., Texas A&M, among others. Link to USDA release today on its farm bill implementation progress so far.

Crop insurance payment cap legislation was introduced by Sens. Jeanne Shaheen (D-N.H.) and Tom Coburn (R-Okla.) that would save up to a billion dollars over 10 years by capping federal crop insurance premiums at $70,000 per farm each year. The legislation will not likely go far in the legislative process so soon after a new farm bill was completed, but the measure shows that this program will be a favorite target for lawmakers seeking budget offsets or budget cutting areas in the future. "Crop insurance subsidies are yet another example of egregious government spending that needs to be reeled in," said Shaheen, who may face a tough reelection race this fall. Coburn is retiring.

FOOD POLICY: Several hearings on tap today regarding food policy, food safety issues. FDA Commissioner Margaret Hamburg testifies before the Senate Agriculture Appropriations subcommittee today. She will likely be asked about the rollout of rules for the Food Safety Modernization Act (FSMA). She could be asked about the menu labeling rule that FDA was required to implement under the Affordable Care Act. That rule, plus a second one requiring calorie labeling on vending machines, was formally sent to the Office of Management Budget for review today. Ahead of today's hearing, Sens. Dick Durbin (D-Ill.) and Kirsten Gillibrand (D-N.Y.) sent a letter to the subcommittee's leaders seeking "robust" funding to ensure for food safety at FDA and USDA. "We request additional funds be appropriated towards the goal of implementing FSMA," the letter said. "It is critical that the FDA is provided funding necessary to modernize our food system." President Obama’s FY 2015 budget request includes $24 million in new money for implementation of the law.

Poultry inspection rule a likely focus at hearing today. House Agriculture appropriators will likely ask Brian Ronholm, USDA's acting food safety undersecretary, about a pending poultry inspection rule. Supporters say it moves food safety into the 21st century and opponents argue undermines federal oversight of food.

ENVIRONMENTAL POLICY: Dairy farmers concerned about administration's methane strategy. A House Energy and Commerce hearing Wednesday included questions on methane strategy. It was noted that some dairy farms fear the White House’s climate strategy could eventually force producers to install methane digesters. "No one at this point that I know of is talking about anything in the regulatory context," said EPA Administrator Gina McCarthy. The Obama administration would like to see farms install the equipment, which convert manure emissions electricity, but only as part of a voluntary, "collaborative process" to reduce methane emissions, McCarthy said. But Rep. Lee Terry (R-Neb.) told McCarthy that "when farmers hear voluntary they know it’s followed up with mandatory." Farms with no more than 300 cows couldn’t afford the equipment, he said.


Lucas targets regulatory policy issues. House Ag Committee Chairman Frank Lucas (R-Okla.) in a prepared statement before a House Ag Hearing on the rural economy listed several regulatory issues he is concerned about. USDA Secretary Tom Vilsack is slated to testify at the hearing. The following are comments Lucas made regarding regulatory issues he is concerned about:


"Providing regulatory relief for our producers is another priority. I am concerned about the administration’s regulatory initiatives that can harm the health of production agriculture and rural America. These initiatives often, but not always, originate at other agencies by people who have no frame of reference for how farmers produce our nation’s food supply.


"The latest example of this disconnect is the Environmental Protection Agency’s recent proposed rule to redefine the scope of waters protected under the Clean Water Act. Under this proposal, small streams and ditches would be regulated even if they are miles away from navigable waters, even if they are dry most of the time. This is an expansion of power that defies common sense and puts the livelihoods of our agricultural producers in jeopardy.


"Further, the EPA has proposed or finalized more than 100 new greenhouse gas-related regulations exceeding 3,000 pages in the Federal Register. These regulations impact everything from transportation to energy. Agriculture relies heavily on both of those economic sectors so anything that negatively impacts them, negatively impacts us. Ultimately, this represents an unprecedented expansion of regulatory control over the US economy as a whole and the rural economy specifically. Today, I hope you will share with us your thoughts on some of the actions of the EPA and other agencies and their impact on production agriculture.


"Closer to home, we recently learned from constituents that the Dietary Guidelines Advisory Committee, which is jointly appointed and overseen by your agency and Health and Human Services, is venturing into areas like methods of food production. This is a subject matter that is beyond the Advisory Committee’s scope and understanding and could affect regulations it is not even qualified to assess."

TRADE POLICY: US Trade Representative Michael Froman will testify today before the House Ways and Means Committee, but his previously scheduled appearance before the Senate Finance Committee today was rescheduled for April 30 so the panel can deal with a tax extenders bill instead. Froman will talk about the Obama administration's trade agenda, including pending trade agreements with Asian and EU countries, and the need for Trade Promotion Authority (TPA).

No breakthrough in US-Japan talks: Japanese official. No breakthroughs were achieved in bilateral talks between Japan and the US on autos and non-tariff measures following three days of negotiations in Washington, Japan's Ambassador to the Trans-Pacific Partnership Takeo Mori said April 2. Mori reported steady progress in the TPP-related talks, and he said the negotiations would resume in Tokyo the week of April 7. While in Tokyo, acting Deputy US Trade Representative Wendy Cutler, who represents the US in the talks, will also meet with Japanese Ambassador Hiroshi Oe, Japan's deputy chief TPP negotiator, concerning market access, Mori said. Mori would not say when or if US Trade Representative Michael Froman would join the negotiations in Tokyo. The Japanese negotiator commented on President Barack Obama's upcoming visit to Tokyo. He said that the visit, which is expected at the end of April, is not a deadline for the negotiations but represents an opportunity. Obama will visit Japan April 23-25.

USTR Froman says 'it's time for Japan to step up'. Japan should agree that it won’t seek exemptions for goods including agricultural as it seeks to complete the Trans-Pacific Partnership (TPP) deal with 11 other nations, US Trade Representative Michael Froman said. "It’s time for Japan to step up," Froman said today at a House Ways and Means Committee hearing. "Japan’s not the only country that has sensitivities. We all have sensitivities." The US and other TPP nations are seeking to complete the trade deal.

COOL: A lack of a backup plan should the United States lose the pending WTO case Canada and Mexico filed relative to the US country-of-origin labeling (COOL) rule, and frustration over USDA's biotech acceptance pace were two issues House Ag appropriators pressed USDA about during a hearing. Ed Avalos, USDA's undersecretary for marketing and regulatory programs, was pressed on whether there is a COOL fallback plan if the World Trade Organization (WTO) rules against the rule USDA issued last summer. USDA Secretary Tom Vilsack recently indicated no such backup plan existed, despite a prediction from House Ag Chairman Frank Lucas (R-Okla.) that the US would likely lose the WTO case. The rule requires meat processors to specify state each country where an animal was born, raised and slaughtered. Last week, a federal appeals court rejected an effort by the meat industry to block the labeling rule. What if question asked. Rep. Kevin Yoder (R-Kan.) and House Ag Appropriations Subcommittee Chairman Robert Aderholt (R-Ala.) asked Avalos to consider the possibility that the US could lose the WTO case. "We’ll do our best to address it at the time," Avalos said, while stressing the department was confident the rule would survive the challenge.


-- Lucas blasts Senate inaction on COOL. During a House Ag Committee hearing today, House Ag Chairman Frank Lucas (R-Okla.) said, "Mandatory country-of-origin labeling is another concern of this committee.  It is hard to think of a greater disappointment than our inability to address the economic dislocations that have already occurred, as well as those yet to come, associated with our flawed mandatory country-of-origin law.  It is well known that I, along with a majority of the House Agriculture Committee, support repeal of this onerous law, and we were hopeful the Senate would be willing to work with us to find a solution.  But the fact is the Senate refused to do that.  I remain worried that our economy faces $2 billion in retaliation that will lead to greater disruption in the livestock sector and the loss of countless jobs.  I hope you will pledge today to work with me to secure a real and lasting solution to this problem, which has existed for far too long." Translation: A win for Senate Ag Chairwoman Debbie Stabenow (D-Mich.).

BIOTECHNOLOGY: Panel members also made clear their frustration with the pace of approvals of new biotech crop varieties. Kevin Shea, administrator of USDA's Animal and Plant Health Inspection Service, told the panel that the agency has streamlined its review process and trimmed a backlog of 22 applications to 16. But Shea said his agency can move only so quickly because the decisions must be able to be defended in court. After Aderholt asked if it was USDA’s policy to slow down GMO applications, Avalos said the APHIS goal was to "do it right." Asked about the date when APHIS could assure the backlog was cleared, Shea said the agency could process reviews more quickly once the pending applications are reduced to 12 to 13 cases. APHIS could reach that point a year from now, he said.

AG EQUIPMENT SECTOR: The agriculture equipment industry is pushing for legislative and policy makers to keep them in mind when weighing issues like the Renewable Fuel Standards and international trade agreements, noting that moving forward with regulations unfriendly to the sector could have a considerable impact on the economy. In its 30-page white paper, "The economic footprint of the agricultural equipment industry," the Association of Equipment Manufacturers finds that the industry had a $51 billion economic foot print in 2011, accounting for 377,000 jobs. Link to white paper.


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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