Interview With USDA's Schafer & Conner

Published on: 06:28AM Jul 29, 2008
via a special arrangement with Informa Economics, Inc.


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TOPICS: Doha Round, Sugar, RFS, Haying & grazing court decision, CRP early out, Farm Bill implementation

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On the heels of an active week in farm and trade policy on the global and domestic front, Pro Farmer News Editor Roger Bernard and I spoke with USDA Secretary Ed Schafer and Deputy Secretary Chuck Conner on a host of issues Friday afternoon. Their comments revealed a lot of work is ongoing at USDA in terms of getting the new farm bill implemented, the Doha Round of trade talks and two issues relative to the Conservation Reserve Program (CRP) -- the recent Critical Feed Use (CFU) court decision and the still-pending CRP early out question.

-- On the Doha Round, indications are pointing to President George Bush wanting a successful conclusion to the Doha Round as a "legacy issue," a conclusion Schafer agrees with. "We have been working for seven years on this deal. Importantly, as things have changed around the world, we have worked on this. It will be a huge accomplishment."

But Schafer said he wasn't certain how long the negotiations could last relative to a successful outcome under the Bush presidency. "It depends on which hour you're talking about. This waxes and wanes. While there has been good progress made, I wouldn't want to venture a guess on how long it will take."

-- Regarding farm program implementation relative to the 2008 Farm Bill, Schafer turned to Conner who was the point man on the farm bill and is now the point man on farm bill implementation. "We have five tiers of these programs that we're working on," Conner noted.

The initial focus -- Tier 1 -- has been on matters that get payments in the hands of farmers this year. "Anything that requires money on the table to farmers this year, that involves Tier 1," he said. "That's why we pressed to get signup for the program going so we could get the advance direct payments out there, which we have done. For 2008, our guys have done a good job of getting things in motion."

As for changes in the posted county price (PCP) system, Conner observed that was "an important part" of the new bill, but it isn't a Tier I issue. The initial Tier I focus has been on matters getting the advance direct payments to farmers. PCP changes are a close second on implementation for the fall harvest out there, but we're still dealing with this issue."

The farm bill directed USDA to go to a system other than the daily system of PCPs that has been in place for years. "We're sorting through that and trying to figure the implications that going to a system other than the daily one," Conner said. "The law gives us some latitude on this and we want to make the right call for the producers."

As for lawmaker assurance they would give USDA the authority to issue advance disaster payments to farmers for crop losses incurred this year, Schafer said, "I haven't seen any authority. Part of the problem is that this goes beyond just an annual price problem. It's a revenue-based program." He further noted that if a producer is unable to plant "the north 40" to corn but was able to seed beans and they do well, that could mean a problem for the producer to qualify for aid. "Under total revenue, they might not qualify based on the revenue for the whole farm," he noted. "There's no way we can generate a way to do advance payments under that type of situation," Schafer said.

However, Schafer said that if lawmakers want to come up with a way to make that happen, USDA would try to implement it.

The Average Crop Revenue Election (ACRE) program is of great interest in farm country, but Conner cautioned that one is not a Tier I program. "It is a very important program and since it is applicable to the 2009 crop year, it's not part of Tier 1," he said, and it won't likely be done in time for the first producers to seed 2009 crops -- winter wheat.

"There is a lot of work going into ACRE implementation," Conner assured. "It's a complicated program and it will take a lot of resources to put together, including things like yield benchmarks."

Regarding the payment limit changes and adjusted gross income shifts in the new bill that could affect how producers may structure their operations, Schafer said, "There are payment programs in place now and these are things we've done before. But is the guy sowing winter wheat going to have all the answers? No. But ACRE will be retroactive so they can come back in and sign up for it."

Conner added that defining "actively engaged" is not a Tier I issue but work is under way on this issue.

-- Turning to the Renewable Fuels Standard (RFS) and the possible waiver decision that EPA has delayed until early August, Schafer confirmed he has met with EPA Administrator Stephen Johnson and that "we've had input on this as we are an official consultant."

But, interestingly, Schafer said the delay on the part of EPA was not related to USDA's first survey-based estimate of the U.S. corn crop, which is due out Aug. 12. "I know they are not delaying this for the August report," Schafer stated. "It's an effort to generate the document that they need to vet through two other agencies and to categorize the 15,000 comments they received. I'm very sure it isn't an issue of wanting to wait for more data."

-- Regarding U.S. sugar import policy, via the Tariff Rate Quota (TRQ), Schafer said any discussions on modifying the TRQ has not taken place at his level. "We have a situation of high-priced refined sugar and low-priced raw sugar, and we are aware of that. But we're not churning on any TRQs at this table" (meaning he and Conner).

-- Regarding this week's court ruling on the Critical Feed Use (CFU) effort, Schafer said the ruling "let stand the thousands of acres that we've already given a permit to or acted on an application for. There was no attempt to change what we've already done, and I'm not sure that I would read that we have a mandate to start doing things different than we have done."

The $4,500 spending requirement for those who have not yet applied but want to use CFU was a "dumb number," Schafer said with some disgust. "There's no facts or accounting behind it. That's a random number."

As for how many acres USDA thinks will actually be hayed or grazed, the two officials said it would be the 3 million acre figure they've been working with. Some 4,000 applications were already approved out of 10,000 total applications at the time of the Temporary Restraining Order (TRO). Schafer said "We'll see how many of the remaining applications qualify."

But despite the displeasure at the $4,500 requirement, Schafer also confirmed that they are not going to appeal the decision.

-- Moving to the issue of CRP early out without penalty, Schafer and Conner said they are not aware that an Environmental Impact Statement or an Environmental Impact Analysis had been done.

"It's our intention at this point, and this is without 15 lawyers being in the room right now, that we will deal with this as we have always dealt with it, using the same environmental systems to make the same determinations," Schafer said.

However, Schafer surprisingly said the CFU and early out issues are separate. "There have been lots of discussions on this with lawyers and staff, and they are two separate rulings... two separate issues," Schafer commented. "I do not see a tie-in, but we are taking the CFU issue into consideration based on some of the comments and decisions made by the Bench. But I don't see one holding up or advancing the other."

Asked whether there would be a possible per-acre penalty for taking land out of CRP early, Schafer said, "We're looking at everything." He said the current penalty structure is based on "what taxpayers have put into the deal. We are sorting through this and we have not made a decision."

Regarding a timeline for a decision, Schafer quipped, "Two weeks ago!"

"We want to get this done," Schafer added. "There are a lot of factors involved here, not the least of which is revenue. There are also environmental and wildlife issues. This is taking longer to get done, but we're mindful of the problem and are aware of the field preparations for winter wheat and even for next spring's planting that has to be done."

Schafer would not commit to a date-certain to make the decision, but said, "It will come in plenty of time..... make that on the edge of time... for people in winter wheat country."

Importantly, Schafer also said there was no relationship to the RFS decision or to the Aug. 12 Crop Production Report on the early out CRP decision.

When asked about what a former USDA official has indicated regarding a legal view within USDA that unless an EIS was done, USDA could be vulnerable in court, Conner paused and said, "I don't know. I don't remember anything like that. When we were reviewing this (for 2008), we weren't joking when we told you we were reviewing things literally daily. I can't tell you every comment that was made at those meetings. But as for this decision, the time to make it is now. We've got the info to make the decision."

On any impact statement, Schafer said, "You have to make the decision based on time-sensitive information. That changes a lot. That changed when a good portion of Iowa went under water. That affects the ability to engage in longer-term studies and the impact of those studies. It creates a challenge."

But Schafer said indications are that recent USDA projections for 2009 are that more acreage of corn will be coming back into production and going away from soybeans. "If market conditions are allowed to operate properly and there are no unusual conditions, that acreage between soybeans and corn is going to be re-adjusted to a more traditional acreage," Schafer said.

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