Vilsack to Lawmakers: All Farm Aid Spent

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Until Congress passes a measure to fund the government past September 30, USDA has done all it can to aid farmers hit by low commodity prices, USDA Secretary Tom Vilsack told the Senate Agriculture Committee during a Wednesday hearing on the state of the US farm economy. The department has exhausted its funds to provide direct and guaranteed loans for farm operating capital, activated its dairy margin protection program and bought $20 million in cheese to bolster dairy farmers, but USDA will have to wait until the beginning of the next fiscal year (October 1, 2016) to examine more options, Vilsack said. “At the end of the day, everything I can do, I have done; every penny that I could have spent, I spent,” he said. Link to Vilsack testimony and video of hearing.

Congress has yet to send any appropriations bills to the president’s desk, and lawmakers are likely to craft a continuing resolution (CR) to fund the government past its September 30 deadline. Vilsack said that it was not likely the CR would provide any additional financial aid to farmers beyond the typical amount appropriated, but the department would examine its options once its funds were replenished. “Hopefully with the CR we can take a look at what additional steps we might be able to provide for some of these segments of the industry that are struggling, if the numbers are there,” Vilsack said. “We are seeing some improvement in some markets, and hopefully that continues.”

Regarding the US farm financial situation, Vilsack said data suggest net farm income remains relatively high by historical standards. The five-year average of net farm income since 2014 has ranged between $85 billion (for 2012 to 2016) to $96 billion (for 2010 to 2014), the highest levels since the mid-1970s. Vilsack said most farms have a “strong balance sheet” and delinquency rates remain lower than the 2005 to 2014 average. “It is clear financial stress is increasing and that some producers are more exposed to financial risk,” Vilsack said. “In general, those producers with high costs of production, rent a significant portion of their land base, or have increased borrowing to cover operating costs will be most exposed to financial risk as returns decline with commodity prices.”

The current farm safety net, Vilsack noted, continues to help farmers. In 2015, government farm program payments totaled about $10.8 billion and are expected to increase to nearly $13.8 billion in 2016, Vilsack said. In addition, the crop insurance program offset more than $6 billion in farm losses in 2015 and is expected to cover more than $9 billion in 2016. Last year, USDA enrolled 1.76 million farmers in the new Agriculture Risk Coverage, or ARC, and Price Loss Coverage, or PLC. Vilsack said the two programs have provided $5.3 billion in financial assistance for crop year 2014 to more than 1 million farms.

Vilsack called on lawmakers to change the dairy Margin Protection Program (MPP) to factor in regional differences in costs. “It is a national program that does not appreciate the regional differences that exist within the dairy industry, and so there is a tweak there that could be done,” Vilsack said. The insurance-type program, which pays out to participants after average profit margins for a commodity fall below a specific level, currently calculates input costs on a national standard. The MPP paid out about $11 million. However, Vilsack said that had producers stuck with the same level of coverage as in 2015, farmers would have seen some $40 million in payouts. In 2015, 44 percent of the farms participating in MPP selected the lowest coverage level. This year, more than 77 percent did so.

Lawmakers should approach the next farm bill differently from how Congress started talks over the 2014 Farm Bill, Vilsack said in repeating a statement he has made several times recently. When negotiating the 2014 bill, lawmakers began with one challenge in mind, saving money, he said. “When you start the farm bill conversation that way, you essentially begin the process of pitting the interests that are represented in this farm bill, which are broad, against one another,” Vilsack said. “I think it would be much more helpful and much more profitable for us to start the conversation with what is the need.”

GIPSA proposal. Sen. Thom Tillis (R-N.C.) brought up USDA Grain Inspection, Packers and Stockyards Administration plans to craft rules meant to increase transparency in contracts between livestock producers and processors. Known as the GIPSA rule, it would likely expand the definition for unfair contracting practices between producers and processors, set a base price for growers of the same kind of poultry, and require processors to release sample contacts, among other changes. Some critics, however, have said the rule would be burdensome and a regulatory overreach. Vilsack said he could not give details, as the department was still working out the particulars of a rule, but he told lawmakers that the USDA would allow time for the public to give input. “There is no intent or desire on the part of the USDA, as long as I’m secretary, to sort of foist something on folks without at least giving the opportunity for them to understand what it is, without the opportunity to say whether we have it right or wrong,” Vilsack said.

The House Appropriations Committee approved an amendment in April that would bar USDA from finalizing the GIPSA rule, but Vilsack has said he would continue with the rule making process until directed otherwise.

Sen. Joni Ernst (R-Iowa), commenting on the GIPSA rule, expressed concern that USDA would take the same route as EPA did on the Waters of the US (WOTUS) rule, where many agriculture interests believe the agency did not seek their input before drafting a rule that expands EPA authority. “That will not be the case here, I can assure you,” Vilsack said, noting there will be a public comment period on the GIPSA rule. “Senator, we’ll make sure that we follow the administrative process in terms of what we propose,” he said. “Since we haven’t completed the work, I don’t know what the final product is going to look like, but I can assure you that we’re not going to put out something that doesn’t allow people to review it, understand it, and to give us feedback on it.”

Dicamba and 2,4-D. Sen. David Perdue (R-Ga.) asked Vilsack what USDA was doing to help expedite EPA’s approval process for broadening the use of herbicides dicamba and 2,4-D. Though USDA has approved the bioengineered seeds resistant to dicamba and 2,4-D, the EPA has not approved use of the corresponding chemical. Vilsack said, “We have been in communication with EPA specifically on that issue and asking them to take quicker action so that producers would have some certainty in terms of what they will have available to them.” Rick Keigwin, deputy director of EPA’s pesticides office, said September 19 that his agency would make a decision on the dicamba, 2,4-D mix this fall. “We lost a billion dollars over the last decade in our cotton industry alone to pests and weeds, but the EPA has not approved the herbicide that works in conjunction with the approved traits,” Perdue said. He then told Vilsack, “With you being the voice of agriculture, how do we improve the communication and collaboration with the other regulatory bodies to ensure we are getting producers the tools they need as quickly as possible? The farmers want to comply. The problem is right now is that it’s taking so long to get direction out of cross departmental regulation.”

On food stamps (SNAP), Vilsack said his department would alter proposed new requirements for retailers that participate in the Supplemental Nutrition Assistance Program (SNAP) to address claims that 100,000 convenience stores would be forced to leave the program.

On trade and the export sector, Vilsack observed that US exports are expected to rise in Fiscal 2017, which begins October 1, and that farm debt loads remain far below the levels of the 1980s crisis. Only 10 percent of farm operations are classified as highly or extremely leveraged, he said. “We’ve had the best eight years in agriculture exports in the history of the country and hopefully that’s going to continue,” he said. Farm exports are projected to rise by $6 billion in 2017, to $133 billion.

Undersecretary for trade. Vilsack promised that USDA would finish studies required by the 2014 Farm Bill on reorganizing the department’s trade-related programs under a new undersecretary. “I can assure you that we are on track to get these studies completed. This is a very, very complicated issue that you presented to us,” he said.

Regarding catfish imports, Vilsack again called on Congress to decide quickly on whether to take up a resolution rolling back USDA import inspections of catfish and its Asian relative, pangasius. “I would just ask you all to provide certainty on this issue, because you keep flipping back and forth,” Vilsack said. “Just tell us: do you want us to do the inspection or don’t you?” Critics of the USDA inspection program say that it’s a waste of taxpayer dollars and amounts to protectionism for US catfish farmers. Backers of USDA inspections — mainly Southern-state and consumer advocate-minded lawmakers — point to incidents in which the USDA found catfish imports contaminated with known carcinogens in the few months since the department’s inspection program began. In May, the Senate approved a resolution (SJRes 28) that would nix the USDA inspections, effectively reinstating the cheaper and more lenient FDA inspection process. The resolution now awaits a vote in the House, where its backers say they have a majority. House leadership, however, hasn’t said whether it would bring the measure to the floor.

Roberts raised questions about farm overregulation and uncertainty. Senate Agriculture Chairman Pat Roberts (R-Kan.) focused on what he said was overregulation and uncertainty in the farm sector. “Eleven days ago, I and [House Agriculture] Chairman Conaway (R-Texas) attended the Kansas State Fair, a great opportunity to hear first-hand what folks had on their minds,” said Roberts in his opening statement. “Plain and simple, farmers and ranchers are worried. The downturn in the agricultural economy is taking a toll on their pocketbooks and the health of many family operations.” He added that, “During these tough economic times farmers, ranchers, and agri-businesses compete at the thinnest of profit margins. Unfortunately, this administration appears to be moving forward with regulations across all sectors that will knowingly cut these margins, hurting both producers and consumers. The regulatory framework we have today is vast, confusing and often counterproductive. We must find new ways to inject commonsense into the rule-making process across the entire federal government,” said Roberts in his closing remarks. “The next Farm Bill must provide risk management tools that are straightforward, market orientated, and defendable.”

Roberts cautioned Vilsack on GMO labeling development. As USDA works to implement the GMO labeling law, Roberts urged the department to stay within the limits of what Congress intended. Roberts asked Vilsack about a proposed USDA study on whether consumers will actually use electronic or digital devices when making food purchasing decisions. Roberts said that question goes beyond the scope of the GMO labeling law. “We cannot go beyond the scope of the law and expect to retain support for this bipartisan agreement — and it was a very hard fought, bipartisan agreement,” Roberts said Vilsack disagreed with Roberts’ assessment. He said the study will provide valuable information as USDA develops the framework for GMO labeling. “Number one, to reduce the litigation risk of any implementation. There’s always that risk and we want to make sure we don’t cause further delay,” Vilsack said. “Secondly, we also have international regulations and responsibilities that we have to be cognizant of.”

A separate proposed study would identify potential nationwide technological challenges that might impact consumers’ ability to read electronic or digital links on food packages.

Roberts noted the importance of crop insurance and also told Vilsack that the Obama administration “has proposed cuts to crop insurance programs each and every year. We fought hard to stop a $3 billion cut. The crop insurance program is not a bank. In regard to these proposed cuts -- not in this room, not on my watch.”

Sen. John Thune (R-S.D.) commented about the Conservation Reserve Program (CRP). “One of the concerns that I hear from constituents in South Dakota about CRP is that there is a lack of common-sense when it comes to guidance and policy coming out of Washington,” Thune told Vilsack. Thune noted that South Dakota landowners offered more than 40,000 acres in the most recent general CRP signup, of which only 101 acres were accepted. Additional continuous CRP acres are needed in South Dakota for State Acres for Wildlife Enhancement and duck nesting habitat practices, he said.

As for commodity group testimony, the National Association of Wheat Growers (NAWG) submitted testimony discussing “the dire economic conditions in wheat country,” conveying the importance of current safety net and risk management tools. With Congress in session for only a limited time this month, NAWG it was pleased to see that the Senate Ag Committee “has elevated the discussion of the state of the farm economy,” particularly given the current low prices. “Strong support for our nation’s farmers is critical when the agriculture economy declines to the level we’re experiencing today,” said NAWG President Gordon Stoner. “With severely depressed wheat prices, and countries like China violating their WTO commitments, American wheat growers are unable to compete globally, let alone cover their own cost of production. Now, more than ever, it is important that we have a strong farm safety net and risk management tools in place to support the growers who feed the world.”

In recent weeks, the price of wheat has dipped to decade-lows. Marketing Assistance Loans (MALs) and Loan Deficiency Payments (LDPs), which provide short-term cash flow assistance, have been triggered for the first time in several years.

NAWG said Congress should also oppose destructive efforts by non-agriculture think tanks to undermine the current structure of the crop insurance program and push policies that would hurt farmers.

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