Hoping to push a new farm bill across the finish line during the lame duck session, on Thursday (Nov. 29), Agriculture Secretary Tom Vilsack hosted leaders of the House and Senate agriculture committees. While White House/Congress budget negotiations have predictably devolved into partisan sniping, participants at the Vilsack meeting expressed optimism that the new farm legislation can be quickly passed.
Among them was Oklahoma Rep. Frank Lucas, who was re-elected as chairman of the House Agriculture Committee a day earlier. "I am proud of the work the Committee has completed over the past two years,” said Lucas in a statement. “We have provided valuable oversight of the Commodity Futures Trading Commission, the U.S. Department of Agriculture, and the Environmental Protection Agency to ensure that our agricultural producers are not burdened with unreasonable and costly regulations.
"And, we advanced a strong, reform-minded, fiscally responsible farm bill that can save billions of dollars and provide certainty to our agricultural producers. This process is not complete though I am confident that it’s just a matter of time.”
The new farm bill can’t come quickly enough for Roger Johnson, National Farmers Union (NFU) president. “We want a bill – a five-year farm bill. We’re doing everything we can to make that happen. We see enormous problems with an extension (of the 2008 farm bill) of any duration.”
Johnson also explained NFU’s positions on the budget negotiations, taxes and the recent decision by the EPA to not waive the Renewable Fuels Standard. Among his comments:
On current farm bill negotiations and the chances of new legislation versus an extension of 2008 law…
“We’re strongly opposed to an extension for a bunch of reasons.
“We still think there’s a very credible chance we can get a five-year farm bill passed through the lame duck session. The biggest reason is a five-year bill will deliver some deficit reduction – somewhere between $23 billion and $35 billion. An extension would provide no deficit reduction unless they cut something out of what would be extended.
“An extension would also give nothing for disaster relief. I can’t imagine a circumstance where we’d get an extension with deficit reduction and a disaster title to help heal the livestock sector. I don’t think the dollars or the political will are there to do that.”
On the difficulties of passing an extension…
“Doing an extension is much more difficult (now) than with previous farm bills. Again, the (proposed bills) have deficit reduction. We’ve never seen that during my lifetime – they always added a bit more money rather than cut some out.
“Another reason an extension is difficult is all the innovations put in the 2008 farm bill pretty much expire. With an extension, they won’t get funding. That seems kind of backwards. You’d think the more recent additions would be more relevant to current needs rather than things put in place many decades ago.
“An extension would protect the old things but not the new. Specifically, there were 37 new programs authorized in the 2008 farm bill totaling about $10 billion that disappear – disaster programs, the Energy Title, a number of conservation programs and beginner farmer programs.
“Presumably what’s happening right now is that you’ve got leaders of the (Senate and House agriculture committees) talking about how they can ‘marry up’ the provisions (in the two farm bill versions). Then, they could present a unified proposal to those assembling the pieces of whatever the ‘fiscal cliff’ legislation will be. That’s the vehicle for passing a five-year farm bill. So, yes, we still think passage has a real chance.”
White House budget, EPA
On the White House/Congress budget negotiations and taxes…
“We’re supportive of continuing the provision that exists right now on the estate tax. That’s a $5 million exemption and 35 percent tax rate.
“We think a bigger issue than the estate tax is the alternative minimum tax. The estate tax only comes into play when someone dies and then affects the heirs. The alternative minimum tax will affect a broad swath of people if it isn’t fixed. It was put in place many years ago in an attempt to catch very high income earners from being able to escape any sort of taxation…
“What’s happened, given the inflation that’s occurred over the years, anyone earning in the area of $60,000 is likely to be nicked by the alternative minimum tax. That’s an example of a tax – not unlike the estate tax – where Congress has repeatedly done a ‘patch.’ They’ll fix it for a year, or two, and then the problem arises again.
“There’s a lot of talk about meaningful, major tax reform. We’re hopeful that a number of these kinds of issues will be resolved on a longer term basis.”
On the EPA decision not to waive the Renewable Fuels Standard (RFS) mandate…
“We were very pleased by the EPA. We were less than pleased by the decision from API (American Petroleum Institute) to fight against the RFS.”
Note: the API filed suit against the EPA following its waiver decision. More here.
“The EPA decision was absolutely the right one. I have a background in economics and what they basically said -- after doing extensive economic analyses through the USDA – was that if the RFS was waived it would have an impact of less than 1 percent on the price of corn. I believe that projection is entirely correct.
“What drives the use of corn and ethanol today is both the price of corn and the value of gasoline. As long as those two variables are in the right relationship, they’ll produce ethanol. Now, that may not lead to the building of another ethanol plant – that’s a whole different decision. But if the plant is already there it will produce ethanol if variable costs, and a bit more, can be covered. They can do that with the current price relationship.
“Secondly, the much bigger issue at play here is: what would waiving the RFS do to the rest of the biofuels industry? By ‘rest of the industry’ I’m not talking so much talking about corn-based ethanol as I am about advanced biofuels, cellulosic ethanol. That whole sector is in roughly the same place that corn-based ethanol was in 15 or 20 years ago. It’s barely, marginally economically competitive. It will likely be competitive if there is some long-term market assurance. If there isn’t, however, you just aren’t going to bring investment dollars in.
“The real promise of biofuels is when we can turn waste materials and woody biomass into useable biofuel products. Then, you have something really special and we’re on the verge of that happening. Waiving the RFS would send a message to that sector of the biofuels industry is, ‘You can’t depend on public policy to stay the same. There’s too much risk.’ With that, market opportunities would disappear, very possibly, overnight.
“If you don’t get over the ‘valley of death’ – as they call it in regards to economic development – where you try new technologies or procedures that cost more than they will once all the bugs are worked out, the effort goes belly-up.”
Livestock, poultry, dairy
So what would you do to help the livestock, poultry and dairy industries?
“This is a very real issue (for those sectors). The same economic dynamic I just talked about with ethanol is precisely the same as everyone in the livestock industry is faced with.
“(National Farmers Union) is a general farm organization and a bunch of livestock producers are members. By and large, the bulk of them are supportive of the RFS for a couple of reasons. One is there is a very developed food alternative with the DDGs (Dried Distillers Grains) that come out of ethanol. Another reason is national security, reducing our dependence on foreign energy and those kinds of things.
“More specifically, given the depth of the drought that we’re still in, there are some very dramatic losses in the livestock sector that have occurred. The unfortunate reality is that most of our public policies that are supportive in terms of safety net programs are designed for crop producers. Historically, much of the reason for that is livestock producers haven’t wanted to be part of that net.
“Nonetheless, we have a very good crop insurance program that will come very close to making most grain producers whole, even if they had a disastrous yield. They’ll get a crop insurance payment to make up the difference.
“But any livestock will now face a feed market significantly higher than it was before the drought set in. That’s why we’ve been so supportive of moving a farm bill through the lame duck session and including a disaster title. We’d include a provision to backfill for 2012 (when the last disaster program for livestock producers expired), specifically to deal with livestock losses but also to provide some assurance that there’ll be that sort of safety net if there’s another disaster in the next five years.
“Our members’ philosophy has always been that safety nets should be designed to help when times are difficult, not when times are good. When the market collapses, you need a safety net. When disaster strikes, you need a safety net. A permanent disaster title in the next farm bill is the only realistic way to provide some assistance to the livestock sector, right now.”