Bill Huffman
Director - Government Relations

The Friday Report

May 14, 2010

The spotlight in Washington was on the U.S. Senate this week where the debate continued on the financial reform package offered by Senator Chris Dodd, a new climate change bill which was introduced by Senators John Kerry and Joe Lieberman, and the new Presidential appointee to the Supreme Court began making the rounds of key members of the Senate Judiciary Committee to win their support for her nomination by President Obama.

Agriculture News

The House Agriculture Committee continued its round of field hearings leading up to the development of the 2012 Farm Bill. While these hearings are primarily to give people an opportunity to give Committee members their opinions about current and future farm policy, there is a pattern developing that gives some insight about where the debate over farm policy is going.

Purdue University economist Otto Doering told lawmakers yesterday that “Congress should replace direct payments to farmers with a more effective and appropriate safety net”. Doering said direct payments don’t address the volatility of crop prices, are viewed negatively by the public and are expensive. Doering said “The goal of income parity of farm people versus urban people has been achieved. Our concern now should be volatility”.

Oklahoma Representative Frank Lucas, the ranking member of the committee said “The nation’s weak fiscal condition will make it even harder than it’s been in the past to convince colleagues in Congress that the farm support programs are worthwhile. I just know it’s going to be a tough grind.”

All of this points to the fact that the large Federal budget deficit is going to affect the outcome of the next Farm Bill. Money is tight and that is going to drive the House and Senate Agriculture Committees to strive to find another mechanism to deliver income protection to America’s farmers and ranchers.

By the way, Arkansas rice producer Joe Mencer and Texas rice producer L.G. Raun will testify at House Ag Committee hearings tomorrow in Troy, Alabama and on Monday in Lubbock, Texas.

New Climate Change Legislation

Democratic Senator John Kerry and Independent Senator Joe Lieberman have been working for months with Republican Senator Lindsay Graham on a new climate change legislative package aimed at getting the necessary 60 votes needed in the Senate for passage. Senator Graham dropped out of the effort last week citing his displeasure with Senate Leader Harry Reid’s announcement that he intends to bring “immigration reform” legislation to the Senate floor this year and for other “political reasons”.

Wednesday, Senators Kerry and Lieberman finally introduce their bill (without Republican support). The bill is known as “The American Power Act”, a bill which to date has no Republican support and low odds of being taken up this year by the Senate.

The bill would cap greenhouse gas emissions at 17 percent of 2005 levels by 2050 which is in line with the House passed bill, HR 2454. Further, the bill includes measures to curb the volatility of carbon markets by limiting trading to only companies required to cut greenhouse gas emissions. It would pre-empt state cap-and-trade laws and it includes a “hard price collar” which reportedly binds carbon prices.

As for agriculture, farmers would be exempt from the carbon pollution complacence obligations in the bill, (whatever that means). Further, it is our understanding the bill would create a new multibillion-dollar revenue stream for the agricultural sector via a domestic offset program that would provide incentives for farmers to reduce emissions on their land. The bill would provide USDA primary authority over domestic agriculture and forest projects. Importantly, the Kerry-Lieberman bill has a “circuit-breaker provision” to help prevent an acreage shift to forestry that could hurt the nation’s food supply or drive up commodity prices.

This is a complicated piece of legislation! Commodity groups are analyzing its impacts on production agriculture, especially to determine if it will significantly raise energy prices for fuel and fertilizer, a major concern of most farmers and ranchers.

Most observers in Washington, D.C. we’ve talked to indicate it is unlikely this bill will come before the full Senate this year without Republican support. This will give the agriculture community ample time to analyze the legislation as to how it will affect our industry and what the costs will be before the final debate begins.

A Reminder

USDA reminds farmers and ranchers that the deadline for applying for the congressionally-authorized Conservation Stewardship Program (CSP) is June 11th. This is the popular conservation program authorized in the 2008 Farm Bill. Participation in the program is based on a ranking system whereby all applications are reviewed in each respective state and ranked for possible funding.

CSP offers payments to producers who maintain a high level of conservation on their land and who agree to adopt higher levels of stewardship. Eligible lands include cropland, pastureland and rangeland. Further information can be found on that U.S. Department of Agriculture website. Producers can also contact the California Rice Commission at (916) 387-2264 for information about this program.