Bill Huffman
Director - Governmental Affairs

July 11, 2008

Congress returned to session this week. Most of their effort concerned discussion about an Energy Bill, high commodity prices, and the mortgage crisis. The Senate approved two important bills, one that President Bush signed Wednesday having to do with telecommunications and terrorism and the other bill was a Medicare Bill that would, if signed, stop a planned reduction in payments to medical providers (doctors). There was no activity on issues important to agriculture. Congressional activity on appropriations bills has come to a halt. We expect there will be an “omnibus appropriations package” to cover virtually all appropriations, probably later in the year. The government’s new fiscal year begins October 1. Congress will be in session for the next three weeks, they will take their annual August recess, returning in September for a few days before adjourning for the year.

Grassley and Dorgan Turn Up the Heat on “Actively Engaged” Rules

Senators Charles Grassley, R-Iowa and Byron Dorgan, D-North Dakota wrote to USDA Secretary Ed Schafer this week urging the Department of Agriculture to seek strict eligibility rules for farm subsidies as the Bush Administration implements the 2008 Farm Bill. The two Senators called for immediate “interim rules” as a way to save money this fiscal year.

“As the authors of bills and amendments to sharpen rules related to “actively engaged” and “schemes and devices”, we are requesting that USDA take immediate action to produce interim rules on these two issues that restore integrity to our payment limit system”, they said in their letter. Grassley and Dorgan have been the most outspoken members of Congress on payment rules.

The issue here for the rice industry is the “actively engaged rules”. USDA, through rule making which requires public hearings and industry input, will have to write new rules governing the total contribution of personal labor and active management in order to be eligible for a farm subsidy payment. For corporations, Grassley and Dorgan are also seeking rules on “significant contribution of labor and management to the operation” in order for a stockholder to be eligible to share in a payment.

One of the successes for the rice industry in this year’s Farm Bill debate was that “spouses” would be eligible to meet the “persons” definition for eligibility. That is important now that the 3-entity rule goes away in crop year 2009. It remains to be seen what the rules will be having to do with “actively engaged” for spouses as USDA writes and eventually adopts new rules for eligibility.

The U.S. rice industry will be very much involved in representing growers on this important subject. We expect this topic will be under discussion at the meetings of industry leaders this weekend in Dallas, Texas during the USA Rice Federation’s summer meetings.

USDA Announces Advanced Payment Program

USDA announced on July 7th that the agency would immediately begin making advances on direct payments for the 2008 crop year. As soon as growers sign up and certify their planted acreage, USDA will advance 22 percent of the direct payment to producers who elected to receive the payment at enrollment. The final direct payment will be made in late September or early October.

The Philippines May Buy Rice from Japan

The Dow Jones News Service reported this week that the Philippines and Japan are negotiating a possible rice sale. The deal, according to Dow Jones, involves 40,000 tons of rice that Japan imported from the U.S. and another 60,000 tons it imported from Thailand. Philippines Agriculture Undersecretary Segfredo Serrano confirmed that a deal is being finalized, but refused to discuss details.

The National Food Authority of the Philippines expects to import 2.7 million tons this year. So far they have signed contracts for about 2.3 million tons of rice.

The Conservation Reserve Program

Pressure is building on USDA and the Bush Administration to allow mid-west producers and others to get an “early out” without penalty on their Conservation Reserve Program (CRP) acreages. Many of those contracts, which took acreage out of production and converted it to conservation practices, expire in September. Many groups and industries affected by the high run up in grain commodity prices are lobbying USDA Secretary Ed Schafer to allow producers to convert that acreage to grains production. It would seem to us that would not be of any benefit to increasing corn or soybean acreage this late in the 2008 crop year, however, it would allow producers to begin field preparation for fall and winter seeding of grains.

We expect Secretary Schafer will likely allow an “early out” to producers on those CRP acreages determined to be non-sensitive acreage. That decision is expected in the next five to seven days.