Bill Huffman
Director - Government Relations

The Friday Report

October 23, 2009

Health care reform and climate change legislation continue to be the two major issues before Congress. Weather related problems have affected the harvest in the South and to a lesser extent in California.

Climate Change Legislation

The Senate Environment & Public Works Committee will hold a series of hearings on global climate change October 27th – 29th. The Committee is expected to mark-up its bill, S. 1733, The Clean Energy Jobs and American Power Act, as soon as possible after the hearings. Witnesses at the hearing will include the Secretary of Energy, the EPA Administrator, the Secretary of Transportation and the Chairman of the Federal Energy Regulatory Commission. There has been no word on who will be testifying on behalf of agriculture and other industries affected by this sweeping new legislation. We remain convinced that this bill and others will not be completed by Congress this year simply because the focus of Congress remains on health care reform and it is late in the calendar year getting much closer to adjournment.

Food Safety

Legislation giving the Food & Drug Administration (FDA) new powers to oversee the food supply and food safety appears to be moving in Congress. There were reports this week that bipartisan support and a rare agreement between consumer groups and the food industry is contributing to the success of legislation by Senator Richard Durbin, D-Ill., that would require the FDA to step up its inspections of food facilities and to issue new rules to improve the quality of imported food and to combat contaminants in fresh produce.  The measure would also give FDA the authority to recall products on its own, instead of relying on industry cooperation.

The Durbin legislation is cosponsored by five Republicans, including Senators Saxby Chambliss and Johnny Isakson, both from Georgia. The recent peanut recall originated in Georgia, a state that was hard hit by that food safety issue. Senator Chambliss said, “This legislation affords regulators the authority they need to better identify vulnerabilities in our food supply while maintaining the high level of food safety most Americans enjoy and take for granted”.

The bill is expected to clear committee and advance in the Senate soon.

Accelerated Depreciation to End December 31st

Producers have until the end of 2009 to take advantage of tax credits that were extended this year. The accelerated depreciation provision is set to expire December 31, 2009.  Producers, under that program, can write up to 50% off of their purchases for the year, followed by a normal depreciation schedule, or to write off up to $250,000 this year through the IRS Section 179 provision.

With the Section 179 provision, producers can write off up to $250,000 this year on new or used equipment with the remainder of the balance to be put on a regular depreciation schedule.

Growers may wish to check with the accountants if they want to take advantage of this tax advantage before it expires.

The ACRE Program

We find it interesting that only eight rice farmers signed up to participate in the new ACRE program established in the 2008 Farm Bill. The program, as you may recall, was promoted by the National Corn Growers Association and others. It was the brainchild of former Senator Agriculture Committee Chairman Tom Harkin, D-Iowa.

Growers who signed up for the program gave up their right (forever) to receive traditional farm subsidies, instead opting for a program where they accepted lower support prices in favor of a mechanism to shield them from poor yields as well as low prices.

USDA reported this week that only 13 percent of eligible U.S. crop land enrolled in the program. The program was thought to appeal to growers in the Corn Belt and the Great Plains areas of the country. Of the 22 different crops eligible for enrollment, corn had the highest number of base acres enrolled, followed by wheat and soybeans.

The Rice Harvest in the South

We’ve heard from industry sources and from media accounts about the ugly rice harvest in the South. In early October, there was frequent rainfall in the Mid-South region that delayed the harvest and the maturity of late planted rice. More than 7 inches of rain fell in a short period of time. As of October 20th, press reports indicate that 30-35 percent of the rice was still in the field and the weather wasn’t getting much better. Fields were muddy, there was some extremely cold weather which affected the maturity of the rice, fields where growers were able to harvest were rutted and muddy and there wasn’t much hope for warm weather to dry things out.

This sounds like a situation where a set of “tracks” on a combine would be worth a premium.

Australia Rice Outlook

We also heard reports this week that authorities are indicating there will be some additional water allocations from the Murray and the Murrumbidgee water complexes for rice growers this year. That is spurring interest among rice growers to plant some acreage this season. SunRice, the grower cooperative, is offering $550 a tonne for an initial pool of 65,000 tonnes which is spurring growers to consider planting more rice this year.

Last year only about 100 growers planted rice in that country, due to the severe water shortages.

USDA Forecasts California Rice Production

In its latest report, the National Ag Statistics Service (NASS) forecasts the 2009 California rice crop at 46.7 million cwt, an 8 percent increase of 2008. Acreage was listed at 549,000 acres, up 6 percent from a year ago. NASS is forecasting California yields at 85 cwt per acre, 2 percent above a year ago. In the report, NASS said that the 2009 crop would be the second largest California rice crop on record.

New FSA State Executive Director Named in California

After ten months, the Obama Administration has finally named Val Dolcini to be State Executive Director for the Farm Service Agency in California. Dolcini served as State Director for a short period of time during the latter part of the Clinton Administration.  He replaces John Smythe, the long-time Director of the California office.