Bill Huffman
Director - Government Relations

The Friday Report

December 11, 2009

Health Insurance Reform

Senate Democrats are inching closer to a compromise on health insurance reform after nearly two weeks of intense debate and negotiations. Most observers now believe there will be a floor vote in the Senate during the next two weeks, certainly before the end of the year.

A New Climate Change Proposal

A new proposal surfaced this week that offers another approach to tackling climate change. Senators Maria Cantwell, D-Wash, and Susan Collins, R-Maine, offered legislation proposing the government sell pollution allowances to industry to cut greenhouse gas emissions and then use most of the revenue to send tax-free monthly checks to every American to offset the expected higher cost of energy. The so-called “dividend checks”, were estimated to average about $100 per month over nearly two decades.

While the Cantwell-Collins bill would still limit greenhouse gas emission, it would also allow limited trading of emissions allowances. The proposal largely abandons the broad cap and trade approach that has been the focus in the Senate up until now, which has been broadly attached by Republicans and some centrist Democrats as being too complex, subject to manipulation and tantamount to imposing a huge energy tax that potentially could threaten jobs.

The Cantwell-Collins measure would let the government auction “carbon shares” or allowances to fossil energy producers and importers. Three-fourths of the revenue collected would be returned directly to consumers in the form of monthly checks and the rest would be used to spur clean energy and energy efficiency development and help in the transition to “green jobs”. Allowances could be traded among the energy producers and importers that are subject to the cap, but not to other traders and speculators.

Senator Cantwell said their approach is a simpler way to reduce carbon pollution and boost clean energy alternatives. Like the Kerry-Boxer bill, it would impose limits on greenhouse gases, especially carbon dioxide from the burning of fossil fuels and is designed to cut emissions by 20 percent by 2020 and about 80 percent by mid-century.

Senator Collins said she’s for climate change legislation only if it protects consumers and industries hit by higher energy prices, provides predictability so that businesses can plan and invest and encourages energy efficiency and renewable energy sources.

This latest proposal gives the Senate another approach toward reaching the goal of reducing carbon dioxide and other pollutants that scientists say are creating a “green house gas effect” in the earth’s climate.

Disaster Legislation

Legislation introduced about a week ago by Senator Blanche Lincoln, D-Ark, and Republican Senators Thad Cochran and Roger Wicker of Mississippi to appropriate funds for a “disaster program” for southern farmers hit by weeks of rain and storms during the critical harvest season drew criticism this week.

The Lincoln-Cochran-Wicker bill would provide an estimated $1.3 billion in direct payment assistance to producers in counties declared “primary” disaster areas by USDA.  Similar legislation was introduced in the House of Representatives by Congressmen Marion Berry and Travis Childers, both Democrats from Arkansas.

American Farm Bureau Federation (AFBF) President Bob Stallman has written a letter to sponsors of the legislation expressing his concern that the bill does not require a loss for eligibility, but rather provides funds to any producer in a disaster area. Stallman said, “It is quite feasible that someone with no loss at all or someone who has not even planted a crop could receive a payment”. Stallman said the AFBF believes that “loss provision” would be prudent, given the government’s current budget dilemma.

As you can imagine, the AFBF letter drew protests from some southern farm groups seeking the disaster funds. While the AFBF is not opposed to the disaster funding legislation, the group is simply suggesting it be targeted to those with actual verifiable losses.

As you may recall, the 2008 Farm Bill includes a “permanent” disaster assistance program, however, according to USDA, that program won’t become effective until January 2011.

Bayer Liable for GMO Contamination of Long Grain Rice

Bayer CropScience LP has been found liable in a federal case filed by two Missouri rice farmers after an experimental genetically engineered variety of rice, called Liberty Link, contaminated their crops. The case has been in trial in a St. Louis court for the past month. Bayer CropScience LP must pay about $2 million to the two farmers.  The $2 million jury award was only for compensatory damages.

More than 3,000 similar cases have been filed again Bayer because of the contamination three years ago.The next case in line will involve farmers from Arkansas and Mississippi and is scheduled to start January 11th in St. Louis.

USDA Official Speaks at Rice Outlook Conference

Jim Miller, Undersecretary for Farm and Foreign Agricultural Service, told conferees at this week’s Rice Outlook Conference in New Orleans that USDA’s “number one priority is the creation of wealth on farms and in rural communities through the tools and technology provided by public, private and non-profit sectors. Miller was one of several speakers at the conference which brings together rice farmers and industry related leaders annually for an update on the U.S. rice outlook. Miller also said the Administration’s international priorities are centered on a successful agreement for the Doha Round of multilateral trade talks and other bi-lateral trade agreements.

On payment limitations, Miller told attendees that USDA will publish payment limit rules for 2010 farm payments by the end of the month and that producers would be given an opportunity to comment.

Jim Wiesemeyer, vice president of Informa Economics, also addressed the conference.  Wiesemeyer said newly named Senate Agriculture Committee Chair Blanche Lincoln is the “right person at the right time for agriculture’.  In another note, Wiesemeyer cautioned that the rice industry could be severely affected if a report on climate change legislation issued by USDA proves to be correct.  He said the report predicts U.S. rice production would decrease by 13.1 per by 2013, 19 percent by 2030 and 25.1 percent by 2050. Presumably that is because of higher costs for production and the conversion of some lands into tree farming.

Water Note

The U.S. Bureau of Reclamation recently noted that the Central Valley Project is entering Water Year 2010 with 39 percent of capacity. This represents 4.4 million acre-feet of carry-over storage in the CVP system from Water Year 2009. As a comparison, the 15-year average carry-over for Shasta, Trinity, Folsom, New Melones and the federal share of water in San Luis Reservoir is 6.7 million acre-feet of storage or 59 percent of capacity.

The Bureau of Reclamation will make its initial CVP water supply allocations for 2010 in late February.