Bill Huffman
Director - Government Relations

The Friday Report

May 7, 2010

Farm Bill Hearings

The House Agriculture Committee held four Farm Bill hearings in the past 10-days, one in Washington, another in Iowa, a hearing in Wyoming and on Monday of this week in Fresno, California. These hearings are primarily to get input from various interest groups about future farm policy, to find out what is working and what is not working with the current 2008 Farm Bill and to get commodity groups thinking about a better delivery system for a “safety net” for producers.

Prior to the hearings, the Environmental Working Group (EWG) released their latest “Who Got What and How Much” report on producer subsidies and issued a new report critical of the rising cost of the crop insurance program. The subsidy report gained some media coverage in major metropolitan newspapers such as the Sacramento Bee and the San Francisco Chronicle. Of course the EWG report consolidated data for several years, as they always do, to try to make the numbers look larger than they really are, especially since Congress invoked new payment limit rules when it adopted the 2008 Farm Bill resulting in a lowering of total producer subsidy outlays.

It is clear that the direct payment program and other safety net programs will again be under attack by EWG and the major metropolitan media as well as other groups who are adverse to the current “safety net” program available to farmers.

It should be noted that direct payments and counter-cyclical payments only cost $9.3 billion in 2009, considerably below prior years.

Here are some bullet points summarizing discussions at the first four hearings:

• Given the Federal budget deficit, cost concerns loom large over a bill that doesn’t need to be completed until the fall of 2012.
• House Agriculture Committee Chairman Collin Peterson said part of the reason for starting early with these hearings is to figure out how to improve the “safety net” without increasing the cost of the bill.
• Farmers in Iowa told members of the Committee that changes are needed in the Average Crop Revenue Election (ACRE) program. Several mid-west producers said they don’t see a benefit in signing up for the ACRE program citing discrepancies between various commodities of “what they need” from the program.
• Other Iowa producers said the ACRE program is too complicated and “challenging to accurately determine its usefulness” citing a list of complaints including the statewide yield trigger, the four-year commitment and the 30 percent cut in the loan rate in order to participate.
• Chairman Peterson questioned whether commodity programs need to be the same for every crop.
• Other farmers praised the Conservation Security Program asking that it be funded at a higher level in future legislation.Chairman Peterson shot down the notion that the “safety net” could be improved by raising the loan rates, as some producers advocated, citing the challenges ahead in dealing with the Federal budget deficit.

All in all the hearings went about as expected.  Everyone has an opinion!  Congress will have a tough job writing the next Farm Bill given the budget deficit situation. We should remember that the current farm program doesn’t expire until December 31, 2012.  We do not expect any changes in the current program unless Congress undertakes “budget reconciliation” after this fall’s election and that could be problematic.

By the way, California rice producer Frank Rehermann, Chairman of the USA Rice Producers’ Group testified on behalf of the rice industry at the Fresno, California hearing.  Mr. Rehermann centered his comments on the importance of maintaining a safety net for rice producers and highlighted the extensive environmental, conservation, and wildlife benefits that rice production provides in California. Other witnesses at the Fresno hearing focused their comments on the need for additional funding for conservation and specialty crop programs, market promotion, pest and disease prevention, and immigration issues.

After these initial field hearings, it appears that one of the key questions that will need to be answered is whether producers would consider giving up direct payments, loan rates, counter-cyclical rates, crop insurance and the permanent disaster program for a single safety net that offers higher “revenue protection”?

Port of West Sacramento

The City of West Sacramento’s Planning Commission has approved a conditional-use permit for the development of a wood-pellet manufacturing plant to be built at the Port of West Sacramento. The plant initially is expected to generate revenue of up to $1.1 million annually for the Port and would employ about 35 people. The plant would produce about 170,000 tons of wood pellets annually to be used as a coal substitute at power plants.  The end product would be exported to Asia, Canada and Europe by Enligna U.S., Inc.

Enligna also plans to build a co-generation plant at the Port with the power to be used in their own production facility and with excess power possibly being sold to other Port customers.

Charlie Hoppin Honored by Chico State

We would like to offer our congratulations to FRC Director Charlie Hoppin who was named the outstanding alumnus this year by the School of Agriculture at California State University-Chico. Charlie is a graduate of Chico State. He participated in a day-long program at Chico where he was invited to speak to a couple of classes and was honored at a dinner held on campus.