Bill Huffman
Director - Government Relations

The Friday Report

September 17, 2010

Congress returned this week from their summer recess. On Thursday, the Senate approved a small-business bill that includes $30 billion for a special lending fund and $12 billion in tax breaks to encourage companies to invest and hire. The measure passed on a 61-38 vote with two Republicans voting with the Democrats. It goes to the House of Representatives which earlier passed similar legislation. 

The big question now is how long will Congress be in session before adjourning prior to the November 2 elections?  Speculation is that Congress will adjourn on or about October 8th. Leaders of both houses have said there will be a lame-duck session. A two step session has already been announced. Lawmakers will convene November 15th for one week before Thanksgiving and then return November 29th for an extended period.  No final adjournment date has been announced. Some of the major issues remaining Congressional action are listed below.

Appropriations

It is now certain that Congress will pass a “Continuing Resolution” (CR) for Fiscal Year 2011 spending bills. The Senate has not considered or passed any of the 12 regular appropriations measures for FY 2011. It is expected that the House of Representatives will act first on passing a CR.  As politics play out in Washington, it is not known if Congress will pass a short-term CR or just do a complete package to fund the government for the next fiscal year beginning October 1.

Tax Cut Extensions

As we’ve reported before, the so-called Bush Tax Cuts expire at the end of this calendar year. There continues to be a lot of debate about extending all of those tax cuts or as the Obama Administration proposes ….only extending the tax cuts for those earning less than $250,000. Many Washington, D.C. observers believe this will not be acted on until after the elections and will be taken up in the lame-duck session. The Democrats do not have the 60 votes needed to break the Republican filibuster. Capitol Hill observers believe that Congress will eventually extend all of the expiring tax cuts for at least one year.

Estate Taxes

This is another important issue that needs to be dealt with by the end of December. Most farm groups are lobbying heavily to get Congress to act on an extension of Estate Tax law. If nothing is done, the estate tax will return to its pre-2001 level of a 55 percent tax rate and a $1 million exemption level on January 1, 2011. Congress has a couple of choices on this one. They can either extend the estate tax at the 2009 level which was 45 percent with a $3.5 million individual exemption or adopt a slightly lower tax rate with higher exemption levels. Many Republicans and some Democrats are advocating a 35 percent tax rate and a $5 million individual exemption level. In the end, we believe Congress will act on this one.

Energy Legislation and Climate Control

This is a dead issue for this session.. It’s too hot a political issue to handle in an election year!

Free Trade Agreements

The Obama Administration has finally elevated Free Trade Agreements on its agenda; however, it appears to us that certain members of Congress and trade groups still have major issues with the three pending agreements. Senate Finance Committee Chairman Max Baucus may not elect to hold hearings on the Korea FTA unless South Korea opens its market to all ages and cuts of beef. There are issues with labor and taxes that are creating a hurdle to adoption of the Panama and Columbia Free Trade Agreements. We do not expect much action on these agreements this year.

Food Safety

The Senate has yet to act on Food Safety legislation even though the House of Representatives approved a comprehensive bill back in July of 2009.  We do not expect the Senate will act on Food Safety simply because there is not enough time left in this legislative session.

Immigration Reform

This is another legislative issue that will not be acted on by Congress this year. There will be lots of talk about the issue, but no action.

Agriculture News

• As we predicted last week, the Obama Administration announced an “Agriculture Disaster Assistance Program for Southern Farmers” this week. USDA Secretary Tom Vilsack said his agency will provide $630 million for rice, cotton, soybean, and sweet potato growers in counties that received USDA disaster declarations in 2009, due to excessive rain and flooding during harvest.  Growers must have experienced a 5 percent yield and/or quality loss to be eligible. Senator Blanche Lincoln, D-Arkansas, spent the last year trying to get a $1.5 billion disaster package for southern producers passed in Congress.  She was unsuccessful in that effort; however, the Obama Administration said it would provide funding administratively through USDA. In the end, USDA provided more limited funding than the Senator asked for and southern interests sought. Producers will have to certify and be able to prove their losses in order to participate in the program.

• It appears that the long drought in Australia may have broken. We’ve been receiving reports that heavy rain is replenishing reservoirs and that water supplies will be sufficient for increased plantings of rice. While water allocations remain somewhat below peak years, the Australian rice industry is predicting production in the range of 600,000 tons for their upcoming crop. The Australian rice crop will be planted in October.

• USDA’s National Agriculture Statistics Service reports that rough rice stocks in California mills and off-farm warehouses totaled 7.92 million cwt. on August 1. That was 32 percent above a year ago. Nationally, rough rice stocks in all positions on August 1st totaled 30.4 million cwt., up 23 percent from the total on August 1, 2009.

• Very little rice was harvested this week in California.  A few growers with sweet rice were harvesting; however, very little medium grain was being cut. We expect a few growers will try to begin harvest next week but the bulk of the California rice harvest is not expected to begin until about October 1st.