Washington Insider -- Thursday

Big Verdict Against Hog Producer

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Another White House Biofuels Meeting On Tap

Reports indicate that four senators have been invited to the White House for another session on U.S. biofuel policy on either Monday or Tuesday.

Lawmakers getting the invite are Sens. Chuck Grassley, R-Iowa, Joni Ernst, R-Iowa, Ted Cruz, R-Texas, and Pat Toomey, R-Pa.

Several topics are likely on the agenda, with Grassley and Ernst likely to keep pushing on making E15 available year-round and continuing to hit the administration on the use of the small refiner exemptions relative to their Renewable Fuel Standard (RFS) obligations.

Toomey and Cruz have been seeking shifts in U.S. biofuel policy to bring down the cost of compliance for refiners, something that already has been partially accomplished via the big increase in the use of the small refiner waivers which has brought down the price of Renewable Identification Numbers (RINs), the biofuel credits refiners can buy to prove compliance with the RFS.

Push Continues on Canada Dairy in NAFTA 2.0 Talks

A desire to see advances made and announced on issues related to U.S.-Canada dairy trade – of which, Canada's dairy supply management scheme remains a key topic – has been voiced by President Donald Trump as talks to update the North American Free Trade Agreement (NAFTA) approach their conclusion.

Early on in his presidency, Trump told Wisconsin dairy farmers he would protect their interests in the face of Canada’s "unfair" dairy industry. Now the U.S. dairy industry, members of Congress, President Trump and U.S. Trade Representative (USTR) Robert Lighthizer favor a key change related to NAFTA dairy provisions, aimed at reining in Canadian dairy support policies.

A recent letter to USTR Lighthizer spearheaded by Reps. Ron Kind, D-Wis., and Lloyd Smucker, R-Pa., and signed by an additional 66 lawmakers across both parties, urged that he apply pressure on Canada over dairy issues. A good NAFTA outcome on dairy will “remain an essential element of a positive result," the lawmakers observed. The key issue raised in the letter was Canada's Class 7 dairy pricing program, which they contend is impeding US dairy exports to Canada. They argued Lighthizer should press for Canada to eliminate the Class 7 program.

Besides Class 7, Canada already levies stiff tariffs on most dairy imports, with the milk duty sitting at 270 percent. After a previously robust market for imports of U.S. ultrafltered milk and other protein-rich dairy ingredients suffered with the implementation of the Class 7 program, one of the few bright spots for U.S. dairy exports to Canada vanished.

Given the political, economic and trade dynamics a late breaking NAFTA 2.0 development on dairy remains a possibility, especially with rising calls for action from industry, lawmakers and the president.

Washington Insider: Big Verdict Against Hog Producer

POLITICO is reporting this week that a federal jury last Thursday handed a verdict worth more than $50 million to ten North Carolina plaintiffs who live near a hog farm contracted by Smithfield.

They had charged that the large-scale operation tarnished their quality of life by exposing them to putrid manure smells, buzzards, swarms of flies and a steady stream of trucks laden with dead animals, POLITICO said. And it noted that the verdict could expose Smithfield to millions more in payouts related to other pending cases and “has the potential to force changes to how industrial farms operate.”

That could also have economic ramifications in North Carolina, where hog farming is a pillar of the state economy and total output ranks second only to Iowa, the pork-producing capital of the country, POLITICO said.

Each of the plaintiffs was awarded $75,000 in compensatory damages and $5 million in punitive damages. But North Carolina statute says punitive damages must be limited to three times the amount of compensatory damages, which would shake out to $225,000 per person.

Of course, there will be an appeal, POLITICO thinks. Smithfield has vowed to appeal the decision to the U.S. Court of Appeals for the Fourth Circuit.

It took the jury two days to reach its decision after hearing three weeks of testimony.

The trial was the first of several dozen cases: About 500 residents sued Murphy-Brown, a subsidiary of Smithfield, in 2014 for what they say was the company’s refusal to invest in an alternative waste-disposal method that costs more but would have minimized odors emanating from Kinlaw Farm.

Last week’s proceedings were seen as a bellwether for the remaining cases, which are scheduled to be heard throughout the rest of the year, POLITICO says.

In fact, Smithfield has already indicated how it might make its case to the appellate court, saying it believes the verdict would have been different if the judge had allowed the jury to visit the farm and hear testimony from an expert about odor testing.

Another possible argument is for Murphy-Brown to contend that it didn’t have sufficient control over the operators of Kinlaw Farm, who were not named as defendants, to be held liable for damages, said Clayton Bailey, an attorney in Texas who was not involved with the case but has experience representing agricultural companies.

There may be an uptick in related nuisance cases because of this verdict, Bailey said. “Somebody will look at this and say: ‘These folks won, let’s see how they did it,’ and they’ll try to piggyback and bring one somewhere else,” he said. “It could be against Smithfield; it could be against someone else; it could be in a different industry — it could be in the cattle industry.”

Well, we will see. There has been a lot of ink devoted to efforts to protect producers from stealth videos as well as efforts to roll back government regulations on many, many things. At the same time, some producer groups are increasingly worried at how unpopular even mainline ag operations are, especially on city fringes where expanding communities encounter them.

And while EPA certainly is unpopular among ag groups, urban views of farming operations are far from sunny. These include threats to drinking water quality and fights over pollution and how to control it, animal welfare, use of GMOs and many other issues — including a large number of other farm bill issues.

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