Washington Insider - Tuesday

By DTN's Washington Insider

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

Senate Democrats Pushing Mandatory Label/Disclosure Trigger in Coming Floor Debate

A GMO food labeling/disclosure bill is up for Senate debate and vote this week. A compromise deal was close at hand based on bipartisan talks last week.

The underlying bill (S 2609) would preempt several proposed or enacted state laws mandating that food producers place labels on GMO foods. The Senate Ag Committee approved the measure March 1 with three Democrats voting for the measure. Some Senate Democrats oppose the voluntary system and instead are pushing for a nationwide mandatory labeling/disclosure program.

A compromise deal could involve creating a voluntary system with a trigger that would implement mandatory labeling rules under certain conditions. Democrats largely use the phrase “mandatory labeling” in presenting their position whereas Republicans use the word “disclosure” in commenting on the topic, with some murky regarding whether disclosure is mandatory or voluntary or how long they may have to provide information to consumers.

Sen. Joe Donnelly, D-Ind., says there’s an effort to make sure consumers have the information they want. “But at the same time making sure farmers have the ability to feed the world,” he says. “That’s where the discussion is and we’re trying to find that sweet spot. Where it works.” Donnelly says improvements need to be made to the current bill to find a solution that works for both consumers and producers.

A Vermont law slated to take effect July 1 requires the food industry to identify on the product label if the product contains a genetically modified organism (GMO). It’s estimated that today nearly 70% of all food products are made with at least one ingredient from a biotech crop.

More than 10 states have passed similar laws to Vermont but several of these states put a clause in their bills that they would not go into effect unless Vermont’s bill goes in to effect.

Those opposed to labeling requirements have criticized Vermont’s rules as inconsistent. For example, if a food product without meat has GMOs in it, the product must be labeled as containing the organisms. However, if the same product has meat in it, then the label isn’t required because the state’s law doesn’t require a label for meat products.

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ERS: Lower Farm Income, Higher Debt Ratios Expected in 2016

Net US farm income is forecast to decrease and farm sector debt-to-asset ratios are expected to increase for the fourth straight year in 2016, according to the Economic Research Service (ERS).

US farm income is forecast to drop to $54.8 billion in 2016, down from a peak of around $120 billion in 2013. The 2015 to 2016 drop is projected to be the smallest in the past four years and is largely driven by declines in commodity prices.

Adjusted for inflation, 2016 is expected to see lower farm income than all but five years since 1970. Of those years, all except for 2002 were in the 1980s, period of considerable distress for the US farm sector.

The farm sector debt-to-asset ratio has also increased in recent years, but it remains lower than the peak seen in 1985, at just 13.2%. Inflation-adjusted debt levels are close, but still below the high levels seen in the early 1980s.

Around 80% of the value of farm sector assets is tied to farm real estate. Both farm real-estate and nonreal-estate assets are projected to fall in value in 2016, after having done the same in 2015.

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Washington Insider: Secretary Vilsack Plays Defense

USDA Secretary Tom Vilsack earned his modest salary last week as he trudged up to Capitol Hill to defend a number of hot button items concerning USDA. The event was a Senate subcommittee hearing on his department’s FY 2017 budget.

You may remember that the administration submitted a proposal for FY 2017 which the Congressional leadership has largely ignored, and it is unlikely to be revived since the political gap between the administration’s priorities and those of the Congress is so wide.

You might think there would be at least some areas of agreement, but if so, they weren’t obvious. For example, Bloomberg is reporting that the administration’s proposal to cut crop insurance subsidies from $7.9 billion in Fiscal 2016 to $7.6 billion, with a projected savings of $18 billion over a decade got little, if any, support from the committee—even from the budget hawks there.

Vilsack noted that USDA currently subsidizes about 62% of farmers’ crop insurance costs. “We think it’s probably more fair to the taxpayers that it be more of a fifty-fifty partnership,” Vilsack said.

Lawmakers were not impressed. Sen. John Hoeven, R-N.D., cautioned Vilsack on the proposal, saying that since 2008 about $12 billion has been taken out of crop insurance sector and the reduced subsidies could harm the insurance market. “You want a robust number of companies out there providing crop insurance to have a competitive market,” Hoeven emphasized.

The administration’s final budget proposal to Congress requests $155 billion for the USDA, about $1 billion less than requested in FY 2016 but about $10 billion more than ultimately appropriated by Congress that year.

There were other topics of discussion, but the one the senators seemed to want to hear about was GMOs and here the Secretary faced even tougher criticism. The Senate ag committee has passed legislation that would preempt state GMO labeling programs and create a nationwide voluntary approach. That issue is expected to be debated on the Senate floor in the next few days, and to face surgery if it is to succeed.

On this issue, the Secretary followed his typical two-handed approach. He said he wants a system to prevent a “hodgepodge of systems among states and companies, and he also wants to give consumers an “informed choice,” Bloomberg reported. This, of course, has led to a storm of criticism from consumer advocates who want to define the labels, as well as from the ag industry who want to avoid GMO labels entirely.

While Vilsack temporized about his preference, Sen. Steve Daines, R-Mont., criticized his position heavily. He told the Secretary, “I do believe the USDA’s priorities should be with making determinations on sound science regarding the safety of biotech products within its jurisdiction, not on marketing or mandatory labeling efforts that really have no bearing on food safety.”

So, once again the Secretary and his agency are in the middle of a fight they didn’t necessarily pick, but also one they have had little success in defusing.

It is pretty clear that the “right to know” advocates are really interested in requiring labels they can control to suit their purpose—to exclude important local products as necessary to satisfy local politicians and to put maximum pressure on ag technologies they dislike, for whatever reason. The Secretary seems to be inclined to give food manufacturers or retailers a means to define food ingredients, but to retain for the food industry at least some control and responsibility over label designs and content.

However, Vilsack never had control of this fight—and has not had much luck in mobilizing FDA or other institutions effectively on behalf of the industry, either.

So, it will be important to watch the Senate debate over the next few days. The industry has the electronic means these days to describe food content in much more detail than it does now, and to counter efforts by advocates who want to capture the label language. So, the ag establishment needs to move away from the “nothing to say” position to decide what is important and useful and manageable and push for that—and, to base most of that on science. Otherwise, the U.S. likely will become as anti-technology as the EU, and will pay the price in growing food costs, Washington Insider believes.

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(GH/CZ)

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