Washington Insider -- Monday

Farm Bureau Sends Farm Bill Ideas to House, Senate Ag Panels

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

Organic Producers Discuss Needs Before Senate Ag Panel

Federal help for U.S. organic producers is needed with issues like building supply, combating fraudulently labeled overseas products and gaining access to foreign markets, witnesses told the Senate Agriculture Committee last Thursday.

Some also testified to the impact that a proposed renegotiation of the North American Free Trade Agreement (NAFTA) and the U.S. withdrawal from the Trans-Pacific Partnership (TPP) would have on organic producers.

"As merchants thinking about trade, we are much more interested in stability and continuity and predictability as we engage with our trading partners," Kenneth Dallmier, CEO of Illinois-based Clarkson Grain Company, told the committee. "I would encourage policy makers to investigate and to think about how that stability has been affected as we renegotiate NAFTA, and as we pull out of TPP."

Organics are no longer a niche in the U.S. agricultural industry as they had been in the past. Sales of organic products in the U.S. now represent a $50 billion dollar industry that continues to grow. As demand has risen for organic meat and poultry in the U.S. and abroad, demand for the organic grain necessary to feed those animals has exploded as well. However, U.S. producers are not always able to meet the rising demand, Dallmier observed. Some of the supposedly organic grain entering the U.S. from overseas has been fraudulently labeled, he said.

Policies designed to increase the ability of the USDA and the National Organic Program to monitor organic imports coming into the U.S. and enforce penalties when standards are violated are needed, he argued. These policies would include restricting overseas embarkation points for organic grain destined for the U.S., attaching physical tracking devices to grain shipments to trace them through the supply chain and making the end-users of fraudulent organic grain liable for product recalls.

He also emphasized the need for the USDA to finalize a USDA Certified Transitional seal for producers who are in the process of transitioning their land for organic use to incentivize the creation of more U.S. organic supply.

Multiple witnesses testified to the necessity of programs like the Foreign Market Development (FMD) program and the Market Access Program (MAP), in which the USDA partners with trade associations and small businesses to create and maintain export markets, and share the cost of marketing U.S. crops to overseas markets. "The MAP and FMD programs are really key because regardless of what's happening politically, they've kind of been the bedrock of our international activities," Greg Hanes of the U.S. Meat Export Federation told the committee.

Given the TPP withdrawal and NAFTA renegotiation, these market access and promotion programs show "that commitment of the U.S. industries. Without that commitment, you raise concerns and it leaves the door open to our competitors," Haynes remarked.

Support was also voiced for negotiating of a new bilateral trade agreement with Japan in the absence of TPP, and following EU negotiation of its own bilateral deal with Japan this month. "[Japan is] our highest-value market," Hanes observed.

Farm Bureau Sends Farm Bill Ideas to House, Senate Ag Panels

Farm policy changes for the next farm bill, including shifts to commodity and other programs, have been sent to leaders of the House and Senate Agriculture Committees by the American Farm Bureau Federation (AFBF).

The group's proposals emerged from AFBF's Board of Directors, the group said, calling them "grass-roots" policy options. "These recommendations are not set in stone; rather, they are designed to provide the necessary flexibility to ensure that Farm Bureau is prepared to work with you in achieving the best possible farm bill that meets our key farm policy objectives while assisting you in meeting the challenges this important legislation will endure," the group said.

Among changes AFBF included:

ARC program option. The proposals include allowing farmers enrolled in the Agriculture Risk Coverage (ARC) program to choose between having yields calculated on a simple 10-year average or a five-year Olympic average. The five-year Olympic average, which drops the high and low years, is now the only option. The Farm Bureau also wants to raise ARC reference prices by 5% for corn, soybeans, wheat, sorghum and so-called minor crops.

Margin Protection Program (MPP) for Dairy: The group suggests changes to MPP, including a 25 percent cut to premium rates for the first 4 million pounds of production history and a corresponding 25% increase in premiums for production above that amount. The group also wants to change minimum and maximum coverage levels and increase the feed ration formula for all producers by 10%.

Cotton: Farm Bureau said it supports making either or both cottonseed and cotton fiber eligible for commodity program support.

Costs will be key. The group acknowledged a key point in advocating the above changes – the changes they are suggesting will be "above the baseline with which you will have to work."

Conservation Reserve Program (CRP): While addressing comments from some that CRP payments have become excessive in some states, Farm Bureau does not support increasing the current 24-million-acre cap on CRP or creating a new program that would allow for short-term contracts, as proposed by Sen. John Thune, R-S.D. They also oppose allowing the same parcel of land to be re-enrolled in the general CRP after the conclusion of two contracts.

Washington Insider: The Perpetual Budget Fight

Well, the fight over the FY2018 appropriations is intensifying, if you can believe that. Bloomberg says House leaders are still working on the “regular” spending bills, but also are beginning to push an omnibus bill that incorporates separate bills into a single piece of legislation, assuming that majority party will be unable to agree on spending policies.

At the same time, the stalled House budget resolution is scheduled to be marked up next week although moving it to a full floor consideration could pose more of a challenge. Over the weekend, House Majority Leader Kevin McCarthy listed committee action on the budget resolution as one of the items he expected would occur next week as well committee completion of all appropriations bills.

For some time, a deal on the budget has been elusive as conservatives and moderates have been at odds at how much to cut entitlements Bloomberg said. House Freedom Caucus Chairman Mark Meadows, R-N.C. said there is still a fight within the conservative Freedom Caucus over entitlement cuts to be included in the budget resolution as well as tax-code changes to be put on a fast track through the reconciliation process.

The giant spending package would be based on the $1.13 trillion top-line level that the House Budget Committee has discussed but not reported to the floor for a vote.

Proponents of doing an omnibus early, rather than just before the Sept. 30 end of the fiscal year, argue that it increases the chances that a final bill negotiated with the Senate will have more conservative policy priorities in it. They say a unified Republican approach with a House-passed bill is a stronger opening position in final spending talks this fall.

Democrats are critical of this process, of course. "This is a new low in our budget and appropriations process," said Rep. Nita Lowey, D-N.Y., the top Democrat on the Appropriations Committee. "Having failed to adopt a budget, the majority declares preemptive defeat on individual appropriations bills and chooses instead to advance an omnibus that would cause a $72 billion defense sequester, slash critical job-creating investments, and presumably waste billions on a border wall to fulfill the president’s campaign applause line."

Appropriator Hal Rogers, R-Ky. said all 12 bills will be reported out of the full Appropriations Committee next week, setting up the omnibus for floor consideration the last week of July. Rules Committee Chairman Pete Sessions said there would be a structured rule for any omnibus that would limit number of amendments allowed on the floor.

Under the 1974 Budget Act, the House and Senate are supposed to agree on a budget top-line by April 15 and after that individual appropriations bill are supposed to be voted on the floor based on the overall number.

Meadows told reporters an omnibus could pass the House with Republican votes, even if the chamber has not adopted a budget. Passing the spending bill would allow Republicans to focus on the core issues of tax and entitlement reductions they intend to include in the budget resolution, he said.

Freedom Caucus member Jim Jordan, R-Ohio said the group will meet next week to come up with a position on the omnibus.

However, Bloomberg reported that there may be some “cracks in the Freedom Caucus position on the budget resolution.” Gary Palmer, R-Ala., a member of both the Freedom Caucus and the Budget Committee, told Bloomberg that he doesn’t share Meadows’s view that tax-code details need to be agreed on to advance the budget. He’s planning to offer an amendment at the markup that would insert his Agency Accountability Act into the budget. The bill requires any agency that receives a fee, fine, penalty, or proceeds from a settlement to give that to Treasury to be used to reduce the deficit. Palmer said this measure could save $150 billion over 10 years.

Amid all this, the 170-member Republican Study Committee is preparing to release its own budget alternative, written by Tom McClintock, R-Calif. Bloomberg says that package will be offered on the floor as an amendment. It would include far deeper cuts to non-defense discretionary spending than the House Republican budget is likely to. For example, House appropriators are using $621 billion for defense, combined with $75 billion in war funds, and $511 billion for non-defense programs. The RSC would fund defense at $668 billion and provide $394 billion for non-defense.

And, as in past years, the RSC budget would make cuts to future Social Security benefits to restore solvency to the program and partially privatize Medicare starting in 2022.

McClintock said the fiscal 2018 defense level is based on the administration’s request of $603 billion for base defense needs and $65 billion in war funds, with the war money shifted under the budget cap.

The RSC plan calls for raising the age at which seniors would be eligible for Social Security. It would also no longer allow people the option of choosing traditional government administered Medicare. Republicans have proposed a more privatized system of Medicare as an option for seniors in the past.

So, we will see what happens. This could be a fight that threatens government continuity and which producers should watch closely as it proceeds, Washington Insider believes.

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