Washington Insider -- Friday

Administration Proposes to Slash Chesapeake Bay Funding Again

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

US Officials Comment on China Phase One Status

The U.S. has not yet received anything from China that the country expects to delay its purchases of U.S. ag goods under the phase-one trade agreement due to the coronavirus situation, according to USDA Undersecretary for Trade and Foreign Agricultural Services Ted McKinney.

“We have not received any formal notification of a delay, which pleases me,” McKinney said in Houston, Texas, at an ethanol event. “We hope it does not come.” The length of the coronavirus situation will be important, McKinney said, particularly if it impacts shipping and other economic activities. “I suspect it will be determined by how long the issue goes on,” he noted. He also expressed a hope China would deploy additional tariff reductions to help meet the purchase commitments.

“They made the commitment and it will be difficult to meet that commitment with the current tariff schedule and conditions in place,” he said.

Meanwhile, Treasury Secretary Steve Mnuchin told lawmakers during a Senate Finance Committee hearing on the Fiscal Year 2021 budget that with the coronavirus situation in China, implementation of the phase one deal “to a certain extent slowed down.”

Despite the statement by McKinney, there is the full expectation that China will request consultations, likely in March, on the issue of delaying their purchase commitments of U.S. ag goods.

Farm Credit Administration Official: Too Early To Make Call On More Farmer Aid

The CEO of the Farm Credit Administration is “cautiously optimistic” the financial picture for agriculture could improve this year as trade agreements enter into force and interest rates are expected to remain low. “It may take patience, but at least the groundwork has been laid for trade normalization and improved farm prices,” Glen Smith told the House Agriculture Appropriations Subcommittee.

He said that means it is “too early” to know if there should be 2020 Market Facilitation Program (MFP) effort. Smith and Jeffery Hall, a Farm Credit Administration board member, appeared before the subcommittee regarding the independent agency’s Fiscal Year (FY) 2021 budget request of $81 million.

In the third quarter of 2019, Smith said the share of adverse loan quality was 7.4% compared with data from the Farm Credit System putting that at 6.6% at the end of 2018. Nonperforming loans for the third quarter remained below one percent while delinquent loans were at 0.3%.

Washington Insider: Administration Proposes to Slash Chesapeake Bay Funding Again

The president’s Fiscal Year (FY) 2021 budget proposal went to Congress this week and, as expected, it would largely wipe out federal funding for the Environmental Protection Agency’s Chesapeake Bay Program, the Washington Post said this week. The partnership effort includes six states and the District and aims to clean up and restore the Bay. It has been underway since 1983.

The popular program, which received $85 million this year, would be reduced to $7.3 million next year—the fourth year in a row the administration has proposed to cut it sharply.

While the proposed cuts shouldn’t have been a surprise since they have been an annual feature of recent administration proposals, but Will Baker, president of the Chesapeake Bay Foundation, said the number still came as a shock. “This is a program that for years has truly enjoyed broad bipartisan support,” he said. “So it makes you ask yourself, what statement is the President trying to make?”

Such a dramatic decrease of support would threaten the ecosystem’s steady yet fragile recovery, Baker argues. However, he doubts that the final budget will look the way the administration has envisioned.

Last year, the proposed cut also was 90%, as it was the year before – and the year before that, the proposal was to eliminate the federal contribution altogether. Members of Congress who support the bay recovery effort have regularly rejected the president’s proposals and restored funding. Environmentalists and lawmakers have said they expect a similar response this year. But, as always, “there are no guarantees,” the Post said.

Scientists say the Chesapeake Bay is the healthiest it has been in generations. The ecosystem is showing signs of resilience and recovery unseen for decades, and even after record-setting 2018 rainfall resulted in a D-plus grade on last year’s annual report card, most metrics now indicate the estuary is continually improving.

Fishermen and environmentalists have logged sightings of species, including bottlenose dolphins, that had vanished. Signs of natural resilience and recovery — like thriving underwater grass beds and growing oyster reefs — have returned.

Many who work along the estuary use the same metaphors to demonstrate its growth: The Chesapeake Bay, they say, is like a sick patient in the early stages of remission. Why would you stop the patient’s supply of lifesaving medicine when it seems the treatments are working?

The program’s six states and the District have committed to meeting environmental goals, such as improving fisheries, increasing public access and limiting pollution in the bay to target levels by 2025. The restoration plan is outlined in the Chesapeake Bay Watershed Agreement.

Maryland Gov. Larry Hogan issued a public call for the president to reverse course and support the restoration effort--for which he has committed more than $350 million in his budget proposal.

“Maryland is leading the charge to safeguard the Bay — we are simply asking our federal partners to keep up their share,” Hogan said. “At his confirmation hearing, the EPA administrator said: ‘I am very much committed to the Chesapeake Bay and the Chesapeake Bay Program.’ Instead, the administration recklessly and repeatedly proposes gutting Chesapeake Bay funding.”

Hogan, who chairs the Chesapeake Executive Council — a regional commission that consists of governors of the six states along the Chesapeake watershed, the District mayor, the EPA administrator and chair of the Chesapeake Bay Commission — added that the effort to protect the bay has long been bipartisan.

However, not every state has been so diligent. For example, Pennsylvania, which does not border the Chesapeake but contributes a significant amount of agricultural pollution via the Susquehanna River, recently released a bay cleanup plan that underfunds by $300 million a program to help farmers adopt anti-pollution practices.

The Chesapeake Bay Foundation last month announced it intends to sue the EPA over its refusal to cooperate with mandatory Obama-era environmental programs – including those that decrease runoff and aid restoration efforts. Maryland and Virginia also are considering suing the EPA in an effort to compel it to change course.

“With this continued lack of support from the White House, it is all the more important that state practices and programs and funding all come through to help this restoration effort,” Baker said. “It’s very disturbing to see such a broad-based attack on the very fundamental and environmental principles of our nation.”

So, we will see. Clearly, support is strong for this program but so is the opposition in some cases. It is an effort that affects many producers directly and which should be watched closely as the funding fight continues, Washington Insider believes.

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