Home Farm Policy Menu Inside The Beltway -- February '99

Perhaps the biggest potential ag spending issue for the year is how and how much to pay for crop insurance reform. On February 1, the Administration issued a concept paper on "Strengthening the Farm Safety Net" to accompany its budget materials for FY 00.

Rather than a specific legislative proposal, the document lists principles and broad themes. The budget document also does not propose any budget or offsets for achievement of the principles and concepts, though Secretary Glickman suggested they would cost a billion or more dollars over and above the current roughly $2 billion for the programs. Rumors of huge, volume purchase of lottery tickets by Secretary Glickman at convenience stores around the area have proven unfounded. So, aside from riotous laughter, how will Congress deal with this issue substantively and financially? Last year, Congress came up with $6 billion in emergency farm crisis funds, but funding for permanent crop insurance reform may prove more difficult to enact.

Importantly, the Administration's very preliminary proposals include backing for revenue-based insurance products that cover a whole farm's production and revenue, including coverage for livestock. Whole farm coverage and coverage for livestock has been advocated by the Sustainable Agriculture Coalition for the past two years as a way to insure the up-and-coming "safety net" program does not discriminate against sustainable and highly diversified farms.

Congressman Charles Stenholm (D-TX) recently has endorsed whole farm revenue insurance coverage. Two other SAC priorities, relinking conservation requirements to receipt of insurance subsidies and enacting a payment limitation on those subsidies, do not appear in the Administration's proposals. However, in a public forum earlier in January, Deputy Secretary Rominger put USDA on record in support of legislation to apply sodbuster, swampbuster, and conservation compliance to crop and revenue insurance.

Some members of both parties are talking openly of greatly increasing the crop and revenue insurance subsidy budget by combining the existing spending baseline with additional new spending and some or all of the remaining years of the Freedom to Farm (AMTA) payments, for a big new $6-8 billion quasi-insurance, quasi-income transfer program. Others, especially those in states that traditionally don’t have major or frequent crop disasters, are becoming more openly critical of such an approach.

It's safe to say the “safety net” debate will become increasingly intense and divisive before showing any clear signs of resolution.

Secretary Glickman and his entourage appeared before the Senate and House Ag Appropriations Subcommittees the week of February 9th, signaling the start of the annual appropriations ritual. Senator Kohl (D-WI) queried the Secretary near the start of the hearing on the “bizarre” proposal to kill the Conservation Farm Option in favor of new legislation to add money to the Farmland Protection Program. The Secretary was taken aback momentarily, but regained his footing and responded that if Congress wanted to fund CFO, the Department would “not resist” implementing it. On the House side, new subcommittee member Sam Farr (D-CA) pressed Glickman on the national organic rule, soliciting a promise the new draft rule would be issued before the end of 1999.

In general, the hearings went about as expected. Questions covered a wide range of issues, including many parochial ones. Republican members generally beat up on the Administration for not having any budget plan for crop insurance reform (see above) and for loading up the ag budget with the normal gimmicks that never fly (user fees that are never considered, elimination of special grants that routinely are appropriated, pushing spending past the fiscal year in question, etc.). Leave out these items and the USDA proposal is roughly $700 million in the red, which means not only won’t the Administration get its proposed increases, but that ag programs are in for some rather serious cutting. That is, unless Congress decides to start spending the so-called surplus.

The question of spending the surplus (“lifting the discretionary caps” in congressionalese) in fact becomes the major early-year decision with huge ramifications for all appropriations bills. Appropriators of both parties will push hard for lifting the caps, but other factions will push as hard or harder for big defense spending, big tax cuts, a Medicare bailout, a big-time bicentennial celebration for Sen. Strom Thurmond , etc. Without a change in the caps, current spending gets whacked to the tune of some $17 billion so bet on some change in budget rules. Whether they make up the difference in whole or in part, and just how much winds up the ag bill, only the Shadow knows.

Speaking of appropriations, we expect a supplemental ag spending bill for the current year (FY 99) from the Administration any day. It will include roughly $100 million in subsidy costs to cover about $1 billion in additional emergency and regular loan authority, some funding for the Emergency Conservation and Emergency Watersheds programs, additional salary funding for FSA and possibly NRCS, and perhaps a few other items. Details are still being discussed at USDA and OMB. Once the package gets to the Hill, additional items and dollars are likely to at least have a hearing.

We have been encouraging friendly appropriators to push hard for conservation funding in the supplemental, including re-opening the CFO and upping EQIP funding. We’ll continue the encouragement and hope to not come away empty this time around. We also expect to be faced with a wee bit of policy legislating on the erstwhile funding supplemental, especially in the credit area. This may be an opportunity on some needed beginning farmer program changes, but may also put us back into the battle to salvage the family farm requirement for farm loans -- a battle we won last year. The supplemental might also give us a first shot at changing some of the Commodity Credit Corporation provisions that hinder conservation programs.

As always, the big question on the supplemental will be whether the bill gets treated as emergency spending or whether offsets will be required in cuts elsewhere in the ag budget. Stay tuned!

A final rule was published in the Federal Register on February 12th for implementation of the Preferred Lender Program (PLP) and streamlining of guaranteed loan requirements. The PLP grants banks with an established track record in using government guarantees on their private loans greater authority, more flexibility, and less paperwork in using the programs.

These new rules come at a time when, due to the continuing farm price crisis, guaranteed loan demand is at an all time high, as banks scramble to stay with borrowers by passing much of the risk onto taxpayers. Guaranteed farm ownership loans are being used extensively to refinance existing bank customers, and hence the program is out of money less than half way through the fiscal year and in need of supplemental funding.

The new rules also implement a section of the 1992 credit act relaxing the need for documentation on small loans of less than $50,000. Importantly, it also finalizes the congressional directive that operating or ownership loans made in conjunction with an FSA Beginning Farmer Down Payment Loan, as well as any guaranteed loan for used to “graduate” a direct loan borrower, be guaranteed at 95% instead of the usual 90% or lower rate. This was an MSAWG/SAC initiated and secured provision in the 1996 farm bill.

SAC submitted comments recommending revisions to the proposed rules concerning beginning farmer and conservation provisions, none of which were adopted by the final rule. We had noted the banks and the agency have consistently failed to reach statutory targets for guaranteed lending to beginning farmers and wondered why the rule was silent on this issue. We proposed that banks be required to make good faith efforts to reach the targets as a condition of achieving and maintaining preferred lender status, but the Department rather flippantly rejected this idea, stating “the agency does not feel revocation of lender status would be a reasonable method of encouragement” but of course coming up with no alternative method of encouragement themselves. So the rule grants banks enormous new authority to act on the public’s behalf, but without any conditionality.

Equally alarming, the final rule reversed a sensible provision in the proposed rule requiring that banks given PLP status have a history of using guarantees for new loans and not just for refinancing existing loans and existing customers. In response to 88 negative comments, the agency changed its mind, calling its original proposal “ambiguous,” “burdensome,” and “of limited value.” With self-flagellating internal reviews like these, just imagine what the private sector critics had to say!

In response to our comments suggesting the rule was ambiguous with regard to the banks’ versus the agency’s responsibilities with respect to swampbuster, sodbuster, and conservation compliance, the agency maintained the existing conservation regulations are clear and don’t need repeating in credit rules, but agreed that agency handbooks (forthcoming) will need to clarify the procedures for the agency’s review of conservation documentation to be held by the banks. This will deserve our continuing careful scrutiny, both with respect to conservation requirements and NPDES and animal waste/nutrient management plans. They did at least agree to cross reference HEL and wetlands conservation requirements with respect to the borrower in the final rule, a modest step in the right direction.

The Federal Register notice also specifically requests additional comments on how they should operate the revised interest assistance guarantee loan program. Under this program, in addition to the federal guarantee, the public also buys down the interest rate through a direct subsidy. At issue is whether to use a straight 4% interest rate subsidy or whether to use a graduated system based on need. A graduated system would allow guaranteed funds to service a considerably greater number of customers.

Earlier this month, the Time To Act Campaign (having dropped the “A” from the front, it appears we can no longer refer to them as our “ATTAC dogs”) issued its 1999 report card on USDA’s one year performance on the recommendations of the National Commission on Small Farms. Looking over their report card, let’s just say that if little Johnny USDA had classmates, he’d be falling behind them.

The report card read:

• Market Access D
• Market Development B+
• Research & Extension C
• Conservation C+
• Credit C
• Beginning Farmers B
• Farm Workers D
• Civil Rights C
• Risk Management B
• Outreach & Organization C+

The report pointed out several areas that need improvement, most notably active enforcement of market access provisions of the Packers & Stockyards Act and continuing efforts on Civil Rights.

For more information on the report or the Time to Act Campaign, contact the Center for Rural Affairs at (402) 846-5428, or at http://www.cfra.org/.

On February 10, 1999, Representative George Miller of California introduced H.R. 684 -the Farm Sustainability and Animal Feedlot Enforcement Act, or Farm SAFE. This bill is similar to the feedlot bill introduced by Miller in the last session of Congress. The bill is posted on the Web and can be accessed through the http://www.house.gov website or you can request a copy from Martha Noble at SAC.

Many of the provisions are similar to those endorsed by SAC in our comments on the USDA-EPA Draft Unified National Strategy for Animal Feeding Operations. H.R. 684 would require the following:

• Individual permits for CAFOs under the Clean Water Act.
  
  
• Phasing out of open air lagoons on CAFOs within the next 10 years.
  
  
• Nutrient/waste management plans as part of the CAFO permit, with land application standards for nitrogen and phosphorus based on sound agronomic practices.
  
  
• Improved monitoring, recordkeeping, and reporting for CAFO permits.
  
  
• Inclusion of all large-scale poultry operations within the CAFO permit program.
  
  
• Joint liability of CAFO operators and vertical integrators who own the animals or exert control over the operation through a contract or other arrangement.

The bill would also lower the animal unit threshold for determining whether an operation is a CAFO, by including operations with one-half the number of animal units provided under the current CAFO regulation. In its most recent livestock policy paper, the MSAWG has not reached a consensus on the issue of decreasing the animal unit threshold but has taken the consensus position that the threshold number should not be increased.

The comment period on the USDA-EPA Draft Unified National Strategy for Animal Feeding Operations closed on January 19, 1999. At USDA and EPA briefings held after the close of the comment period, the agencies announced that they would accept as part of the official record testimony presented at the regional listening sessions on the Draft Strategy, held from November 16 through December 15, 1998.

As of last week, the agencies had an unofficial count of about 1700 comments on the Draft Strategy, including over 300 comments made at the listening sessions. The EPA and USDA have announced that the comments will be posted on the Web at http://www.epa.gov/OWM/afos/letters.htm. The EPA and USDA expect to release the Final Unified National Strategy on AFOs sometime in March.

The SAC office has submitted several documents to USDA suggesting language and recommendations to be added to the forthcoming final version of the joint USDA-EPA strategy concerning sustainable agriculture and alternative livestock production systems and practices. It appears likely that a dozen or so specific references will be added to the strategy, including a new “guiding principle” to promote and support sustainable systems and some type of sustainable systems “incentives.”

We also now expect somewhat better language on joint liability for integrators, public access to information under general permits, and perhaps clearer delineations on certain regulatory matters. On the negative side, a new section has been added to provide a process for states to declare “functional equivalency” with the national strategy and thereby opt out of some or all of what might be proposed in the detailed follow-up to the strategy. We have not seen the specific language on state coordination, so can’t yet judge just how damaging it might be.

On the nutrient management policy front, we have seen semi-final drafts on the nutrient management standard, which appear to include strong phosphorus standard language, at least general new language on siting, and a reference to whole farm planning. The standard itself will not include any “phase in,” but the nutrient management policy is rumored to still contain a so-called “progressive planning” provision allowing up to 10 years to reach the standard. These documents are still in a final clearance stage and are subject to further change. We don’t expect them to be released until after the final unified strategy goes public sometime in March.

The 106th Congress began its first session with hearings and legislative action on the issues of livestock market concentration and livestock price reporting. The Senate Committee on Agriculture, Nutrition, and Forestry led off on January 26, 1999 with a Hearing on Economic Concentration in Agriculture. The House Committee on Agriculture followed with a Hearing on Livestock Prices on February 10, 1999 and a Hearing on Agribusiness Consolidation on February 11, 1999. Specific issues addressed included consolidation of packers and processors, captive supply, record low prices in the livestock sector, particularly pork; and the proposed buy-out by Cargill of Continental’s worldwide grain merchandising interests.

As nothing exceeds like excess, there was considerable overlap in the testimony provided at these hearings. Most of the written testimony submitted to the Senate Agriculture Committee is posted on the web at http://www.senate.gov/~agriculture/hr99126.htm. If you would like a complete list of those testifying at the hearings and/or copies of the written testimony submitted for the House Committee hearings, contact Martha Noble at the SAC office, and be sure to seek professional counseling at the soonest possible date.

Representatives of the National Pork Producers Council, testifying before both the House and Senate requested that Congress pass legislation with the following 6 elements:

1. Mandatory packer to producer price reporting.
2. A mandatory swine marketing contracts reporting program.
3. Mandatory monthly retail price reporting.
4. Monthly, rather than quarterly, hogs and pigs inventory reporting.
5. Uniform carcass measurement and value pricing.
6. Swine production building construction reporting.

Nothing, apparently, concentrates the mind quite so admirably as the prospect of hanging in the morning. Most of these measures, particularly a call for mandatory price reporting, reflect a 180 degree turn-around of the NPPC position on these issues taken last fall. The American Farm Bureau Federation continued to limit its request for price reporting to a voluntary system, but noted that it would call for mandatory price reporting “if voluntary efforts are inadequate.” We here at SAC cannot fathom how the AFBF finds that the current price reporting system is adequate.

Mark Drabenstott, Director of the Center for the Study of Rural America of the Federal Reserve Bank of Kansas City, opined that “consolidation in U.S. agriculture is generally a positive trend,” especially for consumers but went on to say that with consolidation, rural America will have to find a new economic engine -- we presume not related to agriculture. Maybe he’s referring to that blown Chevy 350 rusting away out behind Dan Specht’s barn. He also noted that those small and mid-sized producers who wish to stay in agriculture will have to” forge new relationships.” In contrast, Professor C. Robert Taylor of Auburn University, stated that the market power taken by a limited number of agribusiness firms will not be good for consumers, producers, or any one else in the long-run, except the powerful agribusiness firms.

On February 10, 1999, Representative Thune introduced H.R. 693, which would institute a mandatory livestock market reporting program for meat packers regarding prices, volume, and the terms of sale for domestic and imported livestock and livestock products. The bill is co-sponsored by Representatives Minge, Emerson, Pomeroy, Evans, Weller and Clayton

The 18th sign-up for the CRP ended December 11. USDA has announced that approximately 90,000 offers representing 7 million acres were received. As usual, North Dakota lead the way (over 1 million), followed by Montana, Minnesota, South Dakota, and Kansas, each with over 500,000 acres. It will be a month or more before bid selections are made, but the USDA budget made public on February 1 estimates a 5.8 million acre sign-up for budget purposes, bringing CRP total cost for FY 00 to $1.58 billion. For long term projections, the budget assumes a 36.4 million acre CRP by 2002, including 5.5 million acres of partial field enrollments through the Buffer Initiative and the CRP Enhancement program. Current buffer enrollment through the continuous sign-up totals only 760,000 acres.

Word out of FSA is North Carolina will be the next CREP to be finalized. The focus, like the existing Maryland CREP, will be water quality and pfiesteria. In the Midwest, both Ohio and Indiana have proposals in the works and well into the process, while Iowa is just getting started on a plan (related to hypoxia) and Nebraska has produced a draft plan for the eastern and south central portion of the state, also focused on ground and surface water, with particular attention to atrazine setbacks. The existing CREP in Illinois is reported to have the best sign-up rates of all the approved states. We continue to encourage MSAWG organizations to find out what is going on in their states on CREP and on the buffer initiative in general, and to keep the Washington Office posted on developments.

The organic community scored a major victory on January 14 when the Food Safety and Inspection Service (FSIS) announced that it would establish criteria for approving the "certified organic" label claim on meat, poultry, and egg products. This decision reverses the FSIS's long standing position that organic labeling of these products would have to await implementation of national organic standards.

Producers who operate under recognized private certification standards will now be able to petition FSIS to make an organic claim on their products. This promises to open up a high volume, high value market niche which had previously been expressly closed to organic producers. Not only will this benefit livestock producers and consumers, but it will significantly strengthen the market for organic grains because 100 percent certified feed has become the accepted standard for certification. Many thanks to the Organic Trade Association and the CROPP Cooperative for leading this fight for a loooonnnng time.

The National Organic Standards Board enjoyed a highly productive meeting in Washington between February 9 and 11. Keith Jones, Program Manager of the National Organic Program, stated that the Department was “dotting the i’s and crossing the t’s” on the next Proposed Rule for national standards. After further editing, internal review and sign-off by other agencies (EPA, FDA, and OMB), Keith hopes to see the Proposed Rule published this summer.

It’s apparent that the USDA is responding to the overwhelming public rejection of the first version. Keith stated that the Proposed Rule will prohibit the big three (genetically engineered organisms, irradiation, and biosolids) in organic production, will acknowledge the NOSB’s authority to determine which materials may be added to the national list of allowable synthetics, and will not attempt to restrict alternative eco-label language. With regards to livestock, the Proposed Rule will prohibit the use of antibiotics, restrict the use of parasiticides, require the use of 100% certified organic feed, and require, with very limited exceptions, access to the outdoors for all animals. The USDA is also following the NOSB’s recommendation that organically raised ruminants enjoy access to pasture and that grazing be an integral component of the nutrient management plan.

So can we now join with Neville Chamberlain in declaring peace in our time? Yeah, right. While the NOSB and the organic community members in attendance responded favorably to the USDA’s outline of the new standards, several contentious issues remain undecided.

Private certifiers have been adamant that they retain the right to revoke certification from non-compliant operations, while the Department has maintained that the organic seal is a federal license which can be removed only after the due process afforded by an administrative hearing. Participants reached a tentative compromise during the meeting, which would allow certifiers to revoke a non-compliant operation’s certification certificate and to withdraw the right to use that certifier’s seal. The ultimate determination of whether to revoke the federal license would await the outcome of a hearing before a USDA administrative law judge.

Under this arrangement, certifiers would maintain internal appeals processes (as they already do) to insure that cases are thoroughly reviewed before the decision to revoke the certificate and possibly initiate federal action on the license is made. Both the private certifiers and the NOP staff at the meeting expressed preliminary satisfaction with the agreement, but how the language reads in the Proposed Rule will be very closely watched.

Keith Jones also announced that the USDA will go to Congress and request a one time appropriation to cover the cost of accrediting (or verifying the ability to perform required services) all certifiers. Many smaller certifiers have expressed concern that the potential expense of accreditation could prevent them from participating in the federal program.

The NOSB made substantive policy recommendations on a number of difficult issues. The Board recommended that inert ingredients from EPA Lists 1 and 2 be prohibited in organic production, and that synthetic inerts on List 3 be prohibited if not specifically recommended for approval within three years. The recommendation includes a phase out provision to avoid penalizing producers who have previously used these materials in good faith.

The intent of this approach was to compel manufacturers of compounded agricultural amendments (mostly pesticides) that wish to have their products used in organic production to disclose which inert ingredients they contain. The USDA has indicated that it wants to work with the organic community, and especially the Organic Materials Review Institute, to expedite review of synthetic inerts. The EPA, which is responsible for the registration of pesticides, will be called upon to play a large role in these efforts.

In a second major policy decision, the Board approved a set of criteria for determining which synthetic ingredients and processing aids can be allowed in the processing of certified organic products. While the original Organic Food Production Act established criteria for allowing synthetic materials to be used as production aids (pheromones, for example), it prohibited their use in processed products. Earlier recommendations by the NOSB and the policy of the USDA support the use of reviewed and approved synthetic materials in processing. This issue has been the subject of considerable debate as more and more processed organic products enter the market. A vote whether to completely prohibit synthetic materials in processed products was narrowly defeated.

Consensus at the end of the three-day meeting was positive -- the next Proposed Rule looks to be considerably improved, the role of private certifiers is being clarified, and the Board took clear positions on many significant issues which remain unresolved. Keith Jones has made an important contribution to bridging the gap which threatened to divide the organic community and the federal regulators. The next meeting of the NOSB is scheduled for June 8-10 in Washington, DC. With all this peace breaking out, it appears that Maddie “The Mangler” Albright will call for a delay in airstrikes against NOP strongholds, at least for the time being.

The EPA has asked for more time to develop risk reduction plans for the organophosphate compounds for which risk assessments are complete. While the missed deadlines are not statutory requirements of the FQPA, they do indicate that the Agency is struggling with its efforts to amend registrations or re-write labels in response to the new human health protection standard.

Last August, the Agency indicated that the risk reduction plans would be available by the end of January, but their release has now been postponed to “late spring.” The Agency expects to issue a preliminary risk assessment for chlorpyrifos, one of the most widely used organophosphates, around the same date. The next meeting of the Tolerance Reassessment Advisory Committee has been pushed back until April.

The agency also announced plans for addressing a number of related pesticide regulatory issues, including farm worker protection standards and food and water residues of atrazine, during 1999. The Agency will not change the farm worker protection standard but will use improved implementation and enforcement strategies to improve conditions in the field. The review will include particular focus upon the risk to the children of farm workers and farm families. For atrazine, a preliminary risk assessment should be completed by December, 1999 in preparation for the compound’s reregistration process in 2000.

The Climate Action Network (CAN), a broad coalition of environmental organizations working on climate change issues, recently started an agriculture committee. The SAC office prepared a memo for the group on win-win opportunities for sustainable agriculture and progress on carbon sequestration through administrative action. The memo included ideas for CFO, EQIP, crop insurance reform, sustainable agriculture research, CRP buffers, farmland protection, the organic program, and the AFO strategy. At the next meeting, we will present a short list of 3 or 4 items CAN members could take to the Administration as proposals. Colleagues at USDA and at World Resources Institute are trying to develop estimates of potential net carbon gains from the various options.

The USDA has two websites up and running with information for farmers interested in direct marketing.

The USDA AMS Farmers' Markets website features a listing of farmers' market locations by state, facts about farmers' markets, and information about establishing a farmers' market on federal property.

The Farmer Direct Marketing website has information about direct marketing including publications, resources and Web links, direct marketing resources by state, news and announcements, and information about USDA's AMS Direct Marketing Action Plan.

As part of the Clinton Administration's Clean Water Action Plan, the Environmental Law Institute, with support from EPA's Nonpoint Source Control Branch, has issued a new report "Almanac of Enforceable State Laws to Control Nonpoint Source Water Pollution (1998)." The report contains summary reports for laws in the states arranged by Forestry Requirements, Agriculture Requirements, and Development and Other Earth-Disturbing Activities. The report may be downloaded in Adobe Acrobat PDF format at http://www.eli.org/bookstore/rralmanac98.htm. Information on ordering a $30 copy of the publication is also available on that website.

Chairman Mao and his hundred flowers had nuthin’ on SARE’s new “1,000 Ways to Sustainable Farming,” which offers all of us the opportunity to explore and refine the definition of Sustainable Ag by profiling successful, sustainable farmers and ranchers. This project is in the able hands of former New Farm editor and Sustainable Farming Connection webmeister Craig Cramer, who would probably still put up a copy of this DC Report screed on the Connection even if we didn’t say fawning things about him here. Beyond describing farming practices, the case studies under development also detail the effects of these practices on farm profitablity, quality of life, rural communities, and the environment. For more information and to nominate farmers and ranchers for the project, see http://1000ways.baka.com/index.htm.

Despite the fact that I’ve felt guilty for months now about that still unreturned fundraising letter from the Organic Farming Research Foundation sitting right here in my desk drawer (next month, Bob, I promise), they continue to do spectacular work in charting the “state of the art” of organic production. Most recently, OFRF released the Final Results of the Third Biennial National Organic Farmers’ Survey, which charts the results of the 1,192 surveys returned by certified organic farmers from around the country. It includes great, up to the minute information on research priorities, marketing, production, and practices throughout the organic world. Contact OFRF at (831) 426-6670 or research@ofrf.org for more information, or find them on the web at http://www.ofrf.org/.

Last but not least, we are thrilled to recognize excellence among us. You see, Iowa may have a Plan, Minnesota a Project, and even ‘Frisco a Kid, but Wisconsin has an IDEA. We are proud to announce that our very own Margaret Krome of the Michael Fields Agricultural Institute is the most recent recipient of the prestigious “Wisconsin Idea Award in Natural Resource Policy,” given each year by the School of Natural Resources at the University of Wisconsin Madison. She will be honored at a special banquet March 16, but congratulatory notes and bratwurst would be welcome any time. Way to go, Margaret!

• January '99
• December '98
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• June '98
• May '98
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• March '98
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• July '97

Home Farm Policy Menu Inside The Beltway -- February '99