While insiders insist there continues to be “quiet progress” on a short-term scheme to avoid the fiscal cliff’s tax increases and economic turmoil on January 1, 2013, key negotiators publicly sniped at each other throughout the week, and the broader political parties signaled their priorities on programs that “must not” be part of the final package if there is one. However, it remains clear if there’s a fiscal cliff deal cut, farm programs will be part of the mix if only because of the savings they contribute. House Speaker John Boehner and the President met at the White House twice in the last 10 days – once with staff, once without – and this week exchanged what reports said were tense phone calls. Partisan rhetoric continues to fly following these meetings from both sides, fueling the media and market pessimism a deal can get done by December 31. The Washington, D.C.-based Business Roundtable this week waded into the broad fiscal cliff negotiations fray, saying lawmakers should raise taxes if necessary – something that appears almost inevitable – to reach an agreement. “We urge you to step forward and demonstrate that principled compromise is once again possible and that the American political system … can function as designed,” the Roundtable said in a letter to congressional leaders. Congress needs to agree on how to get more revenue, it said, “whether by increasing taxes, eliminating deductions or some combination thereof.” However, they cautioned tax increases must go “hand-in-hand” with spending cuts and overhauling entitlement programs, including Medicare, Medicaid and Social Security. President Obama has refused to talk publicly about entitlement program cuts, though congressional Democrat leaders this week said entitlements should not be part of the fiscal cliff negotiations. The GOP said it won’t talk about tax rate increases unless entitlements are on the table. Rep. Dave Camp (R-MI), chairman of the House Ways & Means Committee, responded to the Business Roundtable letter by saying, “Big business may support raising taxes on small businesses, but I do not.” A similar scenario played out among key ag negotiators on a 2012 farm program package that may move with any fiscal cliff package. With farm program spending cuts representing about $32-35 billion in savings, the chairs and ranking members of the respective agriculture committees met December 12 and December 13, in hopes of hammering out at least a short-term farm program agreement. Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) will not accept a straight extension of 2008 programs that she says leaves 37 current programs unfunded while continuing direct payments to producers, but Rep. Frank Lucas (R-OK), chairman of the House Agriculture Committee, says he can live with an extension as it provides producers operational certainty, allows the U.S. Department of Agriculture to prepare for new programs and cuts in old operations, and gives him and Stabenow the opportunity to hammer out a 2013 five-year Farm Bill in the spring. The two big sticking points in the ag talks are farm program payments – the Senate re-invents payment programs as risk control insurance-like programs, but the House includes marketing loans and countercyclical payments – and how and how much to cut federal food stamps. Among the top four House and Senate ag leaders, there have been some major shifts in position, particularly from Senate leaders. Stabenow says she’s willing to entertain deeper cuts to food stamp fraud, waste and abuse if it leads a five-year package included in the fiscal cliff deal. Senate ag panel ranking member Sen. Pat Roberts (R-KS) says he’ll talk about revising his chamber’s Farm Bill commodity program title to include marketing loan and/or countercyclical payments scheme – a move that would mitigate southern peanut and rice producer opposition to the Senate’s risk/crop insurance approach – again if that’s what it takes to get a 2012 package done. However, as of December 14, House and Senate ag negotiators began to mirror the broader party lines on the fiscal cliff negotiations, digging in and trading barbs. After the December 13 meeting among Stabenow, Roberts, Lucas and House ag panel ranking member Rep. Collin Peterson (D-MN), the Senate chided the House bill because it never received a full chamber vote. Lucas and Peterson fired back in a statement this week, “When the Senate Ag Committee starts to negotiate in good faith … rather than in the press, we stand ready to work with them.” The two House ag leaders said, “Contrary to what they would have you believe, this is not a rice, peanut and wheat issue … it’s about making sure policy is defensible to tax payers and works for all commodities in all regions of the country.”
With billionaires Warren Buffett and George Soros calling for dramatic increases in the federal estate tax, with President Obama willing to take the “death tax” back to Clinton era levels while cutting the exemption, and ag groups holding elimination of the estate tax as one of their highest collective priorities, the fate of taxes paid on estates is emerging as a singular issue in the tax reform portion of fiscal cliff negotiations. The current 35 percent tax rate on estates of more than $5 million is set to expire at the end of the year. Without action, the rate would jump to 55 percent on estates in excess of $1 million, affecting nearly 600,000 farms in the U.S. This week, analysts complicated the discussions by pointing out average-quality farmland in some parts of the country has increased in value by more than 20 percent during 2012, and a Purdue University study shows those values are hitting nearly $7,500 per acre, with top-quality land going for nearly $9,000 an acre, and even poor land getting more than $6,000 per acre. This runup in land values means farmers who were not concerned about estate taxes in the past are now paying close attention. Sen. John Boozman (R-AR) said on the Senate floor this week an increase in the estate tax would affect more than 22 percent of Arkansas farmers. Sen. Orrin Hatch (R-UT), ranking member of the Senate Finance Committee, called on President Obama this week to ensure an increase in the estate tax rate is not included in the fiscal cliff negotiations and that there must be “an end to the death tax” as part of broader tax reform efforts next year. He was joined in his Senate floor remarks by Sens. John Barrasso (R-WY) and Sen. Roy Blunt (R-MO), Senate minority whip. Land sales, experts say, have also accelerated by more than 20 percent in the last half of 2012, a concern that Congress will not act on the fiscal cliff and federal capital gains taxes will jump to 20 percent next year, along with a separate 3.8 percent tax on capital gains contained in Obamacare health care law now in effect.
The Environmental Working Group and several conservative tax groups this week publicly opposed enactment of a five-year 2012 Farm Bill as part of any fiscal cliff agreement, saying, “The time to pass a farm bill has come and gone. Congress should pass a fiscally responsible one-year extension of farm and food programs and allow the House to debate the future of farm subsidies.” Calling it a “secret farm bill,” EWG and the tax groups held a Washington, D.C., press conference where they called for the one-year extension, but said direct payments must be ended immediately as a “down payment” on the deficit. Taxpayers for Common Sense said the current farm bill approaches “save too little, preserve ridiculous crop insurance subsidies and create new entitlement programs” and called the approach “the height of fiscal irresponsibility.” One of these new entitlements, said the American Enterprise Institute, is the House Agriculture Committee creation of price loss coverage, and the Senate bill’s Agriculture Risk Coverage programs. The groups said they want to see a “full farm bill process” next year, one that will result in no shallow loss program, reforms crop insurance subsidies and adds “taxpayer protections.”
House Speaker John Boehner (R-OH), who last week flexed his leadership muscle and stripped several sitting House members of prime committee seats going into the new Congress, this week said the actions taken were with “the assent of the majority” of Republican House members. Boehner was responding to a letter from Rep. Tim Huelskamp (R-KS), Rep. David Schweikert (R-AZ) and Rep. Justin Amash (R-MI), all freshmen who lost committee assignments. The letter demanded that Boehner disclose the reasoning behind the seat assignment decision and that he reveal any “scorecard” used to determine how seats are assigned. Boehner said there’s no scorecard and referred the three to the Republican Steering Committee for more information. Huelskamp, who lost seats on both the House Agriculture and Budget Committees, alleges Boehner is “punishing conservative Republican congressmen.” “This decision by GOP leadership, in a closed-door backroom session, confirms … that promises of transparency were simply an election-year ploy,” Huelskamp said. In an interview this week with Roll Call magazine, a Capitol Hill publication, Huelskamp continues to assert he’s not been given a reason for his removal from the two committees. He said the fact he wasn’t warned ahead of time that his votes and public remarks were being “scored” as he alleges was “probably the biggest surprise.” “As far as we can tell, it had to do with certain votes and they said, ‘Hey, if you didn’t vote the way John Boehner decided you should vote, and Kevin McCarthy and Eric Cantor, you’re removed from that committee.’” Huelskamp said the toughest part is explaining to constituents of the First District of Kansas – which has had a member on the House Agriculture Committee for more than 70 years – “exactly why you kick a fifth-generation farmer off the House Ag Committee … everybody’s speechless, including staff of the committee, including other members.” In a “telephone town hall” meeting last week, Huelskamp said 20,000 people from his district “were on and off” the call, and he polled them about whether he should vote for Boehner to be re-elected speaker next year. Only 12 percent said “yes,” he said. He said his loss of committee seats – and the loss by other members – “reminded conservatives that hitching to the Republican wagon doesn’t always work.” He said his district is not only the biggest ag district in Kansas, “but the biggest producing ag district in the whole country … we have a right to be on that committee.” Huelskamp confirmed he’s formally requested the Steering Committee to re-instate him to his slot in the House Ag Committee.
A $60-billion Senate bill and is written to provide emergency assistance to the victims of Superstorm Sandy, and includes $224 million for agriculture disaster assistance, is set for floor action next week, a synopsis of the bill released this week by the Senate Appropriations Committee reveals. The bill mirrors a formal White House request this week – and an estimate made by Senate Majority Leader Harry Reid (D-NV) last week – for post-Superstorm Sandy emergency relief, and will likely get the grudging support of both parties and chambers despite its price tag. Of the ag allotment, $25 million will go to shore up the emergency conservation program to provide money and assistance to farms and ranches damaged by natural disasters and for emergency water conservation; $58.9 million is set aside for emergency reforestation efforts; $125 million would be available for emergency watershed protection to mitigate the effects of flooding, droughts and preventing erosion, and emergency food assistance programs would get $15 million.
All companies currently registered under the federal Bioterrorism Act of 2002 are required to register with the Food and Drug Administration under new requirements of the Food Safety Modernization Act of 2010, and while FDA has had problems with its registration system, this week the agency announced it is extending the deadline for reregistration until January 31, 2013. The registrations are required every two years, with the “window” for reregistration set as October 1-December 31, in even-numbered years. However, FDA’s registration system didn’t come online until late-October, the agency said, and reregistrations were stymied. Registration under both the Bioterrorism Act and FSMA are required of companies with facilities that manufacture, process, package, receive or store food for man or animal in the U.S. Go to www.fda.gov to get specifics on registration.
The U.S. and China this week announced they’ve renewed for five more years their cooperative food safety agreement, which was first signed in 2007. The agreement – signed in the wake of the Chinese melamine-in-pet food contamination incident and problems with exported Chinese dairy ingredients in several food products – is designed to “enhance cooperation between the U.S. and China on food and feed safety.” The agreement includes enhancement of FDA’s identification of high-risk food products exported to the U.S.; collaboration on inspections of facilities that process and produce food; a focus on high-risk foods exported from China to the U.S., including canned and acidified foods, pet food and aquaculture; and creation of a certification process for FDA to accept “relevant, verified information” from China’s government on registration and certification of food and feed facilities. The first agreement led to the opening of FDA offices in Beijing, Shanghai and Guangzhou, and allowed FDA to increase the number of facility inspections in China from zero in 2007, to 85 in 2011, the agency said. FDA and the Chinese government have conducted workshops for the Chinese industry on FDA requirements for several categories of exported food.
Just as Congress sent legislation granting Russia permanent normal trade relations with the U.S. for President Obama’s signature, the Russian government formally restricted U.S. pork and beef imports – worth an estimated $500 million a year – unless the meat carries certification the animals were not given ractopamine, a product which promotes carcass leanness. The Russian action also came on the heels of a U.S. Department of Agriculture-led trade mission to Russia, a trip Under Secretary for Farm & Foreign Agricultural Services Mike Scuse said included discussions on sanitary/phytosanitary issues. Scuse told the press the talks “went better than anyone had anticipated.” Some say the Russian action is in retaliation for separate Senate action on another bill to provide future sanctions on governments on human rights violations, including Russia. Secretary of Agriculture Tom Vilsack and U.S. Special Trade Representative Ron Kirk said this week that since Russia is now part of the World Trade Organization, it must live by WTO rules, signaling that if Russia doesn’t rescind its ractopamine program, the U.S. could file a formal WTO complaint. Vilsack and Kirk said the demand for testing and certification that meat imports are ractopamine free “appears inconsistent” with WTO standards. The U.S. Meat Export Federation said it was confident the Russian demand that exports be tested and carry a “certified-free” certificate on ractopamine could be resolved amicably. Ractopamine, an Elanco Animal Health product, is approved in the U.S. as well as several other countries, but not in Europe and China, which stand to benefit from the Russian restriction on U.S. imports.
The Brazilian government this week scurried to calm trading partner fears after it confirmed on December 7 that the discovery of its first case of BSE was initially made nearly two years ago. Japan immediately banned imports of all Brazilian beef indefinitely, and South Africa and China also banned Brazilian beef imports. The Brazilian government said the 18-month delay in testing and reporting the BSE case was the result of domestic laboratory work overload and international rules which resulted in samples from the animal being classified as low priority for diagnosis. Brazil’s Minister of Agriculture said the BSE animal was a breeding animal in the state of Parana, and said it has provided all relevant information to the governments of its trading partners. One Brazilian official characterized the discovery as “an old and isolated occurrence” and that the animal showed evidence of “non-classic” BSE which may have been a “spontaneous mutation” given more than 90 percent of Brazil’s beef herd are grass-fed on pasture. OIE, the world animal health organization, says it is maintaining Brazil’s BSE status as “insignificant,” the lowest risk level possible, with a risk grade of level 1, a status enjoyed by just 15 countries.