After three days of intense debate, the House was nearing completion of a $1.2 trillion Continuing Resolution (CR) to fund agencies and programs for the remainder of FY11. Absent congressional action, funding for all agencies and programs expires March 4.
Speaker Boehner (R-OH) expressed confidence that the House will pass the continuing resolution to fund the federal government through the next seven months of the fiscal year. The CR (H.R. 1) is necessary because last year Congress did not pass any of the regular appropriations bills for FY11. House Republican leaders, under pressure from newly elected members, introduced a bill that would reduce discretionary spending by $100 billion compared to the President’s proposed budget from last year that was never enacted.
The NCC joined other ag groups in a letter – available on the NCC’s website athttp://www.cotton.org/issues/2011/agbudg.cfm– expressing concern that the cuts to agriculture are disproportionate.
During the debate, several amendments were filed that would have a significant adverse impact on the cotton industry. Even though the CR is supposed to be limited to addressing discretionary program spending, Congressional Members crafted amendments that would affect current farm programs, and, in one case, undermine an important agreement between the United States and Brazil related to the Brazil WTO case.
Rep. Kind (D-WI) offered an amendment that would prohibit USDA from transferring funds to the Brazilian Cotton Institute. The Institute was established as part of an agreement between the United States and Brazil, which resulted in Brazil agreeing to suspend retaliation against US exports until the ’12 farm law is approved and the United States complies with the WTO’s ruling. The Kind amendment was defeated 183-246.
Had the Kind amendment become law, there was concern that Brazil would have considered the United States out of compliance and immediately implemented retaliatory action against US exports.
Rep. Blumenauer (D-OR) has proposed amendments that would apply a $250,000/entity limit to all program benefits -- including marketing loan gains -- and another which would change the AGI test to deny all benefits to individuals with average adjusted gross incomes exceeding $250,000.
The amendments were scheduled to be debated on Feb. 18 prior to final action on the package. A high-stakes battle over federal spending will occur in early March, when the House and Senate will either have to pass a short-term bill to fund the government or face a “shutdown” similar to what occurred in the mid ’90s.
The House and Senate will adjourn for a one-week break at the conclusion of business on Feb. 18. Congressional leaders have taken tough positions that will result in difficult negotiations over spending cuts and raise chances that funding could lapse and federal employees will face furloughs.
Speaker Boehner (R-OH) announced he will not agree to move even a short stop-gap measure when negotiations with the Democratic-controlled Senate and the White House begin in earnest next month. He told reporters he will consider passing a short continuing resolution if the House and Senate cannot reach an agreement on a longer-term spending plan by March 4, when the current CR expires.
“But I am not going to move any kind of short-term CR at current levels,” Boehner said as the House was working to finish a government funding bill with $60 billion in cuts.
In his comments to reporters, Rep. Boehner said the GOP will have met its pledge to cut $100 billion when H.R. 1 is passed. Even a stop-gap funding bill must contain more cuts, he said. Senate Democrats, in contrast, have said relatively little about the CR that they plan to unveil in March. Majority Leader Reid (D-NV) earlier had said they support a five-year freeze in discretionary spending.
President Unveils FY12 Budget Proposal
While the House debated a funding measure to cover the remainder of FY11, the President unveiled his FY12 budget proposal. The President’s budget provides $23.9 billion in discretionary funding to USDA, a decrease of $3.2 billion from the FY10 enacted level.
In the summary document accompanying the budget, the following statement was included, “In keeping with the Administration's priority goals, departmental funding focuses on renewable energy development and innovation research -- areas critical to job creation, long-term growth and global competitiveness. The budget reflects tough choices needed to address challenging times. Savings are created by reducing direct payments to high-income farmers, refocusing USDA’s home ownership programs, and streamlining and targeting USDA conservation programs.”
The budget includes several proposals that would affect the cotton industry. There is a proposal to phase-in a new adjusted gross income test, which would deny direct payments to individuals with average adjusted gross non-farm income over $250,000. This would achieve savings of $2.5 billion over 10 years and affect only 2% of program participants, according to USDA.
The budget also proposes a funding reduction for the cotton pests account (cost share funds for boll weevil and pink bollworm eradication programs) to $9 million -- citing the program’s success as the rationale for proposing a $14 million reduction.
The proposal also includes significant reductions and reprogramming of research funds which could adversely affect cotton and textile research at a number of research labs across the Cotton Belt.
Hearings Address Farm Economy
Chairwoman of the Senate Committee on Agriculture, Nutrition and Forestry Stabenow (D-MI), said during that panel’s hearing to examine agriculture’s effect on the US economy that American agriculture now is supporting 16 million jobs and is one of the few industries leading the economic recovery.
Attending his first Senate agriculture committee hearing as ranking member, Sen. Roberts (R-KS) said America’s farmers and ranchers are critical to the US and global economies and that he would work to ensure producers have the tools they need to meet the food and nutrition demands of a growing global population. "We must work together because too often agriculture programs become the target of criticism and attacks,” he said. “Some see America’s producers as cowboys wearing black hats in the western movies … but not me.”
House Agriculture Committee Chairman Lucas (R-OK) said during that panel’s hearing that,"The agriculture economy is highly cyclical and it changes like the weather in western Oklahoma: fast, sharp, and without notice. This reality helps explain why the mood in farm country today is both upbeat and apprehensive. This fact, along with experience, offers a cautionary note to anyone who might be tempted to cite current economic conditions on the farm as the basis for setting long term farm policies."
That panel’s Ranking Member, Rep. Peterson (D-MN), said, "The farm economy is good, and has been solid through the past few years. This is due, in part I believe, to the farm bill that we passed in 2008. I look forward to working together to provide farmers with five more years of certainty by passing another strong farm bill in 2012 and today’s hearing was a good place to start."
Secretary of Agriculture Tom Vilsack’s testimony before both the House and Senate agriculture committees included an extensive review of the US farm economy and coverage of other key matters,including: biotechnology; conservation; trade; the estate tax; nutrition; the proposed Grain Inspection, Packers and Stockyards Administration rule; and civil rights. Larger themes also emerged during his testimony; among them commodity prices, land values and economic stability, regulation, dairy policy, and crop insurance.
Regarding the US farm economy, Secretary Vilsack told both committees that economyis “coming off unprecedented increases in US agricultural exports, farm cash receipts, farm income, and asset values the past few years.”
He noted that crop cash receipts are forecast to reach $195 billion in ’11, exceeding the previous record set in ’08 by $18 billion. Cash receipts for corn, soybeans, cotton, and fruits and nuts are all expected to rise to all-time highs. Cash receipts for wheat will likely be up in ’11 but remain below the record level set in ’08.
He said government payments to producers in ’11 are expected to total $10.6 billion, down $1.6 billion from ’10. In ’11, producers are forecast to receive $4.7 billion in direct payments, $3 billion in conservation payments, $1.9 billion in disaster payments, and $0.8 billion in tobacco transition program payments. With major crop prices forecast to be near or above previous record high levels in ’11, counter-cyclical payments and marketing loan benefits are projected to be only $20 million in the coming year.
The Secretary stated that prospects for the coming year generally look bright with more normal weather and production increases worldwide leading to an improved supply-demand balance in key markets. With biofuel demand expected to continue growing, although at a slower pace in the future, he said a big challenge will be responding to that demand by producing on more acres and producing more per acre while protecting the environment.
Bills Would Replace Business-Tax Reporting Requirement
During a recent mark-up, the Ways and Means Committee approved two bills that would replace a widely criticized business-tax reporting requirement in the ’10 health care law. On a party-line 21-15 vote, the Committee approved H.R. 705 which is fully offset and would eliminate a tax reporting requirement for businesses and owners of rental real estate. The panel also approved H.R. 4 that would similarly strike the provision in the health care law that requires businesses to file an IRS form 1099 for every vendor to whom they pay more than $600 a year. However, that measure does not include an offset.
Congressional Members from both parties, as well as President Obama, agree that the law should be changed to remove the reporting requirement, which is set to take effect in ’12. They differ on how to make up the $19.2 billion in tax revenue that the 1099 provision is estimated to produce over 10 years.
Ways and Means Democrats objected to the fully offset bill, which would be paid for by allowing the government to recapture a larger share of overpayments to consumers receiving health insurance subsidies for the new health insurance exchanges.
Republicans rejected the claim and said the provision would prevent individuals from receiving thousands of dollars in health care subsidies to which they were not actually entitled. In a related development, Sen. Johanns (R-NE), who has led efforts in the Senate to strike the provision, introduced S. 358 which is identical to the bill reported by the Ways and Means Committee “in hopes that it might get it to the president’s desk more quickly.”
House Panels Consider Legislative Fix For Pesticide Permits
Rep. Schmidt (R-OH), chairman of the House Agriculture Committee's Subcommittee on Nutrition and Horticulture, and Rep. Gibbs (R-OH), chairman of the House Transportation and Infrastructure Committee's Subcommittee on Water Resources and Environment, held a joint public hearing to examine the regulatory burdens posed by a court decision in National Cotton Council v. EPA and to review related draft legislation.
Under the ’09 Sixth Circuit Court ruling, pesticide users, including farmers, forest managers, state agencies, city and county municipalities, mosquito control districts, and water districts, would have to obtain a permit under the Clean Water Act (CWA) for the use of pesticides. The court order becomes effective on April 9, ’11, at which time pesticide applications not covered by a National Pollutant Discharge Elimination System (NPDES) permit are subject to fines of up to $37,500 per day per violation. In addition to the compliance costs, pesticide users will be subject to an increased risk of litigation under the citizen suit provision of the CWA.
The House subcommittees are considering a draft bill that would reinstate a ’06 EPA rule that exempted pesticides from CWA permits if the pesticides are applied according to the FIFRA label. EPA drafted the bill language at the request of House lawmakers but the agency has taken no official position on the bill.
Steven Bradbury, director of EPA's Office of Pesticide Programs, provided testimony about how the agency regulates pesticides under FIFRA but declined to answer questions about the agency's forthcoming general permit for pesticides which is being crafted by EPA’s Office of Water. Bradbury did say the FIFRA framework is capable of protecting waterways from environmental hazards posed by pesticides.
The bill’s proponents will have a short time to pass the measure through both chambers of Congress before EPA's pesticide general permit is set to take effect.
EPA Seeks To Increase Water Act's Scope
Rep. Oberstar (D-MN) and Sen. Feingold (D-WI), with the support of environmentalists, introduced legislation in the 111th Congress which would have expanded the scope of the Clean Water (CWA) by replacing the term ‘navigable waters’ with ‘waters of the U.S.’. The legislation died and EPA now is seeking to address the issue in guidance documents.
A draft version of the document was sent to the White House Office of Management and Budget (OMB) for review in December. The guidance will "significantly" expand regulators' ability to oversee wetlands and other marginal waters compared to earlier guidance prepared by the Bush Administration.
At issue are two Supreme Court rulings that environmentalists say have narrowed the law's jurisdiction over isolated wetlands, intermittent streams and other marginal waters. In Solid Waste Agency of Northern Cook County (SWANCC) v. Army Corps of Engineers, the court limited the basis for asserting jurisdiction over solely intrastate waters, while in Rapanos v. United States, the court provided two competing tests for determining jurisdiction. Justice Kennedy's test for determining jurisdiction states that water bodies must have a "significant nexus" to "navigable waters,” while Justice Antonin Scalia offered a stricter test that required regulators to show a relatively permanent surface connection with a traditionally navigable water to assert jurisdiction.
An EPA spokesperson says that recent interpretations of the CWA "have removed long-standing pollution protections for many American waterbodies" and that the agency and Corps of Engineers are "clarifying the scope" of the CWA with the guidance.
Even before its public release, the guidance is prompting stiff opposition from industry groups. House Republicans included language in their spending plan for the remainder of FY11 that blocks EPA from issuing the guidance.
Sales Steady, Shipments Strong
Net export sales for the week ending Feb. 10 were 194,600 bales (480-lb). This brings total ’10-11 sales to about 15.3 million bales. Total sales at the same point in the ’09-10 marketing year were about 9.2 million bales. Total new crop (’11-12) sales are 3.3 million bales.
Shipments for the week were 417,600 bales, bringing total exports to date to 6.8 million bales, compared with the 4.9 million bales at the comparable point in the ’09-10 marketing year.
Effective Feb. 18-24, ’11
Adjusted World Price, SLM 11/16
200.90 cents
*
Fine Count Adjustment ('09 Crop)
0.53 cents
Fine Count Adjustment ('10 Crop)
0.63 cents
Coarse Count Adjustment
0.00 cents
Marketing Loan Gain Value
0.00 cents
Import Quotas Open
0
Special Import Quota (480-lb bales)
0
ELS Payment Rate
0.00 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 5 Lowest 3135 CFR Far East
217.74 cents
Forward 5 Lowest 3135 CFR Far East
146.64 cents
Coarse Count CFR Far East
NA
Current US CFR Far East
216.55 cents
Forward US CFR Far East
147.40 cents
'10-11 Weighted Marketing-Year Average Farm Price
Year-to-Date (Aug.-Dec.)
80.03 cents
**
**August-July average price used in determination of counter-cyclical payment
