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Tuesday, July 30, 2013

Agricultural Disaster Assistance

Dennis A. Shields
Specialist in Agricultural Policy

The U.S. Department of Agriculture (USDA) offers several permanently authorized programs to help farmers recover financially from a natural disaster, including federal crop insurance, the Noninsured Crop Disaster Assistance Program (NAP), and emergency disaster loans. The federal crop insurance program is designed to protect crop producers from unavoidable risks associated with adverse weather, and weather-related plant diseases and insect infestations. Producers who grow a crop that is currently ineligible for crop insurance may be eligible for a payment under NAP. Under the emergency disaster (EM) loan program, when a county has been declared a disaster area by either the President or the Secretary of Agriculture, agricultural producers in that county may become eligible for low-interest loans.

In order to provide a regular supplement to crop insurance and NAP payments and to assist livestock producers who are generally not covered by these programs, the Food, Conservation, and Energy Act of 2008 (P.L. 110-246, the 2008 farm bill) included authorization and funding for five new disaster programs to cover losses from weather events, beginning with 2008 crops and ending September 30, 2011.

The 2008 farm bill programs were designed to address the ad hoc nature of disaster assistance provided to producers during the last two decades. The largest of the now-expired programs under the 2008 farm bill is the Supplemental Revenue Assistance Payments Program (SURE), which is designed to compensate eligible producers for a portion of crop losses that are not eligible for an indemnity payment under the crop insurance program. The 2008 farm bill also authorized the Tree Assistance Program (TAP), under which eligible orchardists and nursery growers can receive a payment to cover 70% of the cost of replanting trees or nursery stock following a natural disaster, and three livestock assistance programs. These are (1) the Livestock Indemnity Program (LIP), which compensates ranchers at a rate of 75% of market value for livestock mortality caused by a disaster; (2) the Livestock Forage Disaster Program (LFP), to assist ranchers who graze livestock on drought-affected pastureland or grazing land; and (3) the Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP), which provides up to $50 million annually to compensate these producers for disaster losses not covered under other disaster programs. As of July 2, 2013, cumulative payments under these programs totaled $5.8 billion, as claims continue to be processed for losses prior in 2011.

The 112
th Congress considered but did not pass omnibus farm legislation, including extension of certain agricultural disaster programs that expired in September 2011. Instead, at the end of the 112th Congress, on January 2, 2013, the five-year 2008 farm bill was extended one year as part of the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240), but without funding for any of the 2008 farm bill disaster programs.

With expiration of the farm bill (as extended under ATRA) approaching again, the 113
th Congress has been considering an omnibus farm bill with agricultural disaster provisions. The full Senate passed its version of the bill (S. 954) on June 10, 2013. On June 20, 2013, the full House voted to reject the House Agriculture Committee-reported bill (H.R. 1947). It remains unclear whether the House will take up the legislation again in the current session. Both the Senate and House farm bills would retroactively authorize and fund the livestock disaster and tree assistance programs, thereby potentially covering losses associated with the 2012 drought and other weather events through FY2018.

Date of Report: July 3, 2013
Number of Pages: 19
Order Number: RS21212
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Friday, July 26, 2013

Dairy Policy Proposals in the Next Farm Bill

Randy Schnepf
Specialist in Agricultural Policy

The 113th Congress has been considering an omnibus farm bill that would establish the direction of U.S. agricultural policy for the next five years. Among the many provisions being considered, both the Senate-passed (S. 954) and House-passed (H.R. 2642) versions of the 2013 farm bill would reshape the structure of U.S. dairy support.

Current U.S. federal dairy policy is based on five major programs—the Dairy Product Price Support Program (DPPSP), the Milk Income Loss Contract (MILC) Program, Federal Milk Marketing Orders (FMMOs), Dairy Import Tariff Rate Quotas (TRQs), and the Dairy Export Incentive Program (DEIP)—which together are designed to provide price and income support and market stability for dairy producers. In addition, several smaller programs aid the U.S. dairy sector with market promotion, research, price reporting, risk management, and disaster assistance.

In recent years, dairy producers have argued that a simple price-based system fails to reflect the sharp increases in milk production costs (particularly for corn used as feed) that have occurred since the mid-2000s. In response to producer concerns and to the volatile dairy price and margin developments of the past decade, both the Senate-passed (S. 954) and the House-passed (H.R. 2642) 2013 farm bills propose restructuring the traditional set of dairy programs by replacing DPPSP, MILC, and DEIP with a new income support program—a dairy margin insurance program—based on the monthly difference (i.e., the margin) between the national average farm all-milk price and a formula-derived estimate of feed costs. In addition, the Senate bill (unlike the House bill) includes a second program linked directly to margin insurance—the Dairy Market Stabilization Program (DMSP)—which, under certain conditions, would reduce payments to participating producers for their milk marketings, when the margin falls below proposed statutory thresholds, as an incentive to restrain growth in milk marketings during periods of low margins.

The House bill (unlike the Senate bill) also proposes to repeal permanent farm law (based on 1938 and 1949 legislation) and replace it with many of the farm programs in the current bill including the dairy margin insurance program. The differences between the House and Senate farm bills will have to be worked out in conference before a final farm bill can be voted on by both chambers of Congress.

If Congress is unable to successfully resolve the differences between the House and Senate versions of the farm bill, current programs would remain in effect until their expiration. The dairy product price support program (DPPSP) will expire on December 31, 2013. In the absence of new farm legislation, upon expiration of DPPSP, the dairy price support program would revert to “permanent law,” whereby USDA would be compelled to purchase dairy products so as to support the all-milk price at 75% to 90% of a 1910-1914 parity price index. According to USDA, the all-milk parity price was $51.50 /cwt. in May 2013—75% of parity would set the USDA milkequivalent product purchase price at $38.63/cwt. or nearly double the May average all-milk farm price of $19.70/cwt. A doubling of farm prices would likely lead to a substantial hike in retail prices as well.

Date of Report: July 17, 2013
Number of Pages: 39
Order Number: R42736
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Wednesday, July 17, 2013

Sugar Program Proposals for the Next Farm Bill

Remy Jurenas
Specialist in Agricultural Policy

The sugar program provides a minimum price guarantee to sugar crop processors and is structured to operate at no cost to the federal government—an objective that has been achieved over the last decade primarily using two tools: marketing allotments that limit the amount that sugar processors can sell, and import quotas that restrict the quantity of foreign sugar allowed to enter the U.S. market.

Producers of sugar beets and sugarcane, and the processors of these crops into sugar, favor retaining the current program without change. They highlight the jobs and economic activity created by the domestic sugar sector.

Food manufacturing firms that use sugar in their products seek flexibilities in how the U.S. Department of Agriculture (USDA) administers the sugar program, with an eye toward paying lower prices as a result. In advocating changes, they point to the higher wholesale refined sugar prices paid since the 2008 farm bill provisions took effect (twice the level compared to the previous 2002 farm bill period), and to the jobs that their firms create.

In the 113
th Congress, changes to the sugar program were not considered when the House and Senate Agriculture Committees marked up a new farm bill. Both committees approved farm bills that would continue the sugar program as now in effect through FY2019 (Section 1301 of H.R. 1947 and S. 954). Both bills also would continue the sugar-for-ethanol program—a backstop intended to be exercised if the other program tools do not succeed in keeping market prices above minimum guaranteed price levels.

Opponents of the sugar program introduced identical bills (S. 345 and H.R. 693, Sugar Reform Act) to serve as floor amendments to the farm bill. These measures would lower price support levels to those in effect in FY2008, make a number of changes to require USDA to administer sugar marketing allotments and sugar import quotas in ways that would result in sugar being available “at reasonable prices,” and repeal the sugar-for-ethanol program.

On June 10, 2013, the Senate approved its farm bill (S. 954). Earlier, during floor debate, sugar program opponents offered S.Amdt. 925 to revise the Agriculture Committee’s reported sugar program provisions. Identical to S. 345, this amendment was defeated on a 45-54 vote. House opponents of the sugar program offered a similar proposal (H.Amdt. 227) during floor debate on H.R. 1947. On June 20, this amendment was defeated on a 206-221 vote. Subsequently, the House defeated H.R. 1947, and placed into doubt what comes next for the House farm bill.

The Congressional Budget Office (CBO) projects in its latest baseline that continuing current sugar policy would result in $188 million in outlays in FY2014-FY2023, all of it associated with the sugar-to-ethanol program. CBO scored the Sugar Reform Act amendment as reducing these outlays by $82 million over this 10-year period.

Sugar program supporters and opponents continued to present arguments for their respective positions, and to challenge each other’s positions, in preparation for floor debate. For each side, the key issue is what the level of domestic sugar prices should be. Sugar growers and processors seek the highest level possible, with the availability of backstops to ensure they receive the benefits of the current price guarantee. Users of sugar in manufactured food products seek as low a price as possible within the basic structure of the current program.

Date of Report: July 1, 2013
Number of Pages: 13
Order Number: R42551
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Table Egg Production and Hen Welfare: Agreement and Legislative Proposals

Joel L. Greene
Analyst in Agricultural Policy

Tadlock Cowan
Analyst in Natural Resources and Rural Development

The United Egg Producers (UEP), the largest group representing egg producers, and the Humane Society of the United States (HSUS), the largest animal protection group, have been adversaries for many years over the use of conventional cages in table egg production. In July 2011, the animal agriculture community was stunned when the UEP and HSUS announced that they had agreed to work together to push for federal legislation to regulate how U.S. table eggs are produced. The agreement between UEP and HSUS called for federal legislation that would set cage sizes, establish labeling requirements, and regulate other production practices. As part of the agreement, HSUS agreed to immediately suspend state-level ballot initiative efforts in Oregon and Washington.

On April 25, 2013, the Egg Products Inspection Act Amendments of 2013 (S. 820 and H.R. 1731) were introduced in the 113
th Congress. The bills are nearly identical to the legislation that was introduced during the 112th Congress (S. 3239 and H.R. 3798). The provisions in S. 820 and H.R. 1731 reflect the 2011 agreement between UEP and HSUS to establish uniform, national cage size requirements for table egg-laying hens. The bills would codify national standards for laying-hen housing over a 15- to 16-year phase-in period, including labeling requirements to disclose how eggs are produced, and set air quality, molting, and euthanasia standards for laying hens.

Compared with the bills from the 112
th Congress, S. 820 and H.R. 1731 add provisions specific to California that establish deadlines based on whether or not cages are new or existing, and add a four-step phase-in period for California producers. The legislation also requires that any eggs bought or sold in California meet the California requirements in the legislation, no matter where the eggs are produced.

The agreement and legislation were a marked shift in direction for both UEP and HSUS. UEP views the legislation as being in the long-term survival interest of American egg farmers. It says that egg producers would benefit from national egg standards that halt costly state-by-state battles over caged eggs that result in a variety of laws across the country. For HSUS, which has actively campaigned for cage-free egg production, accepting enriched cages was a compromise, but one that could result in significant federal farm animal welfare legislation. Egg legislation has been endorsed by a wide range of agricultural, veterinary, consumer, and animal protection groups.

Farm group opponents have criticized egg legislation for several reasons. First, they are concerned that the bills federally mandate management practices for farm animals, something that has not been done in the past. These groups argue that the bills could set a precedent, paving the way for future legislation on animal welfare for other livestock and poultry industries. Opponents hold the view that the cage requirements are not science-based, and undermine long-standing views that animal husbandry practices should be based on the best available science. They also argue that codifying cage standards today ignores innovations that could appear in the future. Additionally, opponents are concerned that the capital cost of transitioning to enriched cages would be high, and could be prohibitive for small producers.

UEP and HSUS and other supporters favor moving egg legislation forward through the farm bill process, but other livestock groups strongly oppose this legislative route. Reportedly, S. 820 was considered for inclusion in the Senate Agriculture Committee 2013 farm bill draft, but it was not included. Senator Feinstein’s submitted egg bill amendment (S.Amdt. 1057) was not considered during the Senate farm bill (S. 954) floor debate. The House-reported farm bill (H.R. 1947) does

not include egg legislation, but it does include an amendment (Section 12314) that prohibits states from imposing standards on agricultural products produced in other states.

Date of Report: June 17, 2013
Number of Pages: 31
Order Number: R42534
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