"Cap and Trade" Troubles Agriculture
As reported and summarized in last month’s edition of Country Focus, the controversial Climate Change (“Cap & Trade”) legislation (H.R. 2454, the “Waxman-Markey Bill”) has landed in the U.S. Senate after its passage in the U.S. House of Representatives by a 219-212 vote margin. There is significant pressure from the White House, environmental organizations and the Senate Majority Leadership to achieve passage of Climate Change legislation this year. Senate Committees have been asked to finish their work by the end of September.
The “Cap and Trade” portion of the Climate Change bill is intended to reduce the use of fossil fuels (primarily coal) by granting permits to utilities and industries that emit carbon into the atmosphere. Over time, these limits would become more restrictive and the cost of permits would increase. That, in turn, would significantly raise the costs of fuel, fertilizer and energy. Permit holders would be given the option to sell or buy “carbon offset” allowances depending on their needs. One scenario would allow permit holders to buy “offsets” from those who sequester (hold or reduce) carbon emissions.
Farm Bureau successfully fought for farms to be exempted in the legislation from a cap on carbon emissions. The bill also includes several Farm Bureau-supported amendments that enable farmers to use agriculture practices that create carbon credits for sale to those purchasing “off-sets”.
Farm Bureau has been a strong advocate for the development and implementation of renewable energy. Similarly, Farm Bureau policies have encouraged environmentally sound agricultural practices. However, Farm Bureau believes that the Waxman-Markey Cap and Trade legislation does not meet and balance the interests of agriculture, for reasons which include:
The Economics Don’t Add Up for Agriculture
The legislation being considered in Washington will result in higher energy and fertilizer costs. Supplies used on farms and the delivery of agriculture commodities from farm to market will cost more as transportation costs soar. New income potential for agriculture from carbon offsets will occur for some producers in specific circumstances, but not likely outweigh a farm’s higher production costs. Other farms will suffer the pain without the possibility of gain.
Playing ‘Russian Roulette’ on Energy Issues
The Waxman-Markey Climate Change bill severely limits fossil fuels without providing for practical energy alternatives or expanding reliable energy sources like nuclear. The legislation paints a rosy (and probably unrealistic) scenario for ‘clean coal,’ while sponsors of Cap and Trade would like to phase out coal completely. Wind, geothermal and solar are energy sources that become cost-competitive only when carbon costs rise (resulting in the cost of other goods and services to rise as well).
Forfeiting America’s Competitiveness
The Cap and Trade bill does nothing to require China or India (the largest global greenhouse gas emitters) to adopt similar emissions limits. It imposes a tariff on goods coming into the U.S. if China and India do not limit emissions, which would violate World Trade Organization rules and likely cause counter measures against American agricultural exports. The eventual consequence would be a massive loss of jobs
Climate Change is a Global Issue
A ton of greenhouse gases in China is the same as a ton in Pennsylvania. Regulating climate emissions in the United States without regulating emissions in China will have little or no effect on the environment.
Help Needed for Pork Producers, Too
While low dairy prices have been attracting news media attention lately, pork producers continue to suffer through an economic crisis that has been going on for nearly two years.
In March, USDA announced the purchase of an additional $25 million in pork products for federal food nutrition assistance programs – its second supplemental purchase of pork in less than a year.
Both American Farm Bureau Federation (AFBF) and the National Pork Producers Council (NPPC) have requested additional help since then. In May – following the outbreak of the H1N1 virus initially referred to as “swine flu” – AFBF President Bob Stallman requested more pork be bought using the U.S Department of Agriculture’s Section 32 (food nutrition) program.
“Hog producers are in dire straits right now,” said Franklin County pork producer Tom Sollenberger, a member of PFB’s Livestock, Poultry and Grains Committee. Sollenberger manages a farrow to finish operation with 2,800 sows. “Our base price is currently in the $34-35 range per hundred pounds liveweight,” he said. “The break even price is in the low $50s.”
Barring a large liquidation of the swine herd by producers which has yet to materialize, Sollenberger said economists are predicting that pork prices will continue to stay in the red through 2011.
While high feed prices have been a big factor in causing the current difficulties, there is also “definitely an oversupply,” he added. Pork exports had been good, he noted, until the worldwide recession began to take its toll late last year, followed by the H1N1 flu outbreak in April.
“The so-called ‘swine flu’ has hurt us and it’s going to hurt us again,” commented Chris Hoffman, a Juniata County hog producer and a member of the Pennsylvania Farm Bureau Board of Directors. “When that broke last spring it hurt sales and it will have an impact again.” A Presidential advisory panel has predicted the H1N1 virus could infect from 30% to 50% of the U.S. population in the months ahead. Hoffman, who also serves on AFBF’s Swine Commodity Committee, expects the “fresh” side of the market – pork chops and pork shoulders – to be affected more by the flu being back in the news than products like ham which some consumers don’t associate with pork.
“And the economy is still playing a role in what people are eating,” he added. With pigs typically growing faster in the cooler fall weather month, Hoffman also expects hogs coming to market at heavier weights to make matters worse for the industry.
“We need to get more pork products into the military and in government feeding programs to move it off the shelves,” he said. U.S. pork supplies held in storage ballooned to the highest level ever in June as consumers turned to other meats in reaction to the spread of the H1N1 virus, according to analysis by USDA.
Last month, the NPPC urged USDA to provide $250 million in financial assistance and take actions to help producers, who since September 2007 have lost an average of more than $21 on each hog marketed.
NPPC urged the government to purchase an additional $50 million of pork for various federal food programs – other than ones in USDA’s Section 32 program – using fiscal 2009 funds. Fiscal 2009 ends Sept. 30. The funds would not come from USDA’s Section 32 program. (USDA annually buys pork for food programs; it bought $62.6 million worth in 2008, for example.)
NPPC also urged Congress to lift a spending cap on the Section 32 program, and use $50 million of $300 million available to purchase pork for the program, which uses customs receipts to buy non-price-supported commodities for school lunch and other food programs.
NPPC is also requesting that USDA buy on Oct. 1 a minimum of $50 million of pork, using fiscal 2010 funds. Fiscal 2010 begins Oct. 1. The purchase would be in addition to USDA’s annual buy.
Furthermore, NPPC is requesting that $100 million of the $1 billion appropriated by Congress for addressing the H1N1 virus be used for the swine industry. This would include $70 million for swine disease surveillance, $10 million for diagnostics and H1N1 vaccine development and $20 million for industry support.
NPPC is also calling for a study of the economic impact on the livestock industry of an expansion of corn-ethanol production and usage.
In addition, NPPC is asking USDA Secretary Tom Vilsack to work with the U.S. Trade Representative to open export markets to U.S. pork. Several countries, including China, continue to impose unwarranted bans on U.S. pork because of the H1N1 flu.
Farm Bureau and the NPPC continue to urge the news media to use the scientifically accurate term “H1N1” rather than swine flu when referring to the influenza. Last month, hog producers and other farmers from around the country, along with ag supporters, used the microblogging site Twitter to contact the media about correctly identifying the influenza. Messages about how pork is safe to eat and that human-to-human contact, not pork consumption, spreads H1N1 also were tweeted. Twitter users added #oink—known as a hashtag—to each message (tweet) in support of hog producers.
The effort will hopefully pay dividends in the months ahead as health officials are predicting a resurgence of the flu in the U.S. this fall.
More Action Taken to Improve Dairy Prices
On July 31st, the Obama administration announced it would increase the amount paid for dairy products through the Dairy Product Price Support Program (DPPSP) from August through October.
The action was expected to increase dairy farmers' revenue by $243 million. The increases raised the support price for nonfat dry milk from $0.80 per pound to $0.92 per pound, for cheddar blocks from $1.13 per pound to $1.31 per pound, and for cheddar barrels from $1.10 per pound to $1.28 per pound.
It was estimated dairymen will see an increase of about $1.25 per hundredweight as a result of the action.
Also in July, Pennsylvania Farm Bureau’s State Dairy Committee met to discuss the dairy price crisis and the opportunity for policy development by both PFB and American Farm Bureau to address the issue.
In addition, PFB Vice President Rick Ebert, himself a dairy farmer and chairman of the PFB Dairy Committee, testified last month before the state House Agriculture and Rural Affairs Committee regarding the ongoing crisis.
“Reduced demand for exports, excess milk and dairy product supply, and high feed and energy costs have created a perfect storm within the dairy industry,” he said, “driving prices so low that the very survival of dairy farmers is threatened.”
He told the committee that most in the dairy industry agree there needs to be both short- and long-term solutions to the dairy crisis.
“For the short-term, it means putting more money in the hands of dairy farmers as soon as possible through increases in programs like the Milk Income Loss Contract (MILC) program and raising payment levels in the Dairy Price Support Program,” Ebert said. “In the long-term, Farm Bureau seeks a market-oriented national dairy program which is consistent with a worldwide fair and open trade policy, and modifications in the federal order to increase the price paid to dairy farmers, reduced volatility in the marketplace and an expansion of opportunities on both domestic and international markets.”
Here’s a summary of other action recently taken by PFB and others to address the dairy situation:
Northeast FBs Seek Change in Milk Pricing System
PFB and 12 other northeast state Farm Bureaus urged USDA Secretary Tom Vilsack to consider a possible overhaul of the Federal Milk Marketing Order system.
“It’s clear to the Northeast Farm Bureaus that overhaul of the order system should include a better mechanism to ensure regional production of fluid milk,” said the Northeast Farm Bureau presidents in a letter to Vilsack.
The current nationally-based pricing system “works reasonably effectively to balance national supply and demand, but does not always recognize the regional production needs throughout the entire nation, and tends to penalize areas with higher costs of production but which are closer to existing population centers,” said the Farm Bureau leaders.
AFBF Testifies on Dairy “Price-Cost Squeeze”
Iowa Farm Bureau President Craig Lang, appearing on behalf of American Farm Bureau Federation, testified before a House Agriculture subcommittee. He pointed out that at Farm Bureau’s urging USDA has purchased dairy products for nutrition programs. Milk Income Loss Contract payments have also been triggered for the first time in two years, and USDA has allocated the maximum volume of dairy products eligible for incentives to boost exports under world trade rules.
Lang said Farm Bureau supports several options to assist dairy producers in the short-term, including the Cooperatives Working Together herd retirement program.
CWT To Remove Nearly 87,000 Cows
The Cooperatives Working Together program announced in August it had tentatively accepted 294 bids in its third herd retirement in the last nine months. The 86,710 cows and 1.8 billion pounds of milk accepted in this round, combined with CWT’s previous two herd retirements, equal a total production capacity of 4.8 billion pounds of milk being removed since December 2008. A CWT spokesperson said the program is prepared to conduct additional herd retirements later this year if necessary. CWT, a voluntary producer-led and funded program, was established by dairy cooperatives in 2003 to strengthen and stabilize milk prices.
PFB Sends Dairy Situation Backgrounder to News Media
PA Farm Bureau sent a detailed background paper on the current dairy economic crisis to news media around the state last month. “This will contribute to accurate news coverage and likely lead to an even greater focus by the news media on the dairy dilemma,” said Gary Swan, Director of PFB’s Governmental Affairs and Communications Division. The information was also provided to members of the General Assembly and Pennsylvania’s Congressional delegation, and is posted on PFB’s website at www.pfb.com.
Farm Bureau’s Involvement With The Health Care Reform Debate
As massive health care/health insurance reform legislation works its way through the U.S. Congress, Farm Bureau wants to be sure that farmers with employees are not burdened with costs they cannot afford. One of many other goals is to preserve the freedom-of-choice options currently enjoyed by farm families and others.
Differing legislation in the U.S. House and Senate have some form of “play or pay” provisions which requires certain employers to either provide health coverage or pay a tax or fee. A U.S. House bill (H.R. 3200) would require an 8 percent excise tax, but exempts employers with payrolls at or under $500,000 with the tax phased in for employers up to $750,000. In the U.S. Senate, where legislation is being put together in various pieces by several committees, a similar provision would require employers with more than 25 workers to either provide health care coverage or pay a $750 annual fee ($375 for part time workers). It would exempt seasonal and temporary workers. Beyond the impact on farms, Farm Bureau is troubled about the burden it would place on agri-business companies which, of course, are essential to agriculture.
In discussions with Members of Congress, Pennsylvania Farm Bureau has stressed that farms operate on tight profit margins that are cyclical. Requiring employers to provide insurance coverage would put still more financial strain on already struggling farm operations.
Another “ingredient” of the health care reform legislation is the so-called “public option” -- a government-backed plan to be available through a health exchange where people could buy insurance (public or private) that best fits their needs. Its proponents claim that the “public option” would be self-sustaining and require no subsidies, even though it would likely require government subsidies to start up. Opponents argue that a public plan would eventually push private insurers out of business and cause private employers to drop coverage. They ask how long could private companies compete against the public treasury?
Talk has been growing in Congress to create health insurance “cooperatives” instead of the “public option” – whereby insurance would also be available through a nonprofit, non-governmental consumer entity run by its members. While cooperatives are commonly used in agriculture, it’s not certain that they are as suitable for health care. It’s believed that the cooperatives would need to be comprised of at least 500,000 insurance subscribers and be self-funded (requiring tens of millions of dollars in reserve). It is highly questionable that “association” health plans (such Pennsylvania Farm Bureau’s) could be turned into a “cooperative” health insurance model.
Preserving PFB’s Health Services
Another Farm Bureau goal is to make sure that health insurance reform does not prevent (intentionally or otherwise) the continuation of options like PFB’s Health Services, the largest association health insurance arrangement in the Commonwealth. Working with Capital BlueCross, our group health insurance plans provide coverage for nearly 15,000 farm families and retirees. PFB’s Health Services Division handles all administration, service to subscribers, sales and billing for the group plans that serve our diverse membership. Pennsylvania Farm Bureau has provided health coverage for more than 30 years. The primary functions performed by our carrier are underwriting and the payment of claims.
Because farmers are in a self-employed status which makes it difficult to obtain health insurance coverage, it is all the more important that health care reform not be allowed to destroy Farm Bureau’s Health Services program.
PFB’s History of Advocacy for Reforms
For several years, Pennsylvania Farm Bureau has been calling on lawmakers for improvements in health care and health insurance to reduce costs, expand coverage for the non-insured and prevent unfair requirements on insurance subscribers. PFB’s focus has been at the state level, where the insurance reform debate has been mostly centered until the issue shifted to Washington. Members have adopted several policies including the following:
Farm Bureau -
• Opposes compulsory national health insurance and any national health plan.
• Supports the promotion of personal wellness, fitness and preventive care as basic health goals.
• Supports efforts to improve health care delivery and foster health care competition.
• Supports additional tort reform; defensive medicine is a major cost driver
• Supports federal tax policies that encourage individuals to prepare for health care needs.
• Supports a reduction in mandated benefits and believes that group health insurance programs of associations should be exempt from mandates.
• Supports direct government financial assistance for those unable to pay for their own health care.
• Supports government incentives for medical and mental health services in rural areas.
• Supports the creation of voluntary regional insurance purchasing cooperatives, subject to state regulation, to expand the availability of insurance coverage.
• Supports eliminating the 7.5 percent adjusted gross income threshold so that all medical expenses are deductible.
• Supports expanding tax incentives for health savings accounts (HSAs).
• Recommends a tax deduction for health insurance premiums paid by the self-employed against self-employment taxes.
• Opposes taxes on any agricultural commodity to fund health care programs.
• Supports community rating as a preferred alternative to the current method of demographic rating. Community rating – even in a modified form still using certain demographic factors – spreads the risk more evenly among all insured, and reduces the potential for rate-shock.
Rural Challenges
Farm Bureau also believes that health care reform legislation should address the disparities that exist between rural and non-rural communities. Farm Bureau urges Congress to:
• Support equitable Medicare payment rates to rural hospitals and physicians and expand;
• Enhance Medicare beneficiary access to tele-health services;
• Address the critical shortage of qualified health care professionals and health care facilities; and
• Create incentives such as scholarships and loans to students who agree to provide health care services in medically underserved areas.
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