February 25, 2009 Volume 5, Number 8

Obama asks for major investment in renewables, farm program cuts

In his first formal address to Congress Tuesday night, President Barack Obama tried to sooth concerns over our nation’s dismal economic conditions and give Americans hope that better days are ahead. "The weight of this crisis will not determine the destiny of this nation," he said. "The answers to our problems don't lie beyond our reach. They exist in our laboratories and universities, in our fields and our factories, in the imaginations of our entrepreneurs and the pride of the hardest-working people on Earth."

“While our economy may be weakened and our confidence shaken, though we are living through difficult and uncertain times, tonight I want every American to know this: We will rebuild, we will recover, and the United States of America will emerge stronger than before,” Obama emphasized.

To “truly transform our economy,” the President asked Congress to send him legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America. To support that innovation, “we will invest fifteen billion dollars a year to develop technologies like wind power and solar power; advanced biofuels, clean coal, and more fuel- efficient cars and trucks built right here in America,” he said.

Despite the recession and a large budget deficit, the president promised to press forward with major initiatives in health care, energy and education. At the same time, he insisted that he could cut the deficit in half by 2013, Obama referenced $2 trillion in wasteful and ineffective programs he will try to cut from the budget, including “direct payments to large agribusinesses that don’t need them.”

This is the second time this week that Obama has referenced the need to cut farm program payments --- a message that Agriculture Secretary Tom Vilsack telegraphed when he spoke to commodity organizations over the last two weeks. During a White House Fiscal Summit Monday, the President praised USDA for rooting out wasteful spending and delivering its programs and services in a more efficient manner and then also promised to "end the payments to agribusinesses that don't need them."

However, exactly what this could mean in terms of actual cuts remains to be seen. Obama made similar statements during the presidential campaign, but it’s unclear whether the proposal

1 will be to further tighten farm program payments down to a maximum of $250,000, eliminate direct payments altogether, or a combination of cuts. President Obama is expected to unveil his budget outline Feb. 26, which could contain some clues, but the full 2010 budget is not expected to be unveiled until the week of March 30. Even then, with crumbling commodity prices, farm state lawmakers will fight hard against removing a key portion of the safety net.

USDA, EPA & state ag departments search for common ground

The U.S. EPA’s agricultural liaison Sally Shaver told state agriculture commissioners on Sunday that what she hears around EPA headquarters these days is that: “We need to do something about agriculture, whether it is non-point sources or whether it is air emissions, or whether it is large animal feeding operations.” Shaver noted that with mounting concern about hypoxia in the Gulf of Mexico, recommendations under consideration at EPA include reducing fertilizer use by 20% to control reactive nitrogen.

Shaver’s warnings about potential regulatory changes impacting agriculture were matched by warnings from state ag commissioners, directors and secretaries assembled in Washington, DC for the midyear meeting the National Association of State Departments of Agriculture (NASDA). After hearing Shaver list a string of EPA’s Clean Water Act and Clean Air Act concerns ranging from pesticide applications to greenhouse gas releases, North Carolina Agriculture Commissioner Steve Troxler said “the total effect of this is going to be devastating to agriculture.” He added that “these people who are making these rules and regulations and laws, they need to not eat for four or five days and have a real empty stomach before they starting thinking about things that are going to affect our food supply.”

Troxler is concerned that “every time these issues put another farmer out of business, or these regulations adversely affect their ability to make a profit, we’re moving closer and closer to not being able to produce our food supply here in the United States. . . I think everybody needs to step back and say, OK, long-term, what’s the goal? The goal is that we continue to feed ourselves and have a safe food supply. . . We certainly don’t get there by piling layer after layer after layer of regulations on that don’t make common sense.”

In their joint appearance at the NASDA meeting, Agriculture Secretary Tom Vilsack and EPA Administrator Lisa Jackson tried to ease concerns. The two promised to work as partners to deal with environmental issues and regulations affecting the farm sector. Brian Oakey, Deputy Director of the Idaho Department of Agriculture, welcomed their promises and said: “We certainly look forward to working with EPA. . . We invite EPA oversight, we invite their input on what we are doing and what we can do better. And if we can continue that relationship, then I think the environment will continue to improve.” But Oakey warned that “If jurisdictional issues continue to get pushed over to the federal level and erode the states’ abilities to do their own work, then I think we take a step backward in environmental stewardship.”

Oakey is especially concerned about a possible EPA crackdown on CAFOs (concentrated animal feeding operations). He points out that under its current agreement with EPA, the Idaho Agriculture Department carries out “a minimum of two and a half inspections every year on every livestock facility in the state of Idaho” – something EPA lacks the manpower to do so that “even when they are in our state, they only see and inspect a very small percentage of those facilities.”

2 Florida’s Agriculture Commissioner Charles Bronson is concerned about possible new pesticide and soil fumigant regulations. He said proposed new EPA regulations “will severely impact the production of fresh fruits and vegetables” and “basically would close down a lot of farms.”

Jackson, a chemical engineer by training, took note of such concerns and explained that EPA is committed to “building a partnership that assures each one of you and all of your constituents through you that EPA has a willing ear, that we are not operating in a vacuum.” She asked the ag commissioners to support this partnership because “We cannot get clean water in this country unless agriculture is actually carrying our mission forward. . . Getting the environment clean is going to be part of your agenda as much as it is our agenda.” She said this partnership has become more important than ever because “now we are at the hard stuff.” Listing non-point source runoff as a major concern, she said “The price tag for fixing it will not be low and it will involve a much larger segment of society including agriculture, a huge role for agriculture in terms of trying to fix that issue. And if we don’t work together, we’re . . . not going to make any progress.”

Jackson said in the case of nitrous oxide and sulfur dioxide, “We have huge issues to deal with there and agriculture will be part of the discussion, especially as we move towards issues about animal feeding operations because there are certainly air and water issues associated with those.” More broadly, Jackson listed EPA objectives as “climate change and air pollution, protecting the vital waters of the United States, dealing with Vilsack: Lesson learned wetlands issues which are so important in our country and which remain an open issue, cleaning “I have learned one thing about this job. It is up toxic waste sites, restoring science and the rule different from being governor. Way different. of law, and dealing with toxic chemicals, an issue When I was governor and I wanted somebody that EPA is uniquely poised to give the American hired, I just hired them. It is a process folks, which is why we don’t have any under secretaries people some level of comfort on in terms of what and why I don’t have a deputy and why I don’t is in the products that they use.” have a full staff complement. . . We have seven people in the [Agriculture Secretary’s] office Jackson acknowledged that EPA will issue new right now. That’s all we’ve got.” regulations affecting agriculture as it pursues a science-based approach to enforcing the laws as passed by Congress and as interpreted by the courts. She called on the ag commissioners to work with EPA on drafting and implementing these new regulations because “that’s actually in your financial interest for your constituencies, for the farmers that you serve.” The alternative, she said, is costly stagnation. She called on NASDA members to understand “that the laws were not put in place to harm our economy but rather to make it a resilient economy, a sustainable one.”

Stimulus bill: Extra $10 billion for NIH research vs. $0 for ag research

After a coalition of farm, food and Land Grant organizations lobbied hard to include $200 million for agricultural research in the stimulus bill, the final Senate version provided $50 million. But when House, Senate and administration negotiators pared the final American Recovery & Reinvestment Act down to $787 billion, they eliminated the ag research funding entirely.

Slashing ag research from $200 million down to zero was particularly galling because the stimulus bill that President Obama signed into law Feb. 17 included $10 billion for the National Institutes of Health, $3 billion for the National Science Foundation, $1.6 billion for the Energy

3 Department’s research programs, and $400 million for NASA research programs. Stephanie Patrick, President of the National Coalition for Food & Agricultural Research (NCFAR) which fought hard for the $200 million, laments the loss. During the fight, she sent a letter to President- elect Obama in January urging him to double ag research funding over the next four years because “The potential payoff is enormous for both Americans’ health and the nation’s economy.” She followed up in February with an e-mail to House Appropriations Committee Chair David Obey (D-WI) and Rural Development Subcommittee Chair Rosa DeLauro (D-CT) insisting that new ag research funds would create “1,500 high quality jobs” and that studies have shown “an average 81% annual rate of return on public investments in ag research & extension.”

With no stimulus bill funding for ag research – and the threat that ag research funds authorized by last year’s Farm Bill could be trimmed back in this year’s congressional budget process – Patrick warns that “The stakes are enormous. If you are not paying for research in areas like drought now, what will happen as water shortages and other problems manifest themselves over the next 50 years?” NCFAR President Patrick, who is Vice President for Policy Initiatives & Advocacy at the American Dietetic Association, is particularly concerned about human health implications. For human health, she explains, research is needed to improve agricultural production, yield and quality because “that keeps agriculture profitable.” Without profitability, she insists, food availability, nutrition and human health all will suffer.

American Farm Bureau Federation President Bob Stallman, a member of the NCFAR board, shares Patrick’s concerns. “Research, in terms of maintaining our productivity, is very important,” he says. “But then the issue is, when you are looking at a one budget number that has to be split among all the other priorities that we have, we’re forced to make decisions about which priorities to pursue.” He points out that “neglecting agricultural research will decrease our productivity and that’s been our competitive advantage in the world.” But he adds that “Realistically, given the economic conditions and the budget deficits we’re facing in this country, it’s unlikely that we’re going to be doing anything but be fighting about money in this Congress, and that’s across the board, not just for agriculture but for all authorized programs.”

After their NCFAR board meeting in Washington, DC last week, Stallman and Patrick explained they’re searching

for new ways to Total expenditures on agricultural research in the public sector increased publicize the from about $4.5 billion in 1995 to $4.6 billion in 2005, when adjusted for importance of inflation. Research expenditures at State-level institutions, such as land- agricultural grant universities, accounted for most of the growth in public R&D; research. They’d expenditures increased at about 2 percent annually between 1970 and 2005, in real terms. The rate of increase for research expenditures at Federal agencies was 0.2 percent annually. . Source: USDA, Economic Research Service. 4 like to generate far greater awareness within Congress, farm organizations, the food industry, and Agriculture Secretary Vilsack’s office of the urgent need to boost agricultural research funding dramatically. Yet, they also acknowledge that making longer-term ag research a top priority for the key commodity groups with great influence on Congress will be a tough sell. Stallman explains that “producers like to see research dollars targeted for production research.” Patrick concludes that as highlighted by recent food contamination problems including nine peanut-related deaths, “Clearly there is a need for a viable, productive, focused-on-the-future, 21st century agricultural research component. But at current funding levels, that isn’t going to happen.”

Push is on for Omnibus Appropriations bill

Congressional leaders are pushing for fast approval of a $410 billion omnibus appropriations package, hoping to beat the March 6 deadline when the current continuing resolution expires. The House is expected to take up the package Wednesday or Thursday, which consists of the nine fiscal year 2009 appropriations bills that Congress has not yet passed. (Three appropriations bills -- Defense, Military Construction-VA and Homeland Security were funded last fall.) House Republicans argue that an extension of the current omnibus at FY08 levels will do. The federal government "can get by at last year's levels," emphasized House Minority Leader Boehner during at a briefing Tuesday. Boehner and other Republicans have taken issue with the bill's earmarks, but both Republicans and Democrats seem to disagree on what qualifies as an earmark and what does not.

Taxpayers for Common Sense (TCS) found 8,570 disclosed earmarks worth $7.7 billion. Of those, 504 earmarks totaling over $353 million are ag-related. (See the TCS list at: http://www.taxpayer.net/user_uploads/file/Appropriations/fy2009/FebOmnibus/Ag%20Earmarks %20Only.pdf When you add the $6.6 billion in disclosed earmarks that were in the three FY09 spending bills that passed in the fall (Defense, DHS, MilCon/VA), TCS says you end up with $14.3 billion worth of disclosed earmarks in FY09. However, a big disparity between TCS’s number and the Committee number ($3.8 billion) is that the Appropriations Committee chooses not to include earmarks from project-based accounts in their totals, despite the fact that they were not requested by the administration. For example, the Corps of Engineers budget is made up of hundreds of projects that add up to the agency total. Yet, these numbers are not included in the committee totals or in their reduction predictions. In addition, the committee ascribes many operations and maintenance projects to the President when they were not actually requested as part of the FY09 budget.

A summary provided by House Majority Whip James E. Clyburn outlines the key provisions on food and agriculture in the appropriations package, totaling $20.5 billion. In 2008, the ag- related portion was $18.0 billion. Key investments and provisions include:

• Food and Drug Administration: $2 billion, $335 million above 2008, to help FDA improve the safety of domestic and imported food and medical products. • Food Safety and Inspection Service: $972 million, $41 million above 2008, to keep our food safe and implement new farm bill requirements. • Nutrition for Women, Infants, and Children (WIC): $6.9 billion, $1.2 billion above 2008, to provide proper nutrition to mothers and their children. Rising food costs and the economic downturn are expected to increase participants to 9.1 billion Americans in 2009 - 400,000 more than 2008.

5 • Commodity Supplemental Food Program: $160.4 million, $20.7 million above 2008, to provide nutritious food to nearly a half million low-income women, infants, children, and elderly citizens struggling with rising food costs. • International Food Aid (P.L. 480): $1.2 billion, $15 million above 2008 for P.L. 480 and $100 million for the McGovern-Dole program, to address world hunger at a time when rising food costs are creating a global food crisis. • National Animal Identification: $14.5 million, $4.8 million above 2008, to meet the technology needs of the new animal tracking system and to continue efforts to enroll stockyards to prevent the spread of disease, improve food safety, and protect the farm economy. Roughly 500,000 of the 1.4 million U.S. livestock premises are now registered. • Rural Development: $2.7 billion, for USDA programs important to rural communities including rural housing, water projects, community facilities and economic development. • Animal and Plant Health: $881 million, $13.7 million above 2008, to fund programs that protect American agriculture against animal and plant diseases. • Agricultural Research: $1.1 billion for the Agricultural Research Service and $1.2 billion for the Cooperative State Research, Education, and Extension Service for important agricultural research. • Conservation Programs: $968 million, $32 million above 2008, for the Natural Resources Conservation Service to improve service in the field, deliver conservation efforts to protect the environment, and upgrade aging flood control dams at risk of catastrophic failure. • Commodity Futures Trading Commission: $146 million, $34.7 million above 2008, to increase staff and improve technology in order to strengthen oversight and enforcement capabilities at a time of turmoil in the commodity futures markets. • Ensuring Livestock Competition: $40.3 million, $1.8 million above 2008, to assure fair competition and fair trade practices, safeguard farmers and ranchers, and to protect consumers and members of the livestock, meat, and poultry industries from unfair, deceptive, discriminatory and monopolistic practices. • Imported Poultry Products from China: Prohibits USDA from moving forward with a rule to allow potentially unsafe poultry products from China into the U.S. • Country of Origin Labeling (COOL): Implements the program requiring country of origin labeling for fresh fruits and vegetables, meats and other products by providing $9.6 million for the Agricultural Marketing Service to administer and oversee COOL labeling requirements. • Inspection Pilot Program: Prohibits FSIS from implementing a pilot program to inspect certain facilities using a risk-based model until FSIS implements changes recommended by the USDA Inspector General.

U.S. governors push for higher ethanol blend rate

Members of the 35-member Governors’ Biofuels Coalition sent a letter to the White House last week, urging President Barack Obama to take stronger actions in support of biofuels. During a press conference Monday, North Dakota Governor John Hoeven and Iowa Governor Chet Culver, chair and vice chair of the GBC, said they brought the issue up during a meeting at the White House on Monday. The new president is receptive to their requests, but made no specific commitments, they reported. In their letter, the GBC asked the President to:

• Articulate a vision for the nation’s biofuels future that clearly outlines the role of biofuels in addressing and overcoming America’s economic, energy and environmental challenges;

6 • Establish an interagency task force on lifecycle greenhouse gas emissions and transportation fuels, involving the U.S. Department of Agriculture (USDA), U.S. Environmental Protection Agency (EPA) and U.S. Department of Energy (DOE). The task force would be charged with resolving the debate on this issue by annually and objectively assessing and comparing the lifecycle analysis of biofuels;

• Initiate an immediate substantially similar ruling from the EPA on E13 that would immediately expand the market for domestic biofuels by approving 13% ethanol blends, which are already within EPA’s allowable variance;

• Create new policy options that continue to increase the sustainability of biofuels feedstock production with USDA leading an effort focused on water efficiency and water quality, fertilizer use, habitat conservation, and crop management practices related to the production of biofuels and next-generation, home-grown fuels;

• Implement the nation’s first comprehensive biofuel market development program by creating policies that remove marketing barriers to E85, increase flexible fuel vehicle production, assist retail marketing efforts and increase funding for E85 development.

National electric transmission grid key to new energy

Calling on Congress and President Obama “to be absolutely focused like a laser beam on transmission,” Interior Secretary Ken Salazar and other speakers at Monday’s National Clean Energy Project forum in Washington, DC concluded that creating a national electric grid is key to developing renewable energy.

Speakers, including former President Bill Clinton, former Vice President Al Gore, Energy Secretary Stephen Chu, Senate Majority Leader Harry Reid (D-NV), Speaker of the House Nancy Pelosi (D-CA) and oilman and wind-energy advocate T. Boone Pickens, agreed with rancher and former Colorado Senator Salazar’s warning that no matter how much effort and cash is devoted to renewables in the stimulus bill and other legislation, “Unless we are able to deal with the transmission issue, we will be standing in place five or ten years from now.” Interior Secretary Ken Salazar at National Clean Energy Project Conference Monday, flanked by At the heart of the transmission issue is Sen. Jeff Bingaman (D-NM) and former “balkanization” whereby state utility President Bill Clinton. Photo: Tami Heilemann, regulatory agencies control electricity DOI transmission line planning, siting, permitting and cost allocation. Reid and others at the Clean Energy forum called for breaking this logjam by giving more authority to the federal government as has been done with natural gas pipelines. Reid announced at the forum that he is introducing bipartisan legislation this week to tackle this politically charged issue. He explained that those opposed to shifting more

7 authority to the Federal Energy Regulatory Commission (FERC) should remember that it was federal action in the 1950s which created the federal highway system.

Speaker Nancy Pelosi added that “Many states have already begun to adopt innovative policies to move toward more clean, efficient transmission systems. In a signal that change is possible, National Association of Regulatory Utility Commissioners President Fred Butler who is New Jersey’s Public Utilities Board Commissioner noted that the states “are opposed to federal takeover of the siting responsibility.” He said, however, that state utility commissioners are considering “perhaps a shared responsibility” while “the planning process needs to start with the states.” He said that “we’re willing to work and work to a solution that we can all live with.”

Asked why the state-control logjam wasn’t eliminated long ago and why success now may be possible, Senator Reid had a simple answer: “60 votes” – referring to the 60 vote majority needed in the U.S. Senate for overcoming a filibuster to pass legislation. Former U.S. Senator and United Nations Foundation President Timothy Wirth said that “Until now we have lacked the coalition necessary to move this issue.”

Warning of a “planetary emergency,” Nobel prize winner Al Gore said a major difference today is the “extraordinary leadership” provided by Senate Majority Leader Reid and House Speaker Pelosi. He said thanks to this leadership, he is hopeful that the United States finally will end “our ridiculous overdependence on dirty, dangerous, expensive carbon-based fuels.” Gore concluded that the answer is “a generational one-off investment to switch from an energy infrastructure that’s based on these carbon-based fuels, to a new infrastructure that’s based on fuels that are free forever.”

Recalling the skepticism he faced in turning Wal-Mart green, Wal-Mart Executive Committee Board Chairman Lee Scott warned that turning America green will require “courage and some capacity to be criticized.” T. Boone Pickens made the same point, telling clean energy proponents “Don’t be stopped by that 10%, I don’t care what it is, they’re opposed.” To illustrate, he told the story of his 90-year-old Texas neighbor who was asked about the changes he’d seen in his 90 years and replied “I was against every damn one of them.” Pickens said “That’s the 10% that we can’t let stop us.”

Wanted: ‘Green Power Superhighways’ to move renewable energy

At a time of massive and mounting federal deficits, there’s good news from the renewable energy industry. Its economic, national security and environmental benefits are so great, proponents insist, that the private sector will invest heavily once the federal government replaces today’s costly, cumbersome patchwork of local and state regulatory barriers with a truly national energy policy.

Speaking at Monday’s National Clean Energy Project forum, American Wind Energy Association (AWEA) CEO Denise Bode said that after doubling wind-energy capacity over the past three years, “we’re fully prepared to double it over the next three years.” But she warned that maintaining this rapid growth depends on the federal government sending “a long- term signal that will provide the kind of certainty” that the businesses community needs “to add jobs, to spend the billions of dollars that’s going to be necessary to build out this infrastructure, to build the wind farms, the solar panels, and to build the transmission.”

8 Bode said that instead of stop-and-go tax credits, it’s critically important to establish a Renewable Electricity Standard that guarantees future demand for renewable energy – and equally important to create a national high-voltage transmission grid to replace today’s antiquated “115 balancing centers in the U.S. trying to keep the electricity moving.”

At a joint press conference held by AWEA and the Solar Energy Industries Association (SEIA) last week, SEIA President and CEO Rhone Resch said that “President Obama has issued the bold challenge to double renewable energy generation in the U.S. in three years. This will not be achieved without renewed investment in our electric transmission infrastructure to ensure that the regions with the best solar resources are connected to population centers where they are needed most. At the same time, new investments will create thousands of good-paying jobs in areas hard hit by the recession. This effort will require a cohesive plan from federal, state, and local interests and will not be easy, but we are up to the President’s challenge.”

Bode said in the press conference that “Just as President Eisenhower’s vision of a modern interstate highway system transformed commerce Capturing solar energy in the West to ship to both East and West coasts – once a and transportation in our nation, the benefits of this national transmission grid is built. Photo: kind of investment by our generation will far U.S. DOE. exceed the costs. We need a modern electron superhighway to power our nation’s 21st century economy with clean, renewable energy. Nearly 300,000 megawatts of wind capacity is held up in the pipeline due to transmission limitations. The wind industry is ready to get these projects in the ground, create thousands of jobs, generate investment here in the U.S. and provide an inexhaustible supply of clean, affordable energy for years to come.” To read the complete 28- page ‘Green Power Superhighways’ report, go to: http://www.awea.org/GreenPowerSuperhighways.pdf

Commodity Classic: Preview of the soybean debate

Thousands of farmers are in Grapevine, Texas this week for the 2009 Commodity Classic convention and trade show hosted by the National Corn Growers Association (NCGA), American Soybean Association (ASA), National Association of Wheat Growers and the National Sorghum Producers. NCGA and ASA delegates will hold their annual business meetings on Saturday, but most of the attention will be focused on soybean growers as they consider the ongoing debate over checkoff spending and other issues. ASA has established new rules for voting delegates at its policy-making session, effectively shutting out leaders of the new United States Soybean Federation (USSF). John Hoffman, chairman of ASA, makes no apologies for the decision made by the association’s Credentials Committee.

“We thought it was very important that the delegates to the ASA resolution session be members in good standing, not members of a competing national soybean policy organization,” Hoffman, an Iowa soybean grower, told Agri-Pulse. “We want delegates there that are acting in the best interest of U.S. soybean farmers and the American Soybean Association.

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The USSF was formed by soybean farmers in Minnesota, Missouri and Mississippi in January.

ASA’s Hoffman said the initial interest expressed by growers in other states in joining the USSF has “fallen through” because the rationale for establishing a rival soybean policy organization “is pretty flimsy.”

The four-day Commodity Classic could be the setting for a rekindling of the ASA’s ongoing feud with the United Soybean Board (USB) over the management of soybean checkoff funds. Based on a request by ASA, USDA’s Office of Inspector General (OIG) is currently conducting an investigation and audit of USB’s checkoff spending practices and program activities.

“Most likely the USDA will take corrective action based on the findings” once the OIG’s review is completed, predicted Hoffman, who questioned USB’s hiring of attorney Steve Bunnell, a partner in the Washington, DC office of O’Melveny & Myers LLC who specializes in white collar defense and corporate investigations, to represent USB in the OIG probe.

“To hire a high-priced criminal law firm in Washington, DC is probably not the best use of farmer’s checkoff funds,” Hoffman said.

Contacted by Agri-Pulse, Chuck Myers, chairman of the USB, confirmed the 68 farmer-directors who oversee soybean checkoff spending, voted last week to hire Bunnell.

“Steve has extensive experience with OIG investigations…so we felt it was important to have someone with that experience to facilitate the interaction between OIG and the soybean checkoff so we can expedite the review process, finish it as quickly as we can and get the facts out so soybean farmers have the facts rather than allegations to base their decisions on.”

In a related development, Myers, a soybean farmer from Nebraska, disclosed that an independent audit of USB’s financial records for the 2008 fiscal year, which ended Sept. 30, gave the checkoff program a clean bill of health.

“The entire board takes great pride in these results and remains committed to spending farmer invested checkoff dollars in the wisest manner possible.” Myers expressed hope that the leaders of USB and ASA can interact “in a friendly manner” this week at Commodity Classic.

Appeals court rejects ag groups concerns about dust regulations

A Federal Appeals court ordered the Environmental Protection Agency (EPA) to reconsider its standards for fine particulates, which some have linked to premature death from lung cancer and heart disease and to other health problems, but rejected an appeal from agricultural groups on coarse particulates like dust, and particulate contributions to haze.

The National Pork Producers Council (NPPC) expressed disappointment with the ruling. The organization had argued that while EPA identified problems with coarse PM in urban areas – where it is mostly the byproduct of engine combustion – it failed to show any health effects associated with rural dust, which comes mostly from naturally occurring organic materials such as plants, sand and soil. While recognizing the distinctions between urban and rural PM sources, EPA nonetheless decided to regulate agricultural operations for coarse PM.

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The appeals court accepted EPA’s decision as “reasonable.” In rejecting arguments from NPPC and other livestock organizations, the court adopted the so-called precautionary principle, placing the burden on the livestock industry to prove that its operations are not harming the public or the environment. “In assessing the scientific evidence, the [livestock organizations] have mistakenly equated an absence of certainty about dangerousness with the existence of certainty about safety,” according to the court. Prior to this decision, EPA had the burden of showing there was harm to human health and the environment that needed to be addressed and of explaining why its proposed regulation was necessary to address that harm.

“EPA issued the revised air-quality regulations despite acknowledging that it lacks any science to support imposing them on livestock production operations, and that apparently was okay with the court,” said NPPC Environment Committee Chairman Randy Spronk, a pork producer from Edgerton, Minn. “More troubling, the court is requiring that we prove a negative.”

EPA issued the particulate matter rule in 2006, before a two-year emissions monitoring study of animal feeding operations got underway. The study, which is expected to be completed by January 2010, was part of a 2005 agreement between EPA and the livestock industry. Data from the study is to be used by EPA to develop scientifically credible methodologies for estimating emissions from livestock operations and to promulgate new compliance standards and guidelines. More than 2,700 animal feeding operations, including 1,900 pork farms, signed the so-called air consent agreement.

No deal for JBS, National Beef

JBS, the world’s largest beef producer and exporter, announced on Feb. 20 that it had terminated its acquisition of National Beef Packing LLC, the fourth-largest U.S. meatpacker. In a conference call with analysts, JBS North America CEO Wesley Batista said the company’s decision to not go ahead with the transaction following more than three months of legal wrangling with the Justice Department came down to changing economic conditions.

“We have been working to see if we could divest some assets to reach agreement with the Department of Justice. But in this financial market now, it does not make sense to sell plants at a cheaper price and to acquire National does not make sense for JBS.”

The Department filed an anti-trust lawsuit in the U.S. District Court in Chicago on October 20, 2008 to block JBS’ purchase of National Beef, alleging the transaction would result in lower prices paid to cattle suppliers and higher beef prices for consumers.

“Once (the) DOJ didn’t like the deal we went into prolonged talks with them to try to see if we could find accommodations that work for us and work for them,” said Chandler Keys, JBS-Swift vice president of industry and government relations, but “Over a period of time, we came to the conclusion…there wasn’t something there that we could agree to. So, we made the decision, along with National, to pull back.”

In Washington, the Justice Department issued a statement saying it welcomed the breakup.

11 “The decision to abandon the transaction will preserve competition in the purchase of cattle that has been critical to ensuring competitive prices to the nation’s thousands of producers, ranchers and feedlots.”

U.S. cattle groups generally were pleased that JBS abandoned its bid to take over National Beef. The most vocal opponents of the merger, R-CALF USA and the Organization for Competitive Markets (OCM), issued a joint statement saying they were pleased with the JBS decision. Now, according to OCM executive director Fred Stokes, the two groups “must focus our collective efforts on reversing the anticompetitive mergers of the past, including JBS’ 2008 acquisition of the nation’s largest feedlot company when it acquired Smithfield Beef Group.”

The National Cattlemen’s Beef Association said in a statement that it was confident the Justice Department had done all that needed to be done to consider all the facts in the proposal.

Sanderson Farms spurns PETA on poultry slaughter method

Sanderson Farms, the fourth-largest U.S. chicken processor, last week rejected a request by People for the Ethical Treatment of Animals to asphyxiate chickens by removing their oxygen instead of the traditional slaughter method of stunning birds with a low-voltage electrical charge. The firm also refuted a PETA assertion that a growing number of retailers are buying from suppliers who convert to controlled-atmosphere killing (CAK) or controlled-atmosphere stunning (CAS).

“There is only one installation that uses CAK in the whole of the U.S.,” Chairman Joe Sanderson told PETA representatives who spoke at the firm’s annual shareholders meeting in Laurel, Miss., Thursday. “And when we were scheduled to visit that facility, the trip was cancelled because the system was not operating.” He said that the company has “spent a lot of time looking at” the process, including sending people to Europe to inspect poultry plants that have adopted CAK.

Shareholders voted down a resolution presented by PETA staff member Erika Davis asserting that CAK would have economic benefits for Sanderson. Davis claimed that that “every published report on controlled-atmosphere systems to date . . . concludes that they are far better for animals than the current slaughter method,” she said. “We disagree with PETA’s assertion that it provides any animal welfare benefits for the birds,” Sanderson said before the vote. “We do not believe that [the technology] is economically feasible at this time.” He also contradicted the claim that major retail chains such as Winn-Dixie, Harris-Teeter and Safeway Stores give purchasing preference to suppliers that use the atmospheric method. “We are the sole supplier to Harris-Teeter and Winn-Dixie and a primary supplier to Safeway,” Sanderson said.

Earlier last week, PETA renewed a campaign launched more than nine years ago to persuade McDonald’s to require chicken suppliers to adopt what it called the “less cruel” method. Two years ago, a McDonald’s poultry advisory board recommended the company accept either method of slaughter. “There is no consensus on the practice,” said a company statement. “Some experts believe it may improve animal welfare, while others disagree.”

The renewed PETA pressure follows publication Feb. 13 by two poultry science bodies of a paper that refutes activists’ assertions that atmospheric methods are more humane. “Physiologic evaluation has failed to demonstrate any welfare advantage of any CAS system over other

12 accepted poultry electrical stunning methods in the U.S.,” says the position paper adopted by the American Association of Avian Pathologists and American College of Poultry Veterinarians.

The statement points out that direct comparison of U.S. and European practices is not appropriate because U.S. electrical stunning systems use low voltage to produce anesthesia while the European systems apply high-voltage electrical stunning to electrocute birds. “For that reason, Europe is more inclined to use CAS systems to avoid the tissue damage associated with electrocution,” it says. In a statement issued by the National Chicken Council, animal welfare proponent Bernard Rollin, a professor at Colorado State, said anoxia is not necessarily humane. “There is no distress as severe as the feeling of not being able to breathe,” he said. “Even though CAS creates unconsciousness, there must be a period when the animal feels a sense of suffocation. For this reason, I do not accept CAS as a humane method of euthanasia.”

News briefs

Rural Affairs office? President Obama created a White House Office of Urban Affairs last week, but there are no plans to do the same for Rural America. Spokesman Shin Inouye says, “The president is committed to addressing the needs of rural Americans, and will work with the various departments, including Agriculture, Interior and Commerce, to achieve this goal.”

Global biofuels partnership. With the growth of biofuels worldwide and the growing interest of companies and nations in reducing Green House Gas emissions, three of the world’s largest ethanol trade associations have decided to work together to promote biofuels worldwide. Bob Dinneen, CEO and President, Renewable Fuels Association, Gord Quaiattini, President of the Canadian Renewable Fuels Association and Rob Vierhout, Secretary General of the European Bioethanol Fuel Association (ebio) are hosting a press conference Wednesday morning to announce their new partnership Ethanol and Land Use report. Expansion of corn ethanol production to 15 billion gallons per year in 2015 is unlikely to result in the conversion of non-agricultural lands in the U.S. or abroad, according to a new study released today by Air Improvement Resource, Inc. (AIR). Their analysis was conducted on behalf of the Renewable Fuels Association. The study found that increasing crop yields and growing supplies of nutrient-dense feed co-products are likely to nullify the need to expand global cropland to meet the corn ethanol requirements of the Renewable Fuels Standard, the study found. To download the full report, go to: http://www.ethanolrfa.org/objects/documents/2192/land_use_effects_of_us_corn-based_ethanol.pdf Land values decline. For the first time in a decade and only the second time since 1986, farmland values in Iowa and states surrounding the Great Lakes experienced a quarterly decline, according to the Chicago Federal Reserve Bank’s February AgLetter. Prices for “good” agricultural land in the Fed’s seventh district, which includes most or all of Iowa, Illinois, Indiana, Michigan and Wisconsin, did post a 5% increase in 2008, but that was the smallest increase since 2001, according to AgLetter author David Oppedahl, a Chicago Fed business economist. Given the global recession and accompanying decline in crop and livestock prices, 35% of respondents to the Fed’s survey expected farmland values to fall through March 2009. Only 4% expected an increase while 61% of respondents expected values to remain the same.

Where does Smokey belong? Moving the Forest Service into Interior could potentially improve federal land management by consolidating into one department key agencies with land management missions and increasing the effectiveness of their programs, according to a new

13 Government Accountability Office (GAO) report. At the same time, a move would provide few efficiencies in the short term and could diminish the role the Forest Service plays in state and private land management, a mission the agency has in common with USDA but not with Interior. Many officials and experts suggested that if the objective of a move is to improve land management and increase the effectiveness and efficiency of the agencies’ diverse programs, other options might achieve better results. For example, numerous officials and experts suggested leaving the Forest Service in USDA and increasing collaboration among the land management agencies. For the full report: http://www.gao.gov/highlights/d09223high.pdf

Cellulosic joint venture. BP and Verenium Corporation announced formation of a 50-50 joint venture to produce ethanol from non-food grass crops such as miscanthus, sorghum, energy cane and sugar cane at a 36 million gallon-per-year facility in Highlands County Florida beginning in 2012. The joint venture will act as the commercial entity for the deployment of cellulosic ethanol technology being developed and proven under the first phase of the BP-Verenium partnership announced last August, the companies said at press conference last week. "This next stage in our relationship with Verenium demonstrates our real commitment to making cellulosic ethanol a reality in the U.S. fuels market in the near term. BP and Verenium together have the technological know-how, engineering capability and market expertise required to demonstrate that we can deliver better, more sustainable biofuels, more quickly," noted Sue Ellerbusch, president of BP Biofuels North America said. Together, the companies are committing $45 million in funding and assets to the joint venture.

Deere sees more green. Deere & Company remained profitable during its first quarter of fiscal 2009 despite global economic pressures, the company said in an earnings release on Feb. 18. Deere reported worldwide net income of $203.9 million for the quarter ended January 31, down 45% from the same period a year, on sales of $4.56 billion, which were up from $4.53 billion last year. "During a period of considerable economic uncertainty, John Deere has completed another profitable quarter and sees further opportunities to advance its global competitive position," said Robert W. Lane, chairman and chief executive officer. "At the same time, ongoing higher material costs, the deepening global recession, and volatile foreign exchange rates have put downward pressure on our financial results." Demand for large productive agricultural machinery held up well, Lane noted, due in substantial part to the sound financial health of the U.S. farm sector. Global ag equipment sales – Deere’s biggest operation – rose 18% during the quarter. In a conference call with investors, Deere officials said the outlook for the coming year remains unusually uncertain, especially with respect to foreign exchange, and the outlook's impact on the company's sales and earnings difficult to assess. Worldwide sales of Deere’s ag equipment are forecast to fall 2% in 2009. The company said farm machinery industry sales in the U.S. and Canada are forecast to be flat to up 5% percent for the year. Farm Hands on the Potomac ...... By James C. Webster

The announcement late Monday of President Obama’s intention to nominate Kathleen A. Merrigan to be deputy secretary of agriculture caught farm hands here off guard. More than 24 hours later, not one general farm organization, commodity group or agribusiness trade association had volunteered its reaction. But comments by “sustainable agriculture” activists, critics of commercial agriculture and advocates of alternative food policies who campaigned against Secretary of Agriculture Tom Vilsack were almost ecstatic. The National Sustainable Agriculture Coalition sees her as “a lifelong supporter of family farmers and sustainable and organic agriculture” who will work on policy reform. “I cannot think of a more qualified public

14 policy expert,” says an official of the Cornucopia Institute, a persistent critic of USDA organic policies under the Bush Administration. Consumers Union had similar praise for her.

Nomination of deputy secretary from New England breaks with tradition; every No. 2 official at USDA in living memory has been from the Midwest, South or Southwest. Her record does not make for easy categorization. Her 2000 doctoral thesis at the Massachusetts Institute of Technology faults the “sustainable” agriculture movement for its failure to influence policy. She once told a Senate hearing that “green payments” are the future of agricultural support. She has written in a Tufts publication, “In the polarized debate over biotechnology, I find myself in the middle, equally dismayed by biotechnology cheerleaders who overstate its benefits and refuse to acknowledge its risks, and the doomsday activists who decry the technology and irresponsibly counsel African leaders to turn back GM food aid.”

Merrigan was the principal staffer behind the USDA organic food law as a Senate Agriculture Committee staffer in 1996-87 under Chairman Patrick Leahy, D-Vt., and implemented it as administrator of the USDA Agricultural Marketing Service in 1999-2001. She’s been at Tufts University in Boston since, heading a graduate program in agriculture, food and environment at Tufts’ Friedman School of Nutrition Science and Policy. Earlier, she worked at the Henry A. Wallace Institute for Alternative Agriculture (now merged into the Winrock Foundation) and worked for the Texas Department of Agriculture when it was headed by Jim Hightower.

Tom Buis, President of the National Farmers Union, will be named CEO of Growth Energy, during a press conference this morning. The Indiana farmer came to Washington as a Farm Hand for former Rep. Jim Jontz, D-Ind., as legislative assistant and legislative director and later served as senior agriculture policy advisor to Senate Majority Leader Tom Daschle, D-S.D. Former Iowa Congressman and OMB Director Jim Nussle also joins Growth Energy as Special Advisor to the Board of Directors.

Mary Wakefield, former chief of staff for both Sen. Kent Conrad, D-N.D., and late Sen. Quentin Burdick, D-N.D., has been appointed by President Obama to be administrator of the Health Resources and Services Administration in the Department of Health and Human Services. Wakefield is director of the Center for Rural Health at the University of North Dakota and associate dean for rural health at the university’s medical school.

Shin Inouye, who handled farm media relations for the campaign and was a spokesperson for the inaugural committee, was named director of specialty media in the White House press office. He previously was communications director for Rep. Jerrold Nadler, D-N.Y. . . . Senate Agriculture Committee Communications Director Kate Cyrul is moving to the office of Sen. Tom Harkin, D-Iowa, to be his communications director, replacing Jennifer Mullin.

No confirmation here, but Kentucky newspapers report that Hardin County’s school board announced that Janey Thornton, the school district’s nutrition director, would resign to become deputy under secretary of agriculture for food, nutrition and consumer services. She’s former president of the American School Food Services Assn. (now School Nutrition Assn.)

The Senate Finance Committee is expected to schedule a confirmation hearing next week on the nomination of former Dallas Mayor Ron Kirk as U.S. Trade Representative.

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Terry Detrick, Ames, Okla., was named interim president of the Oklahoma Farmers Union and CEO of American Farmers & Ranchers Mutual Insurance Co. affiliate following the resignation of Ray L. Wulf. The board appointed Secretary-Treasurer Royce Meek, Broken Bow, Okla., general manager of the insurance company and its subsidiaries. Detrick, a past president of the National Association of Wheat Growers, made an unsuccessful run for president of the National Farmers Union in 2002, losing to Dave Frederickson.

Virgil Smail, former president of the American Institute of Baking in Manhattan, Kan., has been named the first executive director of the new United Sorghum Checkoff Program. Smail also has headed research and development for ConAgra Foods’ milling division, the National Association of Wheat Growers Foundation and Kansas State’s Grain and Science Industry Department . . . John D. Hardin Jr., Danville, Ind., pork producer, has been elected to the American Farmland Trust board. He is a past president of the National Pork Producers Council and a former chairman of the United States Meat Export Federation . . . Joie A. Gregor, assistant to the president for presidential personnel in the Bush Administration, has been joined the ConAgra Foods board. She’s former vice chairman of Heidrick & Struggles.

Washington-based food business consulting firms The Tipton Group and Caren Wilcox & Associates have joined forces. The two will operate independently but recruit clients jointly and help each other’s existing clients. The firms are headed by E. Linwood (Tip) Tipton, former CEO of the International Dairy Foods Assn., and Caren Wilcox, former CEO of the Organic Trade Assn. and deputy USDA under secretary for food safety.

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