Government Affairs Meeting

NOVEMBER 14-16, 2016 • SAN ANTONIO, TX

NATIONAL COUNCIL OF FARMER COOPERATIVES NCFC Government Affairs Committee Hyatt Regency Hill Country San Antonio, Texas November 14-16, 2016

AGENDA

November 14th

All Day Arrival and Check-in

6:00 pm Reception & Dinner Windmill Pavilion Hyatt Regency Hill Country Resort

November 15th Fredericksburg E-G Ballroom

8:00 am Breakfast

8:30 am Welcome & Introductions • Chairman's Welcome & Meeting Overview • Self-Introductions • Approval of the Minutes

8:40 am 2016 Election Analysis

Guest Speaker: Matt Lewis Senior Contributor at The Daily Caller CNN Political Commentator

9:30 am Engaging with the New Administration & Congress: Implications for Agriculture • What to Expect in the First 100 Days? • Nominations Process • New Committee Leadership/Membership

Guest Speaker: Brian Baenig Executive Vice President U.S. Beet Sugar Association

10:15 am NCFC CO-OP/PAC Report • 2016 Cycle - Review: How'd we do? • Getting Ready for the Next Cycle - Ideas on How to Improve • PAC Auction

Representing the Business Interests of Agriculture

10:30 am Break

10:45 am Roundtable Discussion: Issues for Farmer Cooperatives • What are your election reactions & perspectives? • What are your priority issues for 2017?

11:15 am Implementing the New Biotech Labeling Law • USDA Regulatory Roll-Out • Coalition’s Preparations and Strategic Plan

12:00 pm Lunch Brady Room

1:00 pm Legal, Tax & Accounting Update • Capper-Volstead Litigation & Potential Need for Legislation • Estate Tax & Tax Extenders

1:45 pm Co-op Sustainability Initiative • Plans for Release and Implementation • Next Steps

Special Guest: Larry Elworth Resolve

2:15 pm Break

2:45 pm NCFC Farm Bill Preparations • Review of stakeholder meetings on each title • Congressional Timeline Projections for Action • Review of the Issues for Co-ops & their Members: What works/what doesn’t in the current farm bill o Commodities & Crop Insurance o Conservation & Energy Programs o Trade & Market Access Programs o Credit & Rural Development o Research o Specialty Crop Programs o Animal Agriculture • NCFC Internal Preparations – Input Needed on Approach o Focus at Annual Meeting – Joint Session o Additional Farm Bill Workshop? o Washington Conference Opportunities for Input

5:00 pm Adjourn

6:00 pm Bus Departs for Reception & Dinner The Culinary Institute of America 312 Pearl Parkway, Building 3, San Antonio, TX 210-554-6400

November 16th Fredericksburg E-G Ballroom

7:30 am Breakfast

8:00 am Trade Outlook • Hope for TPP Passage • TTIP Status • Possible WTO Enforcement Cases • Overall Outlook for the next 2-3 Years

Guest Speaker: Floyd Gaibler Director of Trade Policy and Biotechnology U.S. Grains Council

8:45 am Gearing up (Again) for Immigration Reform • AWC Activities with the Transition Team • Starting Point for Legislation • Strategy to Re-Engage Grassroots

9:15 am End-of-Year Policy Wrap Up • Appropriations • Overtime Rule • OSHA PSM • Veterinary Feed Directive • Food Policy (Child Nutrition, Buy America Provision, Nutrition Facts Label, etc.) • Regulatory Reform Proposals for the next Administration • Other Issues of Concern to NCFC Members

10:00 am Break

10:30 am Review & Update NCFC Priorities & Policy Resolutions

11:30 am Committee Elections • Committee Chair Election • Subcommittee Leadership Selection

12:00 am Other Business

12:15 pm Adjourn (Lunch Provided)

June 2016 Meeting Minutes NCFC Government Affairs Committee Meeting Washington, DC June 13, 2016

Minutes

SUBCOMMITTEE REPORTS

Each of the six Subcommittees of the NCFC Government Affairs Committee met throughout the day. Below is a summary of the Subcommittee meetings:

• Animal Agriculture – William Westman from the North American Meat Institute joined the Subcommittee to review ongoing trade agreements and meat export issues as they relate to animal agriculture. He shared that the Trans Pacific Partnership (TPP) agreement is unlikely to be implemented this year. In outlining the importance of TPP to the meat sector, he noted that Australia already has a 10 percent tariff advantage over the U.S. with Japan on meat trade. Mr. Westman also explained to the subcommittee the importance free trade with Cuba will play in the industry (primarily poultry), and that the Trans-Atlantic Meat Dialogue was created to try to move things forward with TTIP.

Next, the Subcommittee welcomed Dr. Dave Ingram and David Oryang from the Food and Drug Administration (FDA) to discuss the risk assessment of manure application in regards to treated versus untreated manure. Dr. Ingram explained that this risk assessment was contained in the Produce Rule as part of the implementation process of the Food Safety Modernization Act (FSMA). The risk assessment would establish an application strategy for how and when to apply treated manure to produce. Mr. Oryang elaborated further on the risk assessment process of manure application and expressed the agency’s need for data, underlining the potential risks, and explaining how to characterize public health risks of pathogens transferred from manure applied to produce to the food we eat.

The Subcommittee was then joined by Ron Phillips of the Animal Health Institute. Mr. Phillips provided an overview of the Veterinary Feed Directive and the use of antibiotics, only administered by veterinarians, for the sole purpose of fighting disease.

• Fruit, Vegetable & Nut – The Subcommittee was joined by Dr. Katie Wilson, Deputy Under Sectary for Food, Nutrition and Consumer Services at the U.S. Department of Agriculture. Dr. Wilson discussed USDA’s implementation of the Buy America provisions and the importance of these provisions in the school lunch programs. She also highlighted USDA's renewed focus on making sure the provisions were being appropriately adhered to and enforced.

The Subcommittee was then joined by Shawn Stevens, partner with the Food Industry Counsel, LLC. Mr. Stevens discussed the Food and Drug Administration’s (FDA) evolving approach to pathogens and new enforcement techniques, focusing his remarks on FDA's

criminal charges in food contamination situations. Throughout the update, Mr. Stevens highlighted the need to keep good documentation and records for these purposes.

• Environment & Energy –The Subcommittee was joined three panelists who provided insights on state-based environmental programs and issues that are driving on-farm activities. Christopher Henney of the Ohio AgriBusiness Association, provided an in-depth review of water issues in the Ohio River Basin. He also reviewed different programs for implementing sustainable water practices such as Healthy Water Ohio, which is a 20 to 40-year plan to reduce run-off and different water related problems on the farm level, as well as the 4R Nutrient Stewardship Certification.

Becky Kenow with Land O’Lakes, Inc. encouraged subcommittee members to look for proactive and voluntary measures before regulation happens. She specifically highlighted a recent partnership between Land O’Lakes, Inc. and the State of Minnesota on a water quality initiative. Within this partnership, the cooperative is looking at how to make strides through scalability, utilizing technology, precision agriculture, and data management.

Alicia Rockwell of Blue Diamond Growers discussed the on-going water shortage issues in California and the impact it has had on the industry.

NCFC Staff Lisa Van Doren also provided an update on crop protection policy matters, including pesticide NPDES permitting, Atrazine, and other biological evaluations.

• Labor & Infrastructure – Clark Mica with The Fertilizer Institute, spoke to the Subcommittee about the importance of OSHA’s Process Safety Management compliance deadline of September 30. Additional, Mr. Mica reviewed H.R. 5213 Fertilizer Access and Responsible Management (FARM) Act, which was referred to the House Committee on Education and the Work Force.

The Subcommittee also welcomed Jonathon Gold of the National Retail Federation to discuss port and ocean shipper concerns. Mr. Gold presented port congestion challenges due to lack of infrastructure investment, labor shortages, rail problems, and large volumes entering the port. Additional challenges occur through the supply chain with increased regulations.

David Cobb with CHS, Inc. and Janice Serpico of MFA Oil Company joined the Subcommittee to discuss the Department of Labor’s Overtime Rule, effective December 1, 2016. Mr. Cobb and Ms. Serpico discussed the human resource challenges of this rule, including communicating with managers and potential re-designation of staff roles.

NCFC Staff Kathleen Johnson concluded the meeting with a brief overview of the increased demands on the H-2A program and NCFC’s work to find some means to alleviate the bureaucratic backlog that has resulted.

• Food and Nutrition – The Subcommittee welcomed Mary Nowak, Mary Knigge, and Lisa Shelton, all members of the House Agricultural Committee. The panel shared that 40 percent

of food produced goes into a landfill and discussed the confusion surrounding on-package date labels. Currently, there is no national standard on date labeling except for infant formula. They also stressed the importance of consumer education in regards to date labeling in order to meet the USDA’s goal of reducing food waste by 50 percent.

NCFC Staff Kathleen Johnson gave the Subcommittee a FDA outlook discussing how the agency’s priorities will impact farmer co-ops. She spoke on the new definitions of “natural” and “healthy” in regards to nutrient content claims as well as FSMA compliance and implementation. Mrs. Johnson also shared a visual, side-by-side comparison of the old and new Nutrition Facts Label, which has a compliance deadline of July 26, 2018. She concluded by describing the implementation of new Sodium Draft Guidance which aims to reduce sodium intake to 3000mg within two years.

NCFC CEO Chuck Connor provided an update on the biotech disclosure legislation moving through Congress. He reviewed the main issues under negotiation, including that of preemption, the use of GMOs in feed, and the way meat will be labeled.

• International Affairs – Sharon Bomer Lauritsen, Assistant U.S. Trade Representative for Agricultural Affairs and Commodity Policy, spoke to the Subcommittee about TPP and TTIP, and the agricultural impact of each of these trade deals. She explained that the next step with TPP, after hopefully being approved by Congress, would be to make sure all other partners are in compliance. USTR is also working to improve measures to monitor and enforce the import rules. Ms. Lauritsen informed the Subcommittee that while TTIP will be significant in future trade agreements, it is still not balanced; the EU exports to the U.S. are double the U.S. exports to the EU. She stated that there are major gaps and issues that will need to be negotiated before an agreement can be concluded.

Next, the Subcommittee welcomed Craig Thorn with DTB Associates, LLP to expound on Trade-Distorting Subsidies in Developing Countries. He shared that Europe’s high subsidies, which in return produce surplus, lead to the agriculture negotiations that lead to the Uruguay Round agreement. Now, however, a large problem is the level of subsidies developing countries are providing their producers, likely in violation of their WTO commitments. Mr. Thorn presented price support levels for commodities in several countries, including China and India. Those price support levels are significantly higher for a number of commodities than U.S. support levels.

GOVERNMENT AFFAIRS COMMITTEE MEETING

CALL TO ORDER Committee Chairman, Rich Hudgins, called the meeting to order, giving an overview of the meeting and supporting materials.

APPROVAL OF THE MINUTES A motion to approve the February 2065 meeting minutes was made by Chuck Adami and seconded by Wally Knock.

PLENARY SESSION – ONLINE LISTENING The Committee welcomed Michelle Viar of FLM+ to speak about brand and issues management through online listing. Viar explained how you can monitor the “mentions” of your brand and see the conversations the public is having about your brand online. Viar clarified that the negative connotation that surrounds topics such as TPP and GMOs are related to how people portray them through social media. She concluded the presentation by stating that through social media, proper communication and positive publicly of these topics in the agricultural field would yield a more progressive social outlook.

BUSINESS MEETING The Committee proceeded with its business meeting to discuss several additional items of importance to farmer cooperatives, including:

• Legal, Tax & Accounting Update. Marlis Carson reported on developments in a case involving cranberry growers. A U.S. District Court judge refused to certify a class of plaintiffs who brought suit against Ocean Spray Cranberries in a dispute over the cooperative’s dual cranberry pools. The judge concluded that questions regarding actual injury to the growers made it a poor case for the plaintiffs, who had sought a judgment of roughly one billion dollars. She noted that the judge had previously dismissed the plaintiffs’ claims that the cooperative violated the “mutual benefit” requirement under Capper Volstead, ruling that the Act is an affirmative defense and does not create a cause of action.

With regard to tax reform, Ms. Carson noted that there has been activity, but no legislative action. The House Ways and Means Tax Policy Subcommittee recently held a hearing on members’ tax code reform proposals, and President Obama recently discussed the need for tax reform at a White House press briefing. However, it is unlikely that any serious reform efforts will take place prior to the November election.

• NCFC CO-OP/PAC Report. Ms. Billings reported that NCFC CO-OP/PAC began the year and the second half of the 2015-2016 Election Cycle with a balance of $26,403.48. As of April 30, 2016, contributions to the PAC totaled $78,539.00. Individual and member PAC contributions accounted for $51,039.00 and $27,500.00 of the total, respectively. There was strong participation at the 5th Annual PAC Auction held in conjunction with NCFC’s Annual Meeting in Phoenix, AZ in February and raised over $25,000. Ms. Billings said the PAC reached 29 percent of its goal of $275,500 after the first quarter of fundraising.

Ms. Billings announced that the PAC will host the 5th Annual Sweepstakes drawing during the Washington Conference to boost fundraising for 2016. Prizes include golf and spa packages to be used at NCFC’s Annual Meeting in Ft. Lauderdale in February, 2017.

Finally, Ms. Billings reported that since January 1, 2016, the PAC supported 16 members of Congress for reelection in 2016 for a total of $18,000 in contributions to candidates. Other

expenses incurred by the PAC include a combined total of $1,235.49 for account analysis and merchant service fees. As of April 30, 2016, the PAC had an ending balance of $86,706.99.

• Farmer Co-op Sustainability Initiative Update. Ms. Billings provided the committee with an update on NCFC sustainability initiative. The NCFC Council in its February 11 meeting tasked staff with preparing recommended options for the most appropriate next steps in NCFC’s sustainability efforts. At the April 21 Executive Council meeting, two interrelated initiatives and a supporting budget were approved. These steps include the development of a Field Guide of Best Practices for Cooperative Sustainability Programs that includes a Self- Evaluation Tool for Co-ops and the establishment of an Annual Co-op Sustainability Accomplishment and Recognition Program. Ms. Billings explained that this two-step approach had been reviewed and refined by members of NCFC’s Sustainability Working Group and is appropriate to the current needs of NCFC co-ops, offers benefits across the range of cooperative businesses and helps capture the value of sustainability as a platform for communicating about co-ops and NCFC’s overall agenda.

Ms. Billings explained that the Council approved several next steps that will establish a consistent and cooperative-oriented framework for co-ops to use in developing and assessing their sustainability efforts. These steps are a measured approach which allows NCFC to be thoughtful in allocating time and resources while building the knowledge necessary to adapt to the complex and rapidly evolving sustainability environment. Taken together, these steps offer a strategy that can provide value across the spectrum of cooperative businesses, meet the needs of member co-ops and provide a platform for demonstrating, articulating and communicating the unique contribution of cooperatives to sustainability.

The Sustainability working group would meeting in October in Boston to tour Ocean Spray Cranberries’ facility and to further develop the Field Guide and Self-Assessment Tool. A final version of the Guide and Tool will be launched at the Annual Meeting in Ft. Lauderdale, Fla., next February.

• Future Meetings & Other Business. Mr. Hudgins announced that the next Government Affairs Committee meeting will be held in San Antonio, Texas at the Hyatt Hill Country Resort November 14– 16. Staff will circulate meeting materials in advance. Mrs. Van Doren encouraged meeting participants to fill out evaluation forms for the Government Affairs Committee meeting and Subcommittee meetings held throughout the day.

ADJOURN Mr. Hudgins adjourned the meeting.

Election Analysis & Implications for Agriculture MEMORANDUM

TO: NCFC Government Affairs Committee FROM: NCFC Staff DATE: November 9, 2016 RE: Election Recap 2016—The World Turned Upside Down

Legend holds that when George Washington accepted the surrender of Lord Cornwallis at Yorktown—bringing the American Revolution to a close and winning independence for our country—the British band played a march called “The World Turned Upside Down.” Whether true or just a nice piece of folklore, it illustrates what a momentous shock it was for a ragtag band colonists to defeat the world’s greatest empire.

For nearly every pundit and political insider in Washington today, the tune’s title serves as an apt metaphor for how they feel after Donald Trump defied the polls and “inside the Beltway" conventional wisdom to capture the presidency on November 8th, sending shockwaves around the globe. As this memo is written the impact of the election on several issues important to agriculture—from trade to immigration reform—remains unclear.

Rural America played a key role in his victory last night, as the president-elect rolled up wide margins in rural areas of key swing states such as Ohio, Pennsylvania, Michigan, Wisconsin and Iowa. By mid-morning of November 9, President-elect Trump had captured 289 electoral votes to Secretary Clinton’s 218, with races in New Hampshire, Michigan and Minnesota too close to call.

While the presidential transition will get underway in earnest now that the election is over, the Trump campaign has had a transition team doing preliminary work since August. A list of transition team members is included behind this memo.

Looking at the broader picture, President-elect Trump will take office with Republicans also controlling both chambers of Congress, though with narrower majorities than in the 114th Congress. As of the time of writing, the GOP held 51 Senate seats to 47 for the Democrats. Two races remain undecided—the Louisiana Senate race will head to a runoff in December and the New Hampshire race was too close to call with challenger Maggie Hassan (D) holding an 870 vote lead over Senator Kelly Ayotte (R) with nearly all precincts reporting.

Looking ahead, expect the lame duck session of Congress to do the bare minimum necessary to keep federal government operations running past the expiration of the current continuing resolution on December 9th. Congressional leadership elections are also expected to take up time during the early part of the lame duck.

Representing the Business Interests of Agriculture

CAMPAIGN STAFF PROFILES

Gov. Christie leads Trump presidential transition team

Trump presidential transition team

Staff Member Transition Team Role Previous Experience

Chris Christie Chairman • Governor of New Jersey

• Attorney Bill Palatucci General Counsel • RNC Member

Rich Bagger Senior Member • Chief of Staff, Governor Chris Christie

• Director of Appointment, Mitt Romney 2012 Presidential Campaign William Hagerty Director of Appointments

National Security Advisor Mike Rogers • House Intelligence Committee Chairman (role not finalized)

Sources: Josh Rogin, “Top Corker Aid Joins Trump Transition Team,” The Washington Post, August 3, 2016; Zeke Miller, Donald Trump and Hillary Clinton Campaigns Invited to White House Transition Meetings,” Time, July 29, 2016; Rebecca Savransky, “Rogers to Play Senior Role on Trump Transition Teams: Report,” The Hill. August 16, 2016 | Owen Minott Jr. 105

Rural vs. Urban Congressional Districts

Rural 34 (7.8%)

Greater than 50% Rural Population Greater than 50% Urban Population Urban 401 (92.2%)

Figure 1 Source: 2010 U.S. Census Data

Rural vs. Urban Congressional Districts

Rural 34 (7.8%)

Urban More than 90% Urban Population 194 Less than 90% Urban Population Urban/Rural (44.6%) 207 More than 50% Rural Population (47.6%)

Figure 2 Source: 2010 U.S. Census Data Rural vs Congressional Districts

Rual 34 7.8%

Urban/Rural More than 80% Urban 147 Mostly Urban Urban and Rural Mix 33.8% 254 More than 50% Rural 58.4%

Figure 3 Source 2010 U.S. Census

Congressional Farmer Cooperative Caucus

Membership: Rep. Sam Graves (R-MO), Co-Chair Senator Amy Klobuchar (D-MN), Co-Chair Rep. Jim Costa (D-CA), Co-Chair Senator John Thune (R-SD), Co-Chair House (51 44): Senate (15): Rep. Rod Blum (R-IA) Rep. Frank Lucas (R-OK) Senator Thad Cochran (R-MS) Rep. Cheri Bustos (D-IL) Rep. Blaine Luetkemeyer (R-MO) Senator Michael Crapo (R-ID) Rep. Mike Bost (R-IL) Rep. Betty McCollum (D-MN) Senator Dick Durbin (D-IL) Rep. Mike Conaway (R-TX) Rep. Kristi Noem (R-SD) Senator Michael Enzi (R-WY) Rep. Jim Costa (D-CA) Rep. Devin Nunes (R-CA) Senator Deb Fischer (R-NE) Rep. Joe Courtney (D-CT) Rep. Mike Pompeo (R-KS) Senator Al Franken (D-MN) Rep. Kevin Cramer (R-At Large ND) Rep. Collin Peterson (D-MN) Senator Charles Grassley (R-IA) Rep. Rick Crawford (R-AR) Rep. Joseph Pitts (R-PA); Retired Senator Heidi Heitkamp (D-ND) Rep. Henry Cuellar (D-TX) Rep. Reid Ribble (R-WI); Retired Senator Amy Klobuchar (D-MN) Rep. Rodney Davis (R-IL) Rep. Todd Rokita (R-IN) Senator Jerry Moran (R-KS) Rep. Jeff Denham (R-CA) Rep. Gregorio Sablan (D-MP) Senator Michael Rounds (R-SD) Rep. Tammy Duckworth (D-IL); Senate Rep. Bill Shuster (R-PA) Senator Charles Schumer (D-NY) Rep. Stephen Fincher (R-TN); Retired Rep. Michael Simpson (R-ID) Senator Debbie Stabenow (D-MI) Rep. Bill Flores (R-TX) Rep. Adrian Smith (R-NE) Senator John Thune (R-SD) Rep. Jeff Fortenberry (R-NE) Rep. Marlin Stutzman (R-IN); Primary Senator Roger Wicker (R-MS) Rep. Bob Gibbs (R-OH) Rep. Mike Thompson (D-CA) Rep. Sam Graves (R-MO) Rep. Fred Upton (R-MI) Rep. Vicky Hartzler (R-MO) Rep. David Valadao (R-CA) Rep. Tim Huelskamp (R-KS); Primary Rep. Greg Walden (R-OR) Rep. Bill Huizenga (R-MI) Rep. Tim Walz (D-MN) Rep. Lynn Jenkins (R-KS) Rep. Kevin Yoder (R-KS) Rep. Marcy Kaptur (D-OH) Rep. David Young (R-IA) Rep. Ron Kind (D-WI) Rep. Steve King (R-IA) Rep. Adam Kinzinger (R-IL) Rep. John Kline (R-MN); Retired Rep. Rick Larsen (D-WA) Rep. Dave Loebsack (D-IA) Rep. Billy Long (R-MO)

I. Purpose: Provide a forum for Members of Congress interested in working together in support of public policy and programs to protect and enhance the ability of farmers to join together to form cooperative associations to improve their income from the marketplace, manage risk, and strengthen their bargaining power, allowing individual producers to better compete globally.

II. Goals: Promote greater awareness and understanding of farmer cooperatives and their importance as a proven tool to help individual family farmers and ranchers through the ups and downs of weather, commodity markets, and technological change and provide timely analysis and other information on economic and market trends, including existing and proposed laws and regulations impacting farmer cooperatives and the ability of farmer to form cooperative associations.

III. Membership: Bicameral and bipartisan.

IV. Officers: Co-Chair: Senator Amy Klobuchar Co-Chair: Senator John Thune Co-Chair: Representative Sam Graves Co-Chair: Representative Jim Costa

V. Designated Employee(s): Anne Knapke (Office of Senator Klobuchar) (202) 224-3244 Lynn Tjeerdsma and Ty Littau (Office of Senator Thune) (202) 224-2321 Andrew Fisher (Office of Represenative Graves) (202) 225-7041 Donald Grady (Office of Repepresenative Costa) (202) 225-3341

TO: NCFC COUNCIL

FROM: NCFC STAFF

DATE: November 4, 2016

BEGINNING BALANCE: NCFC CO-OP/PAC began the year and the second half of the 2015-2016 Election Cycle with a balance of $26,403.48.

RECIEPTS: As of October 31, 2016, contributions to the PAC total $107,907.00. Individual and member PAC contributions account for $72,907.00 and $35,000.00 of the total, respectively.

The annual goal for the PAC, agreed upon by the NCFC CO-OP/PAC Steering Committee, is $275,500. The PAC reached 39 percent of the goal after ten months of fundraising.

The PAC will host the 6th Annual NCFC CO-OP/PAC Live & Silent Auction fundraiser at NCFC’s Annual Meeting in February. A request for live and silent auction item donations will be circulated next month.

DISBURSEMENTS: Since January 1, 2016, the PAC has supported 28 members of Congress for reelection in 2016 for a total of $63,500.00 in contributions to candidates. Other expenses incurred by the PAC include a combined total of $1,975.21 for account analysis and merchant service fees and $13,262.67 1/3 rule reimbursement to NCFC for silent and live auction at the annual meeting.

ENDING BALANCE: As of October 31, 2016, the PAC had an ending balance of $55,572.60. We look forward to working with you to reach the PAC’s fundraising goals in 2016. Thank you to all who support NCFC CO-OP/PAC!

FINANCIAL STATEMENT Oct-16

Beginning Balance $ 26,403.48

Receipts Contributions from Individuals $ 72,907.00 Contributions from Federal PACs $ 35,000.00 Refunds Other Receipts

$ 107,907.00

Disbursements Contributions to Federal Candidates $ 63,500.00 Operating Expenses $ 1,975.21

1/3 rule - reimburse for silent auction $ 13,262.67

$ 78,737.88

Ending Balance $ 55,572.60

2016 Disbursement List Date Amount Committee Name State Election Period Party 02/04/2016 $2,500.00 Mike Thompson For Congress CA Primary 2016 Democratic 02/25/2016 $1,000.00 Peterson For Congress MN General 2016 Democratic 02/25/2016 $1,000.00 Gibbs For Congress OH General 2016 Republican 02/25/2016 $1,000.00 Blaine For Congress MO Primary 2016 Republican 02/25/2016 $1,000.00 Friends of Kip Tom IN Primary 2016 Republican 02/25/2016 $1,500.00 Gibbs For Congress OH Primary 2016 Republican 02/25/2016 $1,000.00 Mike Bost For Congress Committee IL Primary 2016 Republican 03/09/2016 $1,000.00 Young For Iowa, Inc. IA General 2016 Republican 03/14/2016 $1,000.00 Marcia Fudge for Congress OH Primary 2016 Democratic 03/21/2016 $1,000.00 Conaway For Congress TX General 2016 Republican 03/21/2016 $1,000.00 Graves For Congress MO Primary 2016 Republican 03/21/2016 $1,000.00 Valadao For Congress CA Primary 2016 Republican 04/05/2016 $1,000.00 Deb Fischer for US Senate Inc. NE Primary 2016 Republican 04/05/2016 $1,000.00 Volunteers for Shimkus IL Primary 2016 Republican 04/19/2016 $1,000.00 Walorski for Congress Inc. IN Primary 2016 Republican 05/17/2016 $1,000.00 Tom Rooney for Congress IL Primary 2016 Republican 06/07/2016 $1,000.00 RODNEY FOR CONGRESS IL General 2016 Republican 06/08/2016 $1,000.00 Tim Walz For Us Congress MN Primary 2016 Democratic 06/08/2016 $1,000.00 HEIDI FOR SENATE ND Primary 2018 Democratic 06/08/2016 $1,000.00 Mike Rogers For Congress AL General 2016 Republican 06/16/2016 $2,500.00 Moran for Kansas KS Primary 2016 Republican 06/16/2016 $2,500.00 Volunteers For Shimkus IL General 2016 Republican 06/16/2016 $2,500.00 MARCIA FUDGE FOR CONGRESS OH General 2016 Democratic 06/21/2016 $1,000.00 Hoeven for Senate ND General 2016 Republican 06/28/2016 $1,000.00 MOBROOKSFORCONGRESS.COM AL General 2016 Republican 07/11/2016 $1,000.00 Walberg For Congress MI General 2016 Republican 07/11/2016 $1,000.00 DAVID ROUZER FOR CONGRESS NC General 2016 Republican 07/11/2016 $1,500.00 Peterson For Congress MN General 2016 Democratic 07/21/2016 $1,000.00 ELISE FOR CONGRESS NY General 2016 Republican 09/02/2016 $1,000.00 KANSANS FOR MARSHALL KS General 2016 Republican 09/09/2016 $2,500.00 JIMMY PANETTA FOR CONGRESS CA General 2016 Democratic 09/09/2016 $1,000.00 TEXANS FOR JODEY ARRINGTON TX General 2016 Republican 09/16/2016 $1,000.00 Friends of Todd Young, Inc. IN General 2016 Republican 09/16/2016 $5,000.00 Lucas for Congress OK General 2016 Republican 09/16/2016 $1,000.00 Graves for Congress MO General 2016 Republican 09/16/2016 $1,000.00 Hatch Election Committee UT General 2016 Republican 09/16/2016 $1,000.00 LaHood for Congress IL General 2016 Republican 09/16/2016 $1,000.00 Mike Bost for Congress Committee IL General 2016 Republican 09/16/2016 $1,000.00 McHenry for Congress NC General 2016 Republican 09/16/2016 $4,000.00 Boozman for Arkansas AR General 2016 Republican 09/16/2016 $1,000.00 Blaine for Congress MO General 2016 Republican 09/21/2016 $1,500.00 LaHood for Congress IL General 2016 Republican 09/26/2016 $1,000.00 Dan Newhouse for Congress WA General 2016 Republican 09/26/2016 $1,000.00 Adrian Smith for Congress NE General 2016 Republican 10/14/2016 $2,500.00 Jim Costa for Congress CA General 2016 Democrat 10/21/2016 $1,000.00 Grassley Committee IA General 2016 Republican TOTAL $63,500.00

NATIONAL COUNCIL OF FARMER COOPERATIVES NCFC CO-OP/PAC

SOLICITATION APPROVAL FORM

NCFC CO-OP/PAC is the political action committee of the National Council of Farmer Cooperatives. It helps make sure you have a strong and effective voice on legislative and regulatory issues affecting your cooperative and its farmer owners.

PLEASE COMPLETE AND RETURN BY FAX 202-626-8722 or E-mail to [email protected]

YES. As a member of NCFC, I hereby authorize NCFC CO-OP/PAC to solicit voluntary contributions on behalf of its activities for the following calendar year(s) as indicated by my signature below. I understand solicitation requests will be directed to me and/or any other eligible personnel as I may designate.

Name: ______

Title: ______

Organization: ______

Phone: ______Fax: ______

Email: ______

*** SIGNATURE REQUIRED FOR EACH YEAR AUTHORIZED ***

2016: 2017: 2018: 2019:

*** IMPORTANT ***

This form is not a solicitation. Federal Election Commission regulations require your prior written approval as a corporate member before we can solicit you or any of your eligible personnel on behalf of NCFC CO-OP/PAC. Your approval does not obligate you or anyone in your organization to contribute to NCFC CO-OP/PAC. It also does not limit your activities in support of your own PAC, political candidates or parties. Eligible personnel may include your executive and administrative personnel, stockholders/members, including directors, and their families. Approval may be provided for multiple years. A corporate member may approve only one trade association federal PAC per year. Contributions to NCFC CO-OP/PAC are strictly voluntary.

SUPPORT THE NATIONAL COUNCIL OF FARMER COOPERATIVES

NCFC is the ONLY trade association organized and dedicated to represent and promote the interests of America’s farmer-owned cooperatives!

YOU CAN NOW JOIN NCFC AS AN INDIVIDUAL MEMBER IN ADDITION TO YOUR COOPERATIVE FOR JUST $25 ANNUALLY

When you join NCFC you gain a powerful voice on issues affecting your business. Individual membership allows participation in exclusive events at the Annual Meeting and Washington Conference, including NCFC CO-OP/PAC auction and sweepstakes events. As a member, you will receive NCFC’s weekly e-newsletter -- the NCFC Update -- which is sent out every Friday and recaps the important events happening here in Washington and across the country pertaining to farmer cooperatives. Additionally, you will receive the NCFC Annual Report, updates on legislative and regulatory issues, and advance notice of NCFC meetings and events. To be eligible for individual membership, you must be an employee, director or farmer-member of an NCFC member organization. ------

___ YES! I WANT TO SUPPORT NCFC AS AN INDIVIDUAL MEMBER (You must be an Employee, Director or Farmer Member of an NCFC Member Organization)

Name: ______

Title: ______

Organization: ______

Address: ______

City: ______State: ______ZIP: ______

Phone: ______Email: ______

Type of Payment (Check One): ___ Personal Check ____ MasterCard ____ VISA

Amount to be charged: $25.00

Credit Card Number: ______Date of Expiration: ____/_____

Signature: Date: / /

Check Here if You Prefer to be Invoiced: ______

Return to: National Council of Farmer Cooperatives 50 F St. NW, Suite 900 Washington, DC 20001 Fax: (202) 626-8722 Bioengineering Disclosure Law Implementation

MEMORANDUM

TO: NCFC Government Affairs Committee FROM: NCFC STAFF DATE: 11/8/2016 RE: NATIONAL BIOENGINEERING DISCLOSURE BILL

SUBJECT: Next Steps for Implementing the National Bioengineering Disclosure Bill

Following the final passage of the Bioengineering Disclosure bill, the steering committee of the Coalition for Safe Affordable Food met to discuss the Coalition’s strategy and coordinated next steps for the National Bioengineering Disclosure Bill rulemaking process. Members of the Coalition agreed to maintain a unified voice throughout the rulemaking process and provide industry-backed comments to the U.S. Department of Agriculture as it decides how to implement the new law.

To facilitate the coordinated effort, the Committee outlined six working groups to focus on different aspects of the process.

• Disclosure – statements, font size, placement and appearance for text, symbol, electronic disclosure. Small business requirements, restaurant or similar establishment definition • Scope – definitions (e.g. “bioengineered food”), de minimis threshold, absence claims, process for exceptions • Technological Challenges, Retailer Study – study of electronic disclosure, additional disclosure options • Organic Consistency – No specific requirement on USDA, but they are directed to consider establishing consistency with the National Organic Program. Potential implications could include, but not limited to, negative claims, structure of program, scope, and exceptions • Recordkeeping – Impact of recordkeeping requirements on supply chain • Communications – Nomenclature, messaging, stakeholder sessions NCFC co-chairs the Communications group and will actively participate in the Disclosure, Scope, and Recordkeeping working groups. More information about the scope of each group follows this memo.

Anticipated Timeline for Implementation Mid-November 2016 • Coalition Working Groups will meet again to discuss unresolved issues or areas where further consensus building may be necessary. o By the time the ANPR is published, each Working Group will have identified all key anticipated issues and developed recommended positions on each.

Late November 2016 • Release of Advanced Notice of Proposed Rulemaking (ANPR) o The Coalition Steering Committee will assign questions/issues from the ANPR to respective Working Groups for consideration. o NCFC will convene an internal review team to review questions posed in the ANPR. • Announcement of 4-6 USDA regional stakeholder meetings and 2 virtual meetings o The Communications Working Group will develop messaging that can be shared with Coalition partners, NCFC members and congressional allies, to be used during the meetings. • Third-party bids for retailer study due November 22nd

December 2016 – February 2017 • 4-6 Regional stakeholder meetings and 2 virtual meetings o The Steering Committee will identify speakers for the public meetings from each key segment of the industry, based on the issues agreed upon by the Steering Committee. o The Communications Working Group will coordinate messaging, speaker scripts, media outreach, and Coalition press statements. Messaging will be disseminated to Coalition partners. • ANPR comment period (60-day minimum) o Coalition lawyers will draft comments based on a core issues document approved by the Steering Committee. o Communications Working Group will develop and disseminate comment/letter templates to encourage individuals to submit comments. o Coalition members will brief congressional staff on Coalition positions and issues throughout the ANPR/listening session period.

May 2017 • Results of retailer study submitted to USDA

July 2017 • Retailer study submitted to Congress and formally published

July 2018 • Final rule published

Coalition Working Groups for Bioengineering Disclosure Rulemaking and Implementation

*** CONFIDENTIAL ***

Coalition Working Groups

1. DISCLOSURE Co-Chairs: American Beverage Assn. & Grocery Manufacturers Assn. Section 293(b)(2)(D) requires that the form of food disclosure under the Act be by “text, symbol, or electronic or digital link . . . with the disclosure option to be selected by the food manufacturer.” Regulations are expected to specify textual statements, font size requirements, the appearance of the symbol and other matters regarding the disclosure.

2. SCOPE Co-Chairs: Biotechnology Innovation Organization & American Farm Bureau Federation a. General Authority, Scope. Section 293(a)(2) requires USDA to establish the “requirements and procedures” that “the Secretary determines [are] necessary to carry out” the national mandatory bioengineered food disclosure standard. This provision appears to be a relatively broad grant of authority. While it will likely provide the general authority for USDA to develop the regulatory framework for the labeling standard, USDA could also conceivably rely on this authority to more clearly define the scope of the program.

b. De Minimis, Scope. Section 293(b)(2)(B) provides that the regulations promulgated by USDA must “determine the amounts of a bioengineered substance that may be present in food, as appropriate, in order for the food to be a bioengineered food.” As noted above, the federal GE law defines the term “bioengineering” (with respect to food) as a food “(A) that contains genetic material that has been modified through in vitro recombinant deoxyribonucleic acid (DNA) techniques; and (B) for which the modification could not otherwise be obtained through conventional breeding or found in nature.” While the statute does not appear to explicitly apply to foods such as highly refined oils that were made from a GE source (e.g., GE corn) but in which there is no GE protein present in the oil, USDA indicated in its technical assistance to Congress that it has already concluded the law provides it with the authority to regulate such products (USDA specifically identified highly refined sugars and oils, as well as “the whole host of products derived with traditional gene modification (having gone through the USDA de-regulation process, like corn, soybeans, sugar, and canola) and those derived with gene editing and RNA interference.”).

We expect that, through rulemaking, USDA will clarify whether such foods are “bioengineered food” subject to the mandatory disclosure requirement.

c. Scope, Microorganisms, Processing Aids. Under section 293(b)(2)(C), the regulations must “establish a process for requesting and granting a determination by the Secretary regarding other factors and conditions under which a food is considered a bioengineered food.” Taken together with section 293(a)(2), this provision could be read to not only require that USDA establish procedural requirements for determining the bioengineered status of a food, but also to permit USDA to establish, by regulation, other factors and conditions under which a food is considered a bioengineered food. Thus, it appears that the rulemaking process may be an opportunity for USDA to expand the definition of “bioengineered food” and/or to establish additional exemptions from the mandatory bioengineered food disclosure standard. For example, under section 293(b)(2)(A), the regulations must prohibit an animal-derived food from being considered bioengineered “solely because the animal consumed feed produced from, containing, or consisting of a bioengineered substance.” USDA arguably has the discretion to extend this exemption, through regulation, to microorganisms that themselves are not bioengineered but that consume bioengineered feed. In addition, section 293(b)(2)(C) appears to authorize the Secretary to establish that certain types of foods that meet the definition of “bioengineered food” but that some may argue should be exempt from the disclosure requirement (e.g., processing aids produced with GE) will not be considered “bioengineered food” subject to the disclosure requirement.

d. Small Packages. Section 293(b)(2)(E) requires that the regulations “provide alternative reasonable disclosure options for food contained in small or very small packages.” Thus, USDA must define (1) what constitutes a “small or very small package”; and (2) what will be considered an “alternative reasonable disclosure option” for such packages.

e. Small and Very Small Manufacturer. The regulations must exclude very small food manufacturers and allow small food manufacturers at least an additional year to comply with the regulations. Therefore, USDA must (1) define “very small food manufacturer” and “small food manufacturer”; and (2) establish a delayed compliance date for small food manufacturers.

f. Restaurants. Section 293(b)(2)(G)(i) provides that the regulations must exclude food served in “a restaurant or similar retail food establishment.” Given this, USDA will likely need to define “restaurant or similar retail food establishment” for the purposes of this program, which could be through cross-reference to an already established definition.

3. STUDY TECHNOLOGICAL CHALLENGES Co-chairs: Food Marketing Institute & Grocery Manufacturers Association By July 2017, USDA must conduct a study to identify potential technological challenges that may impact whether consumers would have access to the bioengineering

disclosure through electronic or digital disclosure methods. In conducting this study, USDA must solicit and consider comments from the public. Further, if USDA determines that the study results suggest that consumers would not have sufficient access to the disclosure through electronic or digital disclosure methods while shopping, USDA, after consultation with food retailers and manufacturers, must provide “additional and comparable options” to access the disclosure.

4. ORGANIC CONSISTENCY Co-chairs: Corn Refiners Association & National Milk Producers Federation Section 293(f) directs USDA to consider establishing consistency between (1) the national bioengineered food disclosure standard; and (2) the National Organic Program (NOP), including any rules or regulations implementing the NOP. While USDA rulemaking thus will likely address this issue, USDA is not required to ensure consistency with the NOP.

5. RECORDKEEPING Co-chairs: National Grain and Feed Assn. & National Corn Growers Assn. Section 293(g)(2) authorizes USDA to impose recordkeeping requirements, through rulemaking, that USDA determines are “customary or reasonable in the food industry” to establish compliance with the disclosure standard.

6. COMMUNICATIONS Co-chairs: National Council of Farmer Co-ops & American Soybean Assn. A. Nomenclature: With the enactment of the new law, it is appropriate to reset nomenclature regarding the issue. We propose to discontinue use of “GMO” and “genetic modification” or alternative forms of that term as it is both inaccurate and inconsistent with the nomenclature of the new law. Instead, nomenclature should be consistent with the new law to communicate clearly and avoid confusion. B. Messaging/Common Objectives i. Food Industry (and Supply chain) vs. Opposition a. Potential Message of CSAF: GE use should be disclosed transparently, but in a non-disparaging manner. b. How Opposition is likely to define us: Food industry should disclose GE ingredients on the package. Anything short of an on pack GE label disclosure is viewed as hiding the facts from consumers. ii. Identify coalition common objectives a. Where can we advocate together on the broad themes and details of the rulemaking? iii. CSAF should be aggressive in defining ourselves and our opposition (some sample messaging below). a. Messaging could be reframed to make clear CSAF favors transparency, but opposes disparagement.

b. Because the food industry is about respecting and responding to consumer preferences, the issue could be about how to inform consumers without misleading, not whether food industry can “hide behind a scan code.” c. This messaging could include discussion of the advantages of biotechnology use. d. Potential recognition that GE labels are not about disclosure, but about profit margin to a certain segment of the food industry. C. Public Relations i. Proactive Coalition Messaging throughout rulemaking period. a. Development of credible spokespersons. b. Affirmative public messaging campaign to explain why GE ingredients are used in foods. a. Identification of market segments with GE food interest and credible spokespersons to target each. b. Scientific or other reports (consumer perception data, economic analyses) that may serve as earned media that influence development of proposed rule, as well as evidence for the rulemaking record. ii. Rapid Response to Opposition Messaging, including contingency planning for opposition messaging, throughout the rulemaking period. a. Example: Just Label It is already working to discredit the scan code option and cause it to be interpreted as a symbol for use of GE ingredients. CSAF could potentially work on aggressive responses to such situations and use them as a way to inform about the benefits of the scan code.

*** CONFIDENTIAL ***

Bioengineering Disclosure

NCFC Position: NCFC opposes mandatory labeling of food products containing biotech ingredients. The technology behind genetically modified organisms (GMO) in agriculture is proven safe for the environment and consumers, and is key to increasing food production necessary to feed a rapidly growing global population. Acceptance by consumers depends on a continued effort to better inform the public about the environmental and health benefits this technology provides. Current Status: For two years, the Coalition for Safe Affordable Food (CFSAF), co-chaired by NCFC and the Grocery Manufacturers Association, worked closely with members of the House and Senate to produce a bill that preempts state mandated GMO labeling laws while providing more information for consumers wanting to know more about biotechnology-derived food ingredients. On July 23, 2015, the House of Representatives passed H.R. 1599, the Safe and Accurate Food Labeling Act, which preempted state laws and established a voluntary labeling program overseen by the U.S. Department of Agriculture (USDA). With a looming deadline of July 1, 2016, when the state of Vermont’s mandatory labeling law was set to take effect, attention was shifted to the Senate to pass similar legislation. Senators Pat Roberts (R-KS) and Debbie Stabenow (D-MI), Chair and Ranking Member of the Senate Agriculture Committee, worked closely over the next year to come up with their own agreement to garner 60 votes in the Senate. After consideration of several iterations of a bill, on July 7, 2016, the Senate passed a bioengineering disclosure agreement (S. 764) with a strong bipartisan vote of 63 yeas to 30 nays. A week later, the House of Representatives took up the same measure and passed it by a vote of 306 yeas to 117 nays. The President signed the bill into law on July 29, 2016. Key provisions of the final agreement include: • Pre-emption: immediately prohibits states or other entities from mandating labels of food or seed that is genetically engineered. • National Uniform Standard: the U.S. Department of Agriculture establishes through rulemaking a uniform national disclosure standard for human food that is or may be bioengineered. • Disclosure: requires mandatory disclosure with several options, including text on package, a symbol, or a link to a website (QR code or similar technology); small food manufacturers will be allowed to use websites or telephone numbers to satisfy disclosure requirements; very small manufacturers and restaurants are exempted. • Meat: foods where meat, poultry, and egg products are the main ingredient are exempted. The legislation prohibits the Secretary of Agriculture from considering any food product derived from an animal to be bioengineered solely because the animal may have eaten bioengineered feed.

The Coalition is working closely with USDA during the implementation process and will provide comments throughout the rulemaking. The bill directs USDA to establish a national mandatory bioengineered food disclosure standard by July 2018. Background: A new biotechnology food that is “substantially equivalent” (meaning it has the same chemical composition and nutritional value as conventional varieties) does not require a special label. The FDA regulations state that requiring the labeling of foods that are indistinguishable from foods produced through traditional methods would mislead consumers by falsely implying differences where none exist. And according to the 2012 Consumer Survey by the International Food Information Council (IFIC), U.S. consumers overwhelmingly support current federal rules for labeling foods. Of the small percentage of consumers who want more detail on their labels, only three percent (or one percent of the total sample) cited biotechnology as information they would like to see on food labels. The 2012 defeat of California’s ballot initiative, Proposition 37, to mandate the labeling of food products containing biotech ingredients was only the beginning of an onslaught of similar legislative state initiatives. Almost a year later, a comparable proposal in Washington State was on the ballot and also defeated by a narrow margin. Yet, some states have been successful in banning or mandating the labeling of genetically modified products. In June 2013, Connecticut’s Governor signed the country’s first comprehensive food labeling law requiring a label be placed on all products meant for human consumption that contain GMO ingredients. Maine followed shortly after and passed a comparable law. Both pieces of legislation have trigger clauses that will only allow the laws to take effect after four neighboring states enact similar labeling requirements. Vermont lawmakers passed a mandatory GMO labeling bill in April 2014 and it was signed soon after by Vermont Gov. Peter Shumlin. The Vermont GMO labeling legislation is the first in the nation to be passed without trigger clauses similar to those found in bills passed by Connecticut and Maine.The Vermont law was set to take effect on July 1, 2016. GMO labeling also was the subject of debate during consideration of the farm bill in 2013. Several amendments were filed in support of GMO labeling, and one requiring labeling of all GMO products was voted on. The amendment offered by Sen. Bernie Sanders of Vermont failed by a vote of 27 to 71, sending a clear signal that this issue was not supported by an over-whelming majority of the United States Senate.

November 2016

LEGAL, TAX AND ACCOUNTING COMMITTEE REPORT

TO: NCFC Government Affairs Committee FROM: Marlis Carson DATE: November 15, 2016

Antitrust Developments

District Court Rules Egg Cooperative Has Non-Producer Member, Does Not Qualify for Capper-Volstead. A U.S. District Court has ruled that United Egg Producers does not qualify for Capper-Volstead antitrust protections because one of its members did not own the farms where its eggs were produced. The court noted that although the member was involved in the husbanding of chickens, and even owned some chickens, those factors were not enough to establish that the member is a “producer” for purposes of Capper-Volstead.

Beginning in 2008, several class action antitrust lawsuits were filed against egg producers and against cooperative United Egg Producers. Among the complaints was an allegation that the egg producers engaged in supply management by increasing the size of chicken cages and thus reducing the number of egg-producing chickens. UEP raised Capper- Volstead as a defense.

In granting summary judgment for the plaintiffs, the district court cited National Broiler Marketing Association v. United States, in which the Supreme Court concluded that packers or processors are not farmers within the meaning of the Capper-Volstead Act. The court in the UEP case reasoned that members of a cooperative “who neither own breeder flocks nor maintained facilities at which their flocks were raised, were not producers for purposes of Capper-Volstead.”

UEP argued that National Broiler should not apply, contending that the member in question was engaged in several aspects of production, including working with farms to select the breed of layers, determining when to put the flocks in place, and ensuring compliance with animal welfare and food safety regulations.

The ruling is troubling because the court has concluded that the cooperative’s member “was not a statutory producer,” even though the Capper-Volstead Act does not state that farm ownership is a requirement for qualifying for the Act’s protections. Instead, the Act states that “[p]ersons engaged in the production of agricultural products” may join

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together in associations and receive antitrust protections. The question of who qualifies as a “producer” is complex and unsettled, a point argued by UEP and noted in a footnote to the court’s decision.

The result is also concerning because it reflects the district court’s decision in Mushroom Direct Purchaser Antitrust Litigation in which the court concluded that the “existence of even one non-farmer member in an agricultural cooperative is sufficient to destroy Capper-Volstead immunity.” In the mushroom case, a family of growers inadvertently signed up the marketing arm of its operation for membership in the cooperative, instead of its grower entity.

NCFC believes that an administrative error such as the one committed by the mushroom growers should not disqualify the cooperative and its member from Capper-Volstead protections.

The case is In Re: Processed Egg Products Antitrust Litigation, No. 08-md-2002 (E.D. Pa).

CWT Case Settles. Pending final approval by the court, the parties to the Cooperatives Working Together antitrust suit have reached a settlement. Under the terms of the proposed settlement, the members of CWT will pay out $52 million in cash to the settlement class, which consists of all consumers in fifteen states and the District of Columbia who purchased milk and other fresh dairy products from 2003 to the present.

The class action lawsuit was filed in 2011 against the CWT program -- a voluntary, producer-funded national marketing program developed by the National Milk Producers Federation (NMPF) to better align milk supply with milk demand. NMPF, Dairy Farmers of America, Inc., Land O’Lakes, Inc., Dairylea Cooperative, and Agri-Mark, Inc. are named in the suit.

A fairness hearing has been scheduled for December 16. The case is Matthew Edwards, et al. v. National Milk Producers Federation, et al., Case No. 11-CV-04766-JSW (N.D. Cal.)

Tax Developments

Renewable Energy Legislation. House Ways and Means Committee member Charles Boustany (R-LA), has introduced legislation (H.R. 6228) that would extend and expand the alternative fuel and alternative fuel mixture tax credits though 2021. A number of

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agriculture-related tax extender provisions are slated to expire at the end of the year, including provisions for biofuel, renewable diesel, and alternative fuels.

Recently introduced legislation would make biogas and manure resource recovery property eligible for the Section 48(a)(3)(A) 30 percent energy credit and make such properties eligible for financing with clean renewable energy bonds. H.R. 5489 was introduced in the House Ways and Means Committee and the Committee on Space, Science and Technology. However, House Ways and Means Committee Chairman Kevin Brady, R-Texas, has expressed reluctance to revisit this and other “extenders” provisions this year. NCFC is participating in a broad-based tax extender coalition and is urging Congress to act on extenders during the lame duck session.

Agriculture-related provisions expiring December 31, 2016, include:

• Second generation biofuel producer credit (Section 40(b)(6)(J)). • Income tax credits for biodiesel fuel, biodiesel used to produce a qualified mixture, and small agri-biodiesel producers (Section 40A). • Income tax credits for renewable diesel fuel and renewable diesel used to produce a qualified mixture (Section 40A). • Excise tax credits and outlay payments for biodiesel fuel mixtures (Sections 6426(c)(6) and 6427(e)(6)(B)). • Excise tax credits and outlay payments for renewable diesel fuel mixtures (Sections 6426(c)(6) and 6427(e)(6)(B)). • Special depreciation allowance for second generation biofuel plant property (Section 168(l)). • Excise tax credits and outlay payments for alternative fuel (Sections 6426(d)(5) and 6427(e)(6)(C)). • Excise tax credits for alternative fuel mixtures (Section 6426(e)(3)).

Proposed Changes to Estate Tax Regulations. The IRS recently issued proposed regulations that could increase the estate tax associated with some transfers of family- held businesses by modifying valuation rules. The proposed regulations are designed to address abusive tax avoidance arrangements, but may have the effect of impacting bona fide business transactions and may be beyond the authority Congress granted to Treasury. The proposed regulations will impact estates with valuations in excess of the $5.45

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million estate tax exemption ($10.9 million for couples). NCFC joined with the Agriculture Tax Coalition and other groups to submit comments opposing the proposed regulations. As of the November 2 deadline, more than 9,000 comment letters had been submitted.

NCFC Requests IC-DISC Guidance. NCFC has submitted to Treasury two draft forms of administrative guidance that would clarify and simplify the rules relating to farmer cooperatives’ use of Interest-Charge Domestic International Sales Corporations (IC- DISCs). By using an IC-DISC, farmers can receive the lower capital gains tax rate on exported products. Treasury has not yet responded to the request. Members of the House and Senate taxwriting committees will be sending letters of support to Treasury on NCFC’s behalf.

Republicans Release Outlines of Tax Reform Plan. House Republicans have released a tax reform “blueprint” as part of GOP campaign platform. The plan would repeal the Section 199 deduction; create a new tax rate of 25 percent on pass-through entities; and lower the corporate rate to 20 percent. Republicans plan to develop the plan during the first half of 2017 and produce legislation by year-end.

Human Resources Developments

States Challenge New DOL Overtime Rules. A group of 21 states and a coalition of business groups recently filed suits in the Eastern District of Texas challenging the U.S. Department of Labor’s overtime exemption rule changes, slated to go into effect December 1, 2016. The parties argue DOL overstepped its authority to establish a federal minimum salary level for white collar workers. The new overtime rule more than doubles the salary threshold (up to about $47,500) under which workers are entitled to overtime pay.

NCFC opposes the new rule and submitted comments last fall pointing out that numerous unintended consequences will result if the rule goes into effect. For example, the reclassification of employees from hourly to salaried could lead to the loss of benefits, flexibility, and incentive compensation options. Reclassification for certain positions will also require employers to track overtime for these jobs, leading employers to limit flexible work options which greatly benefit employees and their families. The cases are Nevada v. Labor Dept., E.D. Tex., No. 4:16-cv-00731 and Plano Chamber of Commerce v. Perez, E.D. Tex., No. 4:16-cv-00732.

Tax Reform Outlook: House GOP and Trump Proposals Topic House GOP Plan Donald Trump Proposal Business Reform Corporate Rate 20% 15%, although he has indicated 20% might be more appropriate. Pass-Through Maximum 25% Originally he recommended a 15% pass- Rate through rate, but he has now potentially rescinded that proposal and suggest that pass-throughs would have to become corporations for the 15% rate. Cost Recovery Shifts to full expensing of capital Manufacturers will have access to investments. immediate expensing, but must forgo interest deductibility to receive the expensing benefit. Treatment of Interest Eliminates deduction for net interest, Phases in a "reasonable cap" on the but net interest expense may be deductibility of interest. carried forward indefinitely, allowed as a deduction against new interest income in future years. AMT Repealed Repealed Misc. Provisions Net operating losses would be Retained/Created allowed to be carried forward indefinitely. Last-in, first-out method of accounting would be preserved. Misc. Provisions Repealed Section 199 deduction and all (or Carried Interest. most?) other business tax breaks, except for the research and development tax credit. Individual Reform Rates Establishes three income tax brackets 12%, 25%, 33%. of 12%, 25%, and 33%. Standard Plan would consolidate standard The plan will increase the standard Deduction/Payroll Taxes deduction and personal exemptions deduction for joint filers to $30,000, from into larger standard deduction of $12,600, and the standard deduction for $24,000 for joint filers, $12,000 for single filers will be $15,000. The personal single filers; and $18,000 for single exemptions will be eliminated, as will the individuals with a child in the head-of-household filing status. household. Itemized Deductions Eliminates all itemized deductions, except for mortgage interest and charitable contributions. Capital Gains and Tax capital gains, dividends and other 0%, 15%, 20%, based on income. Repeals Dividends interest as ordinary income, with a the 3.8% net investment tax. 50% exclusion. This exclusion will lead to basic rates of 6%, 12.5% and 16.5%. AMT Repealed Repealed (assumed) Misc. Provisions The plan mentions reducing or eliminating Retained/Created most deductions and loopholes available to the rich while keeping most for the 10% bracket. He specifically mentions carried interest, a steeper PEP and Pease curve, and elimination of the exemption on life insurance interest for high-income earners. Plan would cap itemized deductions at $200,000 for joint filers and $100,000 for single filers. Estate Tax Repealed Repealed, except he eliminates stepped up basis at death.

Revenue Estimates The Tax Foundation determined that The Tax Foundation determined that the the plan would reduce federal tax plan would reduce federal revenue on a revenue on a static basis by $2.4 static basis by between $4.4 trillion and $5.9 trillion over the next decade. On a trillion over the next decade, depending on dynamic basis, the Tax Foundation how a key provision related to pass-through estimates that the House GOP plan taxation is interpreted. On a dynamic basis, would reduce revenue by $191 billion the Tax Foundation estimates that Trump's over the next 10 years. new plan would cost between $2.6 trillion and $3.9 trillion over the next 10 years. The range of cost is due to lack of clarity as to whether Trump's plan offers pass-through businesses access to the lower corporate rate. Prepared by Capitol Tax Partners.

Tax Reform Priorities

NCFC Position: NCFC supports the continuation of Subchapter T of the Internal Revenue Code (the basis for cooperative taxation) and related regulations. NCFC also supports the continuation of the patronage dividend deduction for farmer cooperatives. The deduction is critical for the continued viability of farmer cooperatives. Action: NCFC urges Congress to take into account the unique tax status of farmer cooperatives when developing tax reform proposals. NCFC is concerned that several reform proposals would negatively impact farmer cooperatives, and that a lowered corporate rate would not help to offset those impacts. Current Status: Farmer cooperatives are owned and governed by their farmer members. Earnings from business conducted with or for a cooperative’s members are subject to single tax treatment as income of farmer members, provided the cooperative pays or allocates the earnings to its members. If the earnings are used to support the cooperative’s capital funding or other needs, the earnings are taxed at regular corporate rates when retained and taxed a second time when distributed to the farmer members. Earnings from sources other than business, with or for the cooperative’s members, are taxed at corporate rates. Issues of Concern: NCFC Opposes Repeal of the Section 199 Deduction for Domestic Production Activities Income. The Section 199 deduction was enacted as part of The American Jobs Creation Act of 2004 as a jobs creation measure. The deduction applies to proceeds from agricultural or horticultural products that are manufactured, produced, grown, or extracted by cooperatives, or that are marketed through cooperatives, including dairy, grains, fruits, nuts, soybeans, sugar beets, oil and gas refining and livestock. Cooperatives may choose to keep the deduction at the cooperative level, or pass it through to their farmer members, making it extremely beneficial to both. Section 199 benefits are returned to the economy through job creation, increased spending on agricultural production and increased spending in rural communities. Some have suggested lowering corporate rates to offset the impact of the loss of the deduction. However, because farmer cooperatives’ income is passed through to farmer members, a corporate rate reduction would not benefit cooperatives and their members. NCFC Opposes Repeal of the Deduction for Interest on Debt. Farmers do not have the resources to satisfy all of their cooperatives’ capital needs. As a result, cooperatives in many cases rely on debt to finance growth. The repeal of the deduction for interest on debt would cause harm to farmer cooperatives that are attempting to expand operations. Repeal of the deduction would prevent cooperatives from new hiring, expansion and new product development.

NCFC Opposes Repeal of LIFO Accounting Method. The last-in, first-out (LIFO) accounting method is a widely accepted accounting method and is used by some farmer cooperatives. Taxpayers using LIFO assume for accounting purposes that inventory most recently acquired is sold first. If LIFO is repealed, farmer cooperatives and other businesses would be taxed as though they had sold all of their inventory assets, even though they would have received no cash. Obtaining the funds necessary to pay the tax on this deemed sale would cause severe strain on cooperatives’ capital budgets. Taxation of LIFO reserves would be the equivalent of a retroactive tax on the savings of a cooperative. NCFC Opposes Repeal of Lower of Cost or Market Accounting Method. Using this method, the taxpayer determines an asset’s value using either the original cost or the current replacement cost, whichever is lower. The repeal of this method would harm supply cooperatives because their inventories are comprised largely of commodities susceptible to large variations in value. When commodity prices decline (as in 2009), supply cooperatives must drastically devalue those commodities to reflect a proper carrying value for financial reporting purposes.The repeal of the lower of cost or market accounting method would result in supply cooperatives effectively pre-paying substantially higher income taxes as a result of the disallowed deduction. Key commodities for supply cooperatives include fertilizer; pesticides, herbicides and other agricultural chemicals; grains; feeds; and petroleum products, including diesel, propane and heating oil. NCFC Opposes Elimination of Patronage Dividend Deduction. Patronage refunds are paid out based on the amount of product delivered or business done by the member with the cooperative. For example, a cooperative receives product grown by the farmer-member and makes an advance payment. Following the sale of the product, the cooperative makes an additional payment reflecting the profit made on the sale. Under well-accepted tax principles, the total business expense deduction taken by the cooperative should include both the advance payment and the patronage dividend. Eliminating the patronage dividend deduction would contradict long-held principles of tax fairness. Farmer Cooperatives Should Not Be Treated as “Passthrough” Entities. While cooperative earnings are distributed to member-patrons and taxed at the patron level, cooperatives should not be viewed in the same category as partnerships, S corporations, LLCs, or other passthrough entities. Farmer cooperatives are owned and governed by their farmer members and “stand in the shoes” of their members. Farmer cooperatives generate jobs in rural communities and contribute to the economy in all sectors of agriculture and in all geographic regions of the United States. Farmer cooperatives enable their farmer members to bargain for better prices for their products and more favorable terms from their input suppliers. Earnings from those activities should be taxed only once – at the farmer level.

November 2016

NCFC Position: NCFC is the industry leader in support of the protections afforded by the Capper-Volstead Act’s limited antitrust immunity for farmers and their cooperatives. Such protections are essential to maintaining and promoting the economic well-being of farmers, ensuring access to competitive markets and helping capitalize on market opportunities. Action: NCFC urges Congress and the Administration to support and maintain the crucial protections provided by the Capper- Volstead Act. Without those protections, many farmer cooperatives would cease to exist and the farmers and communities they serve would suffer irreparable harm. Current Status: The Capper-Volstead Act and farmer cooperatives are under threat in ongoing civil suits involving potato, dairy, mushroom and egg cooperatives. The Department of Justice has said enforcement may be stepped up, or the Department may recommend a legislative change to Capper-Volstead, depending on the outcomes of these cases. In each case, plaintiffs seek to diminish the ability of farmer cooperatives to manage the delivery of their products. Also at issue is the ability of farmers and their cooperatives to vertically integrate the production of a product – a vital aspect of modern agriculture. The outcome of these costly lawsuits may be economically devastating and could create tremendous uncertainty for farmers and their cooperatives, employees, suppliers, lenders and customers, as well as for rural communities. Diminishment of the limited immunity provided under the Act would result in less, rather than more, competition by removing farmers’ ability to have some market power in an economy dominated by large companies. Background: Congress passed the Capper-Volstead Act in 1922, giving farmers and ranchers the legal right to join together in cooperative associations. The Capper-Volstead Act gives agricultural producer organizations limited antitrust immunity “in collectively processing, preparing for market, handling, and marketing” their products and permits such organizations to have “marketing agencies in common.” The protections provided by the Capper-Volstead Act are essential to the economic well-being of farmers in today’s economy, and without them farmers could be subject to criminal antitrust violations. Without the Capper-Volstead Act, family farmers would not be able to compete due to their lack of bargaining power in dealing with relatively few, large buyers, and would lack the ability to integrate into agricultural processing to compete with those entities. As a protection against potential monopolistic activity, the Act gives the Secretary of Agriculture authority to prevent cooperatives from using their market power to unduly enhance the price of the products they market. November 2016

Criteria for the Field Guide:

• Relevant across the range of cooperative business models, scale of operations and level of engagement in sustainability programs • Provides useful information for cooperatives considering or beginning sustainability programs • Reflects NCFC sustainability principles and unique nature of co-ops • Consistent with already existing co-op sustainability programs • Compatible with other sustainability programs with which co-ops interface • Provides a clear articulation of sustainability for cooperatives • Offers a useful tool for NCFC members to view and assess their own programs • Serves as a platform for any subsequent sustainability efforts by NCFC and its members

Extensive Consultation is a Key Part of the Process:

• Advisory Group • NCFC Government Affairs Committee • Review Teams • FLM+ • NCFC Sustainability Working Group • Outside Reviewers

Timeline:

• Research – June 2016 • Detailed Outline – July 2016 ––Review and revisions complete August 2016 • First Draft – September 2016 ––Review and revisions complete October 2016 • Second Draft – October 2016 ––Review and revisions completed November 2016 • Final Draft – December 2016 • Initial Roll-out at Annual Meeting – February 2017

NATIONAL COUNCIL OF FARMER COOPERATIVES National Council of Farmer Cooperatives Sustainability Field Guide A Framework of Best Management Practices for Farmer Cooperative Sustainability Programs For discussion purposes only

Purpose of the Field Guide: This Field Guide is intended to fill a gap in the wide range of available sustainability tools by providing a framework that is uniquely oriented to farmer cooperatives for their use in developing and assessing sustainability programs. The Guide is meant to serve four specific purposes: • To provide a common framework for cooperatives across the range of business models; • To provide guidance to cooperatives that are considering or beginning sustainability programs; • To provide a means for co-ops to assess their developing or existing sustainability programs; • To provide resources for incorporating additional strategies into co-ops’ existing sustainability programs; and • To provide a platform to articulate the unique nature and value of sustainability programs in farmer cooperatives.

Detailed Outline Preface Acknowledgements I. Introduction A. Overview of sustainability –national, international; dynamic multi-faceted B. Sustainability and ag – Drivers – supply chain mandates, consumer markets, competition, proactive vs. reactive 1) industry wide platforms a. Innovation Center for U.S. Dairy b. Field to Market c. U.S. Roundtable for Sustainable Beef d. Stewardship Index for Specialty Crops e. Others? C. Sustainability and farmer co-ops 1) What does sustainability mean for farmer co-ops, for the various businesses from CPGs to bargaining co-ops to service and supply co-ops to financial lenders 2) Overview of co-op sustainability efforts 3) Unique features of co-ops – diversification, ownership, governance, education, community D. NCFC sustainability work 1) Genesis, context, and intention – engaged, complementary, communication 2) Principles 3) Messaging

II. Purpose of the guide A. Rationale/process – why a field guide, what does it offer to individual co-ops; to differing types co-op businesses; co-ops as a whole B. Overview of the guide – for co-ops considering or starting programs; for co-ops engaged in programs C. Self-Evaluation Tool – purpose, for internal use by company, yardstick; platform for future uses

III. First steps A. Basics of sustainability: Building blocks and terminology of sustainability programs; dynamic nature; minimizing use of jargon B. Getting started - Thoughts in considering a sustainability program for co-ops 1) Increments, time horizon, financial and non-financial, stakeholders, supply chain 2) Bottom line: Sustainability is inherently a management task that is best incorporated into the overall management of the co-op C. Beginning to develop a program 1) Leadership - involvement of senior management 2) Organization - Convene a management team/steering committee; identify staff leadership D. Define what sustainability means for the co-op – in the three key areas – economic, environmental, community 1) Review existing sustainability programs and frameworks - as a point of reference 2) Identify key areas of importance to co-op (aka aspects, relevant topics) – economic, environmental, community i) by business unit or division w/in co-op ii) by department or activity – e.g., sourcing, manufacturing/processing, distribution, packaging/marketing iii) For each relevant area identify the related impact and where it occurs E. Compile list of stakeholders – value of stakeholder involvement 1) Internal – Business divisions, board directors, managers, employees 2) Co-op members – this is a unique audience for co-ops 3) Supply chain 4) Community

IV. Engaging internal and external stakeholders A. Establish process for stakeholder engagement – identify a lead, provide resources and timeline B. Conduct engagement: interviews, roundtable discussions, focus groups, desk research C. Compile and categorize results of engagement – description of process D. Engage management in assessment of results E. Set priorities in each area of sustainability; F. Advanced case: Conducting a third party materiality assessment approach 1) Reasons, value, timing 2) Align materiality process with: a. Sustainability goals

b. Management strategy c. Reporting process

V. Developing a sustainability program A. Define sustainability goals for co-op based on engagement priorities B. Identify and articulate the key performance indicators for each of the priorities C. Determine metrics, process for measuring and benchmarking for each indicator D. Identify goals for indicators 1) Aspirational, strategic (community, supply chain) 2) Tactical, operational (internal to business) E. Articulate the goals as they apply to the relevant management divisions and or business units F. Develop strategies to meet goals for each indicator 1) Specific management actions, practices, technologies 2) Timeline 3) Resources 4) Establish process for feedback and criteria for reviewing progress G. Identify and articulate value proposition for co-op, management, staff and for members engage financial staff H. Review plan with co-op members, stakeholders

VI. Implementing a sustainability program A. Identify and undertake actions for manufacturing, processing; distribution B. Identify and undertake actions for supply chain (sourcing) and community 1) Actions to support community goals 2) Actions to support supply chain goals 3) Actions to support on-farm sustainability goals a. Develop program in collaboration with farmers, suppliers, advisors, customers in supply chain b. Incorporate into existing relationships or projects c. Focus on sustainability indicators of interest to farmers d. Provide support for farmer interaction with analytic tools (e.g., Farm Smart, Fieldprint Calculator) e. Identify value proposition for farmers and others involved in on-farm adoption f. Identify manageable scope for initial adoption efforts g. Ensure adequate staffing to coordinate and mange initial efforts h. Develop plan for assessment and scalability i. Provide feedback loop for farmers and other participants and project leaders C. Effective data collection in place that is relevant to managers, co-op member stakeholders (per information from engagement process D. Compilation and assessment of data by metric E. Assessment of progress in meeting goals for indicators F. Feedback loop to management and board of directors G. Review and assessment of sustainability program and goals (continuous improvement)

VII. Reporting

A. Sustainability reporting – relevance, timeframe, internal and external impacts, financial and non- financial B. Establishing a reporting system for sustainability 1) Management and co-op members 2) Supply chain and other stakeholders 3) Community C. Key issues to consider in reporting D. Challenges of communicating with multiple parties that have widely differing interests E. Array data compared to benchmarks; adopt appropriate time frame and averaging F. Periodic CSR

VIII. Self - Evaluation Tool A. Description of tool B. Explanation of use C. How to interpret results D. Tool and score sheet - linked to the sections and key points in the guide E. Provide feedback to NCFC

IX. Glossary

X. Resources (People, links organizations, documents)

XI. References (List of resources used in preparing Field Guide)

NCFC Sustainability Principles The National Council of Farmer Cooperatives (NCFC) and its farmer cooperative members have for generations been guided by principles that are integral to sustainably producing food, fiber and fuel for America and the world. Our work is grounded in the core values on which farmer cooperatives were founded - shared economic participation, democratic member control, cooperation and a lasting commitment to community. From those values, the work of NCFC and its member cooperatives, through their own individual commitments to sustainability, is based on the following principles:

NCFC believes the contributions of cooperatives to sustainability are best accomplished through an integrated approach to economic viability, environmental stewardship and community well-being. We define these as: o Economic viability – Providing safe and affordable food, goods and services for our customers while supporting the long-term vitality of our members’ family farms. o Environmental stewardship – Managing our natural resources carefully and efficiently to help ensure the quality and integrity of the environment today and for future generations. o Community well-being – Conducting our businesses responsibly, maintaining a safe, healthy and respectful workplace for our employees, and fostering vibrant rural communities. NCFC believes providing sustainability education is central to its role of: o Improving cooperatives’ ability to achieve their sustainability objectives, and o Increasing stakeholders’ understanding of cooperatives’ commitment to sustainability NCFC believes fostering collaboration among cooperatives and all segments of the supply chain is fundamental to furthering sustainability and continuous improvement in handling, processing, and marketing food, fiber and fuel.

Ag Outlook & Farm Bill Farm Bill Agricultural act of 2014 Detailed Overview Farm Bill Agricultural act of 2014 COMMODITIES & RISK MANAGEMENT PROGRAMS

Overview:

• Mandatory spending on commodity programs in Title 1 is reduced by $14.3 billion relative to the 10-year baseline, for a total of $44.5 billion • Crop insurance spending is up by $5.7 billion over that period, for a total of $89.8 billion • Direct Payments are eliminated immediately; repeals 7 other current commodity programs • Adjustments made to payment limitations, eligibility rules and means testing for program participation • One-time choice of Price Loss Coverage (PLC) or Agricultural Risk Coverage (ARC) • Option to update base acres • Continues existing sugar policy • New area-wide, group-risk crop insurance policy for cotton producers (STAX) • Overhauls dairy policy, including the new Dairy Producer Margin Protection Program • Makes improvements to crop insurance to better serve all producers • Maintains permanent law (the 1938 and 1949 Acts)

Commodity Programs (Title I):

Row Crop Programs

• Direct Payments, Counter-Cyclical Payments (CCPs), Average Crop Revenue Election (ACRE) program, and Supplemental Revenue Assistance Payments (SURE) are repealed.

• Maintains the current restrictions that prevent the planting of fruits and vegetables on acres receiving commodity program payments.

• Owners of a farm can retain base acres, including generic base acres (old cotton base), or reallocate all based acres, other than generic base. Failure to make an election results in the retention of existing base acres. Base acres will be reallocated to the 4-year average of the acreage planted on the farm for each covered commodity from 2009-2012 as well as any acreage that farmers were prevented from planting during that time.|

• In 2014, producers will make a one-time irrevocable election (called Farm Risk Management Election) to receive Price Loss Coverage (PLC) or Agriculture Risk Coverage (ARC) for the 2014-2018 crop years. Cotton acres will not be enrolled in either program.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Prepared by the National Council of Farmer Cooperatives Based on best interpretation of legislation and accompanying managers’ report. Subject to agency rulemaking. COMMODITIES & RISK MANAGEMENT PROGRAMS

• Despite the one-time decision to enroll in either ARC or PLC, USDA’s Farm Service Agency (FSA) will continue to hold annual signup for programs so farmers can inform the agency about changes in ownership, adjusted gross income or other necessary information.

• Failure to choose between ARC or PLC will result in no payment for the 2014 crop year and automatic election in PLC for all covered commodities on the farm for the 2015 through 2018 crop years.

• PLC is a risk management tool that addresses deep, multiple-year price declines. It is intended to complement federal crop insurance, which is not designed to cover multiple-year price declines. ◦◦ PLC will utilize updated yields. ◦◦ Payments on a covered commodity are made when the effective price for the crop year is less than the reference price, with the effective price being the higher of the midseason price or the national average loan rate for the covered commodity.

PLC Payment Made When Effective Price < Reference Price PLC Payment Rate = Reference price – Effective Price PCL Payment Amount = Payment Rate x Payment Yield x Payment Acres

2014 Farm Bill 2008 Farm Bill Crop Percent Increase Reference Prices Target Prices

Barley $4.95/bu $2.63/bu 88% Chickpeas, large $21.54/cwt $12.81/cwt 68% Chickpeas, small $19.04/cwt $10.36/cwt 84% Corn $3.70/bu $2.63/bu 41% Dry Peas $11.00/cwt $8.32/cwt 32% Grain Sorghum $3.95/bu $2.63/bu 50% Lentils $19.97/cwt $12.81/cwt 55% Oats $2.40/bu $1.79/bu 34% Other Oilseeds $20.15/cwt $12.68/cwt 58% Peanuts $535.00/ton $495.00/ton 8% Rice, long grain $14.00/cwt $10.50/cwt 33% Rice, med/short grain $14.00/cwt $10.50/cwt 33% Soybeans $8.40/bu $6.00/bu 40% Upland Cotton n/a $0.7125/lb n/a Wheat $5.50/bu $4.17/bu 32%

NATIONAL COUNCIL OF FARMER COOPERATIVES

• Agriculture Risk Coverage (ARC) is a risk management tool that addresses revenue losses. ◦◦ Producers who elect ARC must unanimously select whether to receive county-wide coverage on a commodity-by-commodity basis or choose individual coverage that applies to all of the commodities on the farm. ◦◦ 85% of base acres are covered for the county option; 65% of base acres for the individual coverage. ◦◦ ARC requires a producer to experience at least a 14% loss (shallow loss) relative to historic average revenue. ◦◦ Coverage under ARC is 76% to 86% of the benchmark revenue and historic yield. ◦◦ Payment rate is equal to the lesser of the amount that the ARC guarantee exceeds the actual crop revenue or 10% of the benchmark revenue.

• Producers remain eligible for marketing loans under the same repayment terms except in the case of cotton. The minimum loan rate for upland cotton is established at $0.45 per pound. The reduction is intended to address the cotton domestic support elements of Brazil’s dispute with the United States before the World Trade Organization.

• Cotton producers cannot participate in PLC or ARC, but may purchase an area-wide, group-risk crop insurance policy (STAX) and a transition is provided for producers while the new program is being implemented. Upland cotton producers will receive a “transitional” Direct Payment equal to 60% of their past payments for the 2014 crop year and 36.5% for the 2015 crop year. Cotton producers are eligible for those transitional payments in counties where STAX is not available. • Sugar policy is reauthorized to operate through 2018 at no cost to the taxpayer.

Payment Limitations & Adjusted Gross Income (AGI)

• The 2014 provides for one payment cap for all commodity programs, set at $125,000 ($250,000 for married couples). This is a departure from the 2008 farm bill that provided a payment cap for each program (i.e., $40,000 for Direct Payments, $65,000 for Counter-cyclical Payments, $100,000 for SURE for a total of $205,000). Under the 2008 farm bill Marketing Loan Gains (MLGs) and Loan Deficiency Payments (LDPs) were unlimited. Now payments received under the newly created PLC and ARC programs as well as LDPs and MLGs must fit under the new cap. Marketing assistance loans continue to operate as non-recourse.

• The two income test approach from the 2008 farm bill (farm and non-farm income) is eliminated in the 2014 farm bill and a single AGI of $900,000 is established for certain commodity programs as well as conservation programs. Defines “farming income” to also include “the processing (including packing), storing (including shedding), and transporting” when determining an individual’s AGI.

• Similar to the 2008 farm bill, 2014 farm bill instructs USDA to promulgate rules to define significant contribution of active personal management on the farm (aka “actively engage”).

Dairy

• The Dairy Product Price Support Program, the Milk Income Loss Contract Program (available until the new Margin Protection Program is up and running), the Dairy Export Incentive Program, and the Federal Milk Marketing Order Review Commission are repealed.

• The Margin Protection Program is a new, voluntary safety net program that will provide dairy producers with indemnity payments when actual dairy margins are below the margin coverage levels the producer chooses on an annual basis.

NATIONAL COUNCIL OF FARMER COOPERATIVES

• Producers can annually select their preferred coverage percentage (allowable between 25% and 90% of their prior established production history) and margin threshold (in $0.50 increments between $4 and $8). Premiums are fixed for through 2018. Marketings 4 Million Pounds a Year Marketings Over 4 Million Pounds or Less

Coverage Level Premiums* Coverage Level Premiums $4.00 None $4.00 None $4.50 $0.01 $4.50 $0.02 $5.00 $0.025 $5.00 $0.04 $5.50 $0.04 $5.50 $0.10 $6.00 $0.055 $6.00 $0.155 $6.50 $0.09 $6.50 $0.29 $7.00 $0.217 $7.00 $0.83 $7.50 $0.30 $7.50 $1.06 $8.00 $0.475 $8.00 $1.36 *Except for the premium at the $8.00 level, these premiums will be reduced by 25 percent for calendar years 2014 and 2015m and only for marketings under 4 million pounds.

• The Margin Protection Program is to be established no later than September 1, 2014. MILC payments are temporarily available to producers until the implementation of the Margin Protection Program or September 1, 2014 (whichever occurs first).

• A new donation program for dairy products is established. The Dairy Product Donation Program would trigger only when dairy margins are under $4.00 for two consecutive months. USDA would be authorized to purchase a variety of dairy products for no more than 3 months during or until margins rebound above $4.00. USDA is required to distribute these products to food banks or other non-profit organizations. USDA cannot store these products and organizations receiving USDA purchased dairy products are prohibited from selling the products back into commercial markets.

• The Dairy Forward Pricing, the Dairy Indemnity Program and the Dairy Promotion and Research Program are also reauthorized through 2018.

• Directs USDA to conduct a hearing prior to the issuance of an order designating the State of California as a Federal milk marketing order. The provision provides USDA with the discretion, if a California Federal milk marketing order is requested, to recognize the longstanding California quota system, established under state marketing regulations, in whatever manner is appropriate on the basis of a rulemaking hearing record.

Crop Insurance (Title XI):

• No adjusted gross income eligibility criteria were included to determine premium subsidies.

• As prescribed in Title II, conservation compliance will be required for participation in federal crop insurance. The requirements will apply to all crops annually tilled. Permanent crops (i.e. orchards, shrubs and vines) are not subject to compliance requirements. Specialty crops and other new participants will have a phase-in time period to comply (5 years for highly erodible land requirements, 2 years for wetlands). Specialty crop producers have first priority to access technical assistance. [NOTE: For more information on conservation compliance see section entitled Conservation Programs – Title II.]

NATIONAL COUNCIL OF FARMER COOPERATIVES

• In time for the 2015 crop year, producers enrolled in PLC can purchase the Supplemental Coverage Option (SCO). The premium will be subsidized at 65%. ◦◦ SCO Coverage will only be triggered if losses in the area exceed 14% of normal levels, limiting SCO coverage to the gap between 86% of revenue and individual insurance coverage. ◦◦ Farmers will choose between coverage based on individual yield and losses or county yield and loss. ◦◦ SCO coverage is not available for crops enrolled in ARC or STAX. A producer may purchase a STAX policy and SCO coverage on the same cotton crop in the same county provided that they are purchased for separate acreage.

• Any future renegotiations of the Standard Reinsurance Agreement will have to be budget neutral, which means the government cannot use it again to make budget cuts.

• Allows for margin insurance to be combined with individual crop insurance coverage.

• Catastrophic Risk Protection (CAT) premium amounts to be re-rated by USDA.

• The additional premium subsidy for enterprise units is made permanent and separate enterprise united for irrigated and non-irrigated crops will being in 2015.

• Insurance plug yields are increased from 60% to 70%. To address declining Actual Production History (APH) due to multiple year disasters when losses are widespread, producers can adjust APH to establish insurable yields. A producer may choose to exclude any year from their APH if their yield in that year is less than 50% of the ten year county average. This also applies to contiguous counties and allows for the separation of irrigated and non- irrigated acres.

• Beginning farmers and ranchers can access a 10 percentage point crop insurance premium reduction during their initial five years of production.

• Requires the submitter of a proposed policy to consult with groups representing producers of agricultural commodities in all major producing areas for the commodities to be served or potentially impacted, either directly or indirectly. Any submission to the Board must include a summary assessment of the consultation and the Board must use the assessment to determine if the submission will create adverse market distortions. The scope of the new consultation requirements is limited to fruits, vegetables, tree nuts, dried fruits, horticulture, nursery crops, and floriculture.

• Allows USDA’s Risk Management Agency (RMA) to conduct research and development of improved risk management tools for underserved crops, such as specialty crops, and regions. Other areas include margin coverage for catfish, biomass and sweet sorghum energy crop insurance, swine catastrophic disease insurance, poultry catastrophic disease insurance, poultry business interruption coverage, and a whole farm diversified risk management insurance plan.

• Federal Crop Insurance Corporation (FCIC) to study the feasibility of insuring specialty crop producers for food safety and contamination-related losses. The study will cover food safety concerns including government, retail, or national consumer group announcements of a health advisory and recalls related to a contamination concern.

• FSA and RMA are directed to share information to correct errors and improve program integrity.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Prepared by the National Council of Farmer Cooperatives Based on best interpretation of legislation and accompanying managers’ report. Subject to agency rulemaking. Farm Bill Agricultural act of 2014 CONSERVATION & ENERGY PROGRAMS

Overview:

• For the first time ever, conservation title spending ($57.6 billion/ten years) outpaces commodity title ($44.5 billion/ten years) • Consolidates the functions and objectives of 23 conservation programs down to 13 • Producer eligibility for crop insurance is made contingent on conservation compliance • Provides nearly $900 million in mandatory funding for renewable energy and energy efficiency programs • Continues key programs such as Rural Energy for America Program (REAP) and Biomass Crop Assistance Program (BCAP) • The Miscellaneous Title provides regulatory relief by enhancing federal agency coordination and removing duplicative reporting requirements

Summary of Major Changes in Conservation Title Programs

Continued Repealed New Grassland Reserve Program (GRP) – objectives included in CRP or ACEP Agricultural Conservation Easement Program (ACEP) – Combines the Conservation Reserve Program (CRP) Wetland Reserve Program (WRP) – objectives functions of the now repealed included in ACEP • Wetland Reserve Program • Grasslands Reserve Program Farmland Protection Program (FPP) – objectives • Farm Protection Program included ACEP Wildlife Habitat Incentives Program (WHIP) – incorporated into EQIP Great Lakes Basin Program (GLBP) – objectives included in the RCPP Chesapeake Bay Watershed Program (CBWP) – Environmental Quality Incentives objectives included in the RCPP Regional Conservation Partnership Program (EQIP) Program (RCPP) Cooperative Conservation Partnership Initiative (CCPI) – objectives included in the RCPP

The Agricultural Water Enhancement Program (AWEP) – objectives included in the RCPP Conservation Stewardship Program (CSP)

Conservation Innovation Grants (CIG)

NATIONAL COUNCIL OF FARMER COOPERATIVES

Prepared by the National Council of Farmer Cooperatives Based on best interpretation of legislation and accompanying managers’ report. Subject to agency rulemaking. CONSERVATION & ENERGY PROGRAMS Conservation Programs (Title II):

Conservation Reserve Program (CRP)

• The CRP, the largest conservation program, is reauthorized but the acreage cap is reduced from 32 million acres in a stepwise manner down to 24 million acres by 2018, and with some important policy refinements. Maximum acreage limitations per year are as follows: ◦◦ 27.5 million acres in 2014 ◦◦ 26 million acres in 2015 ◦◦ 25 million acres in 2016 ◦◦ 24 million acres in 2017 ◦◦ 24 million acres in 2018

• 2 million of the CRP’s 24 million acres are to be enrolled as grasslands comparable to the acres previously enrolled under short-term contracts in the now-repealed Grassland Reserve Program acres.

• Authorizes activities for newly eligible grasslands to include grazing, haying, mowing, or harvesting for seed production along with fire pre-suppression, rehabilitation and construction of fire breaks, fencing, livestock watering, and necessary cultural practices. These uses are consistent with those allowed on existing GRP rental contracts and carried over to align under CRP.

• Establishes the frequency of harvesting and routine grazing on acres enrolled in CRP, consistent with a conservation plan, and provides for the incidental use of buffers adjacent to agricultural lands.

• The specific priority designations for the Chesapeake Bay Region, the Great Lakes Region and the Long Island Sound Region are removed but the Secretary retains authority to designate conservation priority areas.

• Decreases the Farmable Wetlands Program overall cap to 750,000 acres.

• Eliminates “allotment history” and provides that for certain activities in case of drought or other emergencies without a reduction in the rental rate.

• Allows conservation and land improvement practices in the final year of a contract, with a commensurate reduction in rental value only when the participant derives economic benefit form use of the forage. Re-enrollment of lands modified through this provision is prohibited for at least 5 years.

• Expanded use of continuous and Conservation Reserve Enhancement Program (CREP) practices is encouraged

Conservation Stewardship Program (CSP)

• CSP, another working lands program, is reauthorized at 10 million acres a year, down from 12.769 million acres annually under previous law.

• The CSP payment rate is set at $18/acre for the program for the remainder of fiscal year 2014 through fiscal year 2022.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Prepared by the National Council of Farmer Cooperatives Based on best interpretation of legislation and accompanying managers’ report. Subject to agency rulemaking. CONSERVATION & ENERGY PROGRAMS

• Key changes include: ◦◦ Land capable of being used for livestock production is added to the definition of eligible land. ◦◦ Conservation activities involve conservation systems, practices, and management measures, and include the act of doing the “conservation planning” required of applicants. ◦◦ Participating producers must meet or exceed the stewardship threshold of at least two priority resource concerns, and on contract renewal the producer meet at least two additional resource concerns or exceed two existing resource concerns. ◦◦ Eligible producers can receive supplemental payments for making improvements to resource-conserving crop rotations like the inclusion of alfalfa, peanuts or sorghum in rotations. ◦◦ The Secretary cannot give a higher ranking to a contract offer based on the applicant’s willingness to accept a reduced payment.

• USDA is encouraged to emphasize adoption of new practices; with new contracts addressing at least one additional priority resource concern and renewing contracts that address at least two priority resource concerns.

Environmental Quality Incentives Program (EQIP)

• EQIP’s basic program structure and policies are unchanged, although at lower overall funding, and with a 5% funding carve-out for the wildlife habitat practices previously covered under the Wildlife Habitat Incentives Program, which is repealed.

• Maintains that 60% of the funding allocation goes toward promoting environmental stewardship among livestock and poultry producers.

• Advanced payment for the purchase of materials and contracting is increased from 30% to 50%.

• A payment limitation of $450,000 to a person or legal entity for all EQIP contracts entered during FY2014 through FY2018 is established.

• Expands the Conservation Innovation Grants (CIG) program from projects that just demonstrate proven conservation technologies to projects that conduct on-farm research and development of such technologies. USDA is encouraged to increase the level of information and transparency in the CIG, including monitoring to determine if innovative conservation approaches in CIG later become commonly used conservation practices.

• Continues to set-aside $25 million annually for EQIP practices that address air quality concerns.

Agricultural Conservation Easement Program (ACEP)

• Conservation easement programs, including the Wetlands Reserve Program (WRP), Farmland Protection Program (FPP), and GRP, are repealed and consolidated to create ACEP.

• ACEP retains most of the program provisions in the current easement programs by establishing two types of easements: wetlands easements (similar to WRP) that protect and restore wetlands, and agricultural land easements (similar to FPP and GRP) that prevent nonagricultural uses on productive farm or grasslands.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Prepared by the National Council of Farmer Cooperatives Based on best interpretation of legislation and accompanying managers’ report. Subject to agency rulemaking. CONSERVATION & ENERGY PROGRAMS

Regional Conservation Partnership Program (RCPP)

• The Regional Conservation Partnership Program (RCPP) is a new program, designed to encompass the kinds of activities carried out under the now-repealed programs, including the Agricultural Water Enhancement Program (AWEP), Chesapeake Bay Watershed Program (CBWP), Cooperative Conservation Partnership Initiative (CCPI), and the Great Lakes Basin Program (GLBP).

• RCPP uses partnership agreements with state and local governments, Indian tribes, farmer cooperatives, and other conservation organizations to leverage federal funding and further conservation on a regional or watershed scale. Any RCPP participating partners must conduct education and outreach as vital to the success of the program, and make a financial contribution to the project that represents a significant portion of the overall costs.

• The Secretary is to distribute funding equitably across the nation, taking into account the different natural resource concerns that may be unique to each region or non-contiguous multi-state areas, and draw upon the existing capabilities of the land grant institutions and the Cooperative Extension Service system.

Conservation Compliance

• Applies to all crops annually tilled. Producers’ eligibility for the federally funded portion of crop insurance premiums is dependent on the producer implementing an approved conservation plan on highly erodible land (“conservation compliance”), and not converting a wetland to crop production (“Swampbuster”).

• If the wetland is converted at any time after the date of enactment, the person becomes ineligible for premium assistance in the reinsurance year after final determination, unless an exemption applies or if the wetland converted constitutes less than five acres of the person’s entire farm in which case the person can choose to make a contribution to conservation equal to 150% of the cost of mitigation.

• If the wetland was converted at any time prior to the date of enactment, the person cannot be found in violation and thus ineligible for premium assistance based on that conversion.

• If a new policy or plan of insurance becomes available after the date of enactment, ineligibility for premium assistance can only apply to conversions that take place after the date the new policy or plan of insurance first becomes available to the person. In this case the person has two reinsurance years to mitigate the conversion before ineligibility can apply to the subsequent reinsurance year.

• Producers who have never before been subject to conservation compliance or Swampbuster prior to the adoption of this new crop insurance eligibility requirement will have multiple years to come into compliance (5 years for highly erodible land requirements, 2 years for wetlands), subject to certain restrictions.

• The Secretary must submit a report to Congress within 270 days after enactment of the 2014 farm bill on the extent to which conservation compliance and Swampbuster requirements affect specialty crop growers.

• Specialty crop producers have first priority to access technical assistance.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Prepared by the National Council of Farmer Cooperatives Based on best interpretation of legislation and accompanying managers’ report. Subject to agency rulemaking. CONSERVATION & ENERGY PROGRAMS

General Information about Conservation Compliance and Swampbuster

The 1996 farm bill eliminated crop insurance premium sub- NRCS makes technical determinations, such as determin- sidies from the list of at-risk USDA program benefits in an ing whether land is highly erodible or determining if any effort to reduce any regulatory burdens that might impede exemptions apply to a wetland. NRCS also establishes producers’ adoption of crop insurance. conservation plans and systems for highly erodible land and determines whether a wetland conversion has occurred or Producers participating in most programs administered by whether highly erodible land is being farmed in accordance the Farm Service Agency (FSA) and the Natural Resources with an approved conservation plan or system. Conservation Service (NRCS) must abide by certain conditions on any land owned or farmed that is highly erodible FSA determines who is impacted by an NRCS technical or that is considered a wetland. determination of non-compliance, what penalties will be applied, and acts on requests for the application of an ex- Producers participating in these programs and any person emption, such as the good faith relief exemption. or entity considered to be an “affiliated person” of the producer, are subject to these conditions. These requirements To be in compliance with the highly erodible land and wet- are developed in detail through USDA regulations. land conservation provisions, producers must agree, by cer- tifying on USDA Form AD-1026, that they will not produce Highly erodible land is cropland, hayland or pasture that an agricultural commodity on highly erodible land without can erode at excessive rates. It contains soils that have an a conservation system, plant an agricultural commodity on erodibility index of eight or more, a term that is defined a converted wetland, or convert a wetland to make possible by NRCS and measured according to methodology they the production of an agricultural commodity. created. The term “agricultural commodity” is defined in statue as If a producer has a field identified as highly erodible land, “any agricultural commodity planted and produced in a that producer is required to maintain a conservation system State by annual tilling of the soil, including tilling by one- of practices that keeps erosion rates at a substantial reduc- trip planters; or sugarcane planted and produced in a State.” tion of soil loss. Fields that are determined not to be highly erodible land are Producers found in violation but who acted in good faith not required to maintain a conservation system to reduce may file a request to regain program benefit eligibility at erosion. the FSA office where their farm records are administered. If approved, producers are required to take corrective A “wetland” is defined in great detail in the implementing action, and in the case of good-faith relief from a highly regulations, but it is generally an area that has a prepon- erodible land conservation violation, a graduated payment derance of wet soils, is inundated or saturated by surface reduction is applied to the reinstated benefits. There are or groundwater at a frequency and duration sufficient to other exemptions that may apply in limited circumstances. support the prevalence of water tolerant vegetation, and under normal circumstances supports a prevalence of such The new requirements provided in the 2014 farm bill will vegetation. be subject to further rulemaking.

Technical Assistance

• Mandatory funds from programs like CRP, EQIP and CSP are made available to NRCS to carry out the technical assistance needed to support these conservation programs, with priority to producers who request technical assistance to participate in CSP and EQIP for the first time.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Prepared by the National Council of Farmer Cooperatives Based on best interpretation of legislation and accompanying managers’ report. Subject to agency rulemaking. CONSERVATION & ENERGY PROGRAMS

Other Important Provisions or Conservation Programs

• As prescribed by the managers of the farm bill conference report, conservation programs as implemented by USDA should recognize the use of innovative and enhanced fertilizer technologies to increase efficiency, reduce nitrate losses, help protect water quality, and reduce greenhouse gas emissions.

• Adjusted Gross Income Limitation for Conservation Programs – A single, $900,000 adjusted gross income limitation is established to be able to receive combined commodity and conservation program benefits.

• Grazing Lands Conservation on Private Land – reauthorized at previous levels of $60 million per year through FY 2018.

• Grassroots Source Water Protection Program – Reauthorized at previous levels of $20 million per year through FY 2018.

• Voluntary Public Access and Habitat Incentive Program – Reauthorized at a reduced level of $40 million in mandatory money per year through FY 2018.

• Small Watershed Rehabilitation Program – Reauthorized at previous appropriated levels of $85 million per year through FY 2018 and authorizes $250 million in mandatory money for FY 2014, to remain available until expended.

• Emergency Watershed Protection Program – The Secretary is given limited authority to modify or terminate a floodplain easement which is similar authority under other conservation programs. The Secretary is directed to enter into compensatory agreements with third parties to allow for flexibility to modify or terminate the floodplain easements.

• Terminal Lakes Assistance – New version of this program is created, adding a definition for eligible land and terminal lake. Additionally, a new voluntary land purchase grant program is established with a $25 million authorization of appropriations, to remain available until expended. The bill includes a transfer of $150 million in mandatory funds to the Bureau of Reclamation.

• Soil and Water Resources Conservation – Adds Indian tribes as eligible to cooperate with and participate in the soil and water conservation program.

• Transfer of Retiring Farmers CRP Land – Mandatory funding of $50 million is made available to facilitate the transfer of land from retired or retiring owners and operators to beginning or socially disadvantaged farmers or ranchers.

• Wetlands Mitigation – $10 million in mandatory funding is provided for wetland mitigation banking efforts. The Secretary is encouraged to use mitigation with the conversion of a natural wetland and equivalent wetlands functions at a ratio not to exceed a ratio of 1-to-1 acreage.

• Lesser Prairie Chicken Conservation Report – Requires the Secretary to submit a report to Congress no later than 90 days after enactment which considers all USDA and state administered programs that benefit the lesser prairie chicken.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Prepared by the National Council of Farmer Cooperatives Based on best interpretation of legislation and accompanying managers’ report. Subject to agency rulemaking. CONSERVATION & ENERGY PROGRAMS

Energy Programs (Title IX):

• Biobased Markets – Authorizes mandatory funding of $3 million annually through 2018. ◦◦ Limits reporting on the availability, relative price, performance and environmental and public health benefits of biobased materials subject to the availability of data. ◦◦ Adds reporting requirements of quantities and types of biobased products purchased by procuring federal agencies and a focus on biobased content requirements. ◦◦ Mandates the designation of intermediate ingredients or feedstocks and assembled and finished biobased products according to guidelines. ◦◦ Adds auditing and compliance activities to ensure proper use of biobased labeling. ◦◦ It also mandates a study by USDA to assess the economic impact of the biobased product industry, due 180 days after the bill is enacted. ◦◦ Encourages coordination, review and approval of forest-related biobased products. ◦◦ Reauthorizes BioPreferred Program and the Federal Government Procurement Preference Program

• Biorefinery Assistance – The program is renamed as the Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program and is extended to include renewable chemical and biobased product manufacturing. The program is capped for loan guarantees to promote biobased product manufacturing at 15% of total available mandatory funds. Mandatory funding of $100,000,000 is provided for FY2014, $50,000,000 for each of FY2015 and FY2016, and an authorization of $75,000,000 is provided for each of fiscal years 2014 through 2018.

• Repowering Assistance Program – Extended through FY 2018 with mandatory funding of $12 million in FY 2014 available until expended.

• Bioenergy Program for Advanced Biofuels – Extended through FY 2018 with mandatory funding of $15 million annually.

• Biodiesel Fuel Education Program – Extended through FY2018 and authorizes appropriations of $1 million annually.

• Rural Energy for American Program – Increases mandatory funding for REAP by an additional $20 million per year, from $48.2 to $68.2 million.

• Biomass Research and Development – Extended through FY2018 with $3 million in mandatory funding for fiscals years 2014 through 2018, and $20 million in discretionary funding for each fiscal year for the same time period.

• Biomass Crop Assistance Program (BCAP) – Provides mandatory BCAP funding of $25 million annually through FY2018.

• Community Wood Energy Program – Authorization of $5 million for FY2014-2018. The bill authorizes grants of up to $50,000 to establish or expand biomass consumer cooperatives that will provide consumers with services or discounts relating to the purchase of biomass heating systems or products. Any such cooperative that receives a grant must match at least the equivalent of 50% of the funds toward the establishment or expansion of a biomass consumer cooperative.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Prepared by the National Council of Farmer Cooperatives Based on best interpretation of legislation and accompanying managers’ report. Subject to agency rulemaking. CONSERVATION & ENERGY PROGRAMS

• The Biofuels Infrastructure Study and Renewable Fertilizer Study are repealed.

• USDA is required to submit a report to the House and Senate Agriculture Committees on energy use and energy efficiency projects at USDA facilities within 180 days of enactment.

Regulatory Reforms and other Environmental Provisions:

Title VII – Research

• Reauthorizes the Office of Pest Management Policy at USDA and provides $3 million annually through 2018.

Title X – Horticulture

• Aims to improve coordination between USDA, the Environmental Protection Agency (EPA), the U.S. Fish and Wildlife (FWS) and the National Marine Fisheries Service regarding the conflict between laws governing pesticide use and the Endangered Species Act (ESA). Requires two reports to Congress: 1) detailing efforts to minimize delays in integrating applicable pesticide registration and registration review requirements and the species and habitat protection processes of the ESA, and 2) evaluating approaches to utilize the best available science, reasonable and prudent alternative are technologically and economically feasible, reasonable and prudent measures are necessary and appropriate and the agencies ensure public participation and transparency in their development. Authorizes an update of a study to identify reasonable and prudent measures to implement the endangered species pesticides labeling program which would comply with the ESA and allow the continued production of food and fiber.

Title XII – Miscellaneous

• Creates a permanent subcommittee within the EPA Science Advisory Board to conduct peer review of EPA actions that would negatively impact agriculture.

• Enhances coordination between USDA and FWS regarding actions taken to manage the lesser prairie chicken.

• Eliminates duplicative reporting requirements for seed importers.

• Provides certainty to the forest products industry by clarifying that forest roads and related silvicultural activities should not be treated as a point source under the Clean Water Act.

• Provides on year of full funding for the Payment in Lieu of Taxes (PILT) program to go toward building and maintaining roads, supplying emergency services, and providing other infrastructure necessary due to the presence of federal lands near rural communities.

• The 2014 farm bill did not address issues relating to EPA’s release to the public of CAFO data through FOIA or other measures, Spill Prevention, Control and Countermeasure (SPCC) rules for farms or duplicative permitting requirements for certain pesticide uses.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Overview: • Fully funds the Market Access Program and Foreign Market Development Program • Establishes a USDA Under Secretary for Trade and Foreign Agricultural Affairs • Reauthorizes the GSM-102 export credit guarantee program, making $5.5 billion in credit guarantees available per year • Expands the Technical Assistance for Specialty Crops (TASC) program to include other technical barriers to trade • Reauthorizes the PL-480 Title II Food for Peace

Trade Programs: • Continues annual funding through 2018 for the Market Access Program at $200 million, and the Foreign Market Development Program at $34.5 million.

• Authorized funding at $9 million annually through 2018 for the TASC program. Expands the use of funds beyond addressing SPS issues to also include other technical barriers to trade.

• Reauthorizes the GSM-102 export credit guarantee program, making available $5.5 billion in credit guarantees per year while lowering the maximum loan repayment from 36 months to 24 months. Gives USDA the ability to charge higher program fees, and allows the Secretary to implement the program in a manner consistent with WTO obligations.

• Establishes a USDA Under Secretary for Trade and Foreign Agricultural Affairs that will provide a singular focus on trade and foster more effective coordination of trade policies between USDA agencies.

Food Aid Programs: • The P.L. 480 Title II food aid funding and authority is maintained and allows funds to be used to support logistics and development activities in certain circumstances. Expands pre-positioning of food commodities at strategic locations for rapid emergency response.

• Authorizes up to $80 million for a USDA Local and Regional Purchase (LRP) program.

• Food for Progress, Bill Emerson Humanitarian Trust, and McGovern-Dole Food for Education programs are not changed.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Overview: • Value-added Producer Grants reauthorized with $63 million in mandatory funding • Continues Rural Cooperative Development Grants with funding authorized at $40 million • Includes “say on pay” review of rules regarding compensation for senior officers in farm credit institutions • Encourages the use of loan guarantees to finance Water and waste disposal projects

Credit Programs (Title V): • Requires the Farm Credit Administration (FCA) to review rules regarding compensation packages of senior officers in farm credit system institutions. While the Farm Credit Act authorizes the FCA to require appropriate disclosure from FCS institutions, the Farm Credit Act does not explicitly contemplate stockholder voting on specific issues such as compensation.

• Encourages to the maximum extent practicable, private or cooperative lenders to finance rural water and waste disposal facilities by maximizing the use of loan guarantees in communities where the population exceeds 5,500.

Rural Development Programs (Title VI): • Two existing programs – the Rural Business Opportunity Grants program and the Rural Business Enterprise Grants program – are combined into a single program called the Rural Business Development Grants program. The new program will function in a manner similar to its predecessors and award competitive grants to public agencies and non-profit community development organizations for business development, planning, technical assistance, or job training in rural areas.

• Valued-added Producer Grants (VAPG) – Reauthorized to receive $63 million in mandatory funding with additional funding subject to appropriations through 2018. Recognizes the benefits of farmer cooperatives participating in the VAPG program and encourages USDA to view cooperatives as a priority in administering the program.

• Rural Cooperative Development Grants – Reauthorized at $40 million for each fiscal year through 2018, subject to appropriations. Establishes an interagency working group to foster cooperative development and ensure coordination with Federal agencies and cooperative organizations.

• Rural Broadband Loan Program – Limits the existing program from funding competitors to existing rural communication providers and mandates more oversight and reporting requirements.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Overview: • Provides the largest government investment for specialty crops • Fifty-five percent increase in funding levels for specialty crop initiatives and programs • Pilot program to allow schools to test the use of canned, dried and frozen fruits and vegetables • Increased funding for specialty crop research under the Specialty Crop Research Initiative • New funds for research on citrus greening

Specialty Crop Programs: Title I – Commodities

• Planting Flexibility – Maintains the current restrictions that prevent the planting of fruits and vegetables on acres receiving commodity program payments.

• Supplemental Agriculture Disaster Assistance – Continues the Tree Assistance Program (TAP) for eligible orchardists and nursery tree growers that planted and lost trees intended for commercial purposes due to natural disaster. A 15% or greater tree mortality loss is necessary to qualify for assistance consisting of 65% of the cost of replanting trees or sufficient seedling to reestablish a stand. The cost of pruning, removal, and other costs incurred to salvage existing trees or to prepare land to replant is covered up to 50%. TAP has a $125,000 payment limit with a 500 acre cap.

• Adjusted Gross Income – The two income test approach from the 2008 farm bill (farm and non-farm income) is eliminated in the 2014 farm bill and a single AGI of $900,000 is established for certain commodity programs as well as conservation programs. Defines “farming income” to also include “the processing (including packing), storing (including shedding), and transporting” when determining an individual’s AGI.

Title II – Conservation

• Conservation compliance will be required for participation in federal crop insurance. The requirements will apply to all crops annually tilled. Permanent crops (i.e. orchards, shrubs and vines) are not subject to compliance requirements. Specialty crops and other new participants will have a phase-in time period to comply (5 years for highly erodible land requirements, 2 years for wetlands). Specialty crop producers have first priority to access technical assistance. [NOTE: For more information on conservation compliance see section entitled Conservation Programs – Title II.]

NATIONAL COUNCIL OF FARMER COOPERATIVES

Prepared by the National Council of Farmer Cooperatives Based on best interpretation of legislation and accompanying managers’ report. Subject to agency rulemaking. SPECIALTY CROP PROGRAMS

Title III – Trade

• Market Access Program (MAP) – Reauthorizes MAP at $200 million per year.

• Technical Assistance for Specialty Crops (TASC) – Reauthorizes TASC at $9 million per year to address sanitary, phytosanitary and technical barriers that prohibit or threaten the export of specialty crops.

Title IV – Nutrition

• DOD Fresh Program – Reauthorized at current funding levels ($50 million/annually) through 2018.

• Section 32 Purchases – Minimum Specialty Crop Purchases are maintained and reauthorizes current law. Directs USDA to conduct a pilot project in at least 8 states permitting the states to use multiple suppliers and products by allowing geographic preference and flexibility in procuring unprocessed fruits and vegetables.

• Seniors Farmer Market Nutrition Program – Extends the program through FY2018.

• Healthy Food Financing Initiative – Provides loans and grants to eligible fresh, healthy food retailers to overcome the higher costs and initial barriers to entry in underserved areas.

• Food Insecurity Nutrition Incentive Program – $100 million program to establish “incentives grants” for projects that incentivize SNAP participants to buy fruits and vegetables.

• Fresh Fruit and Vegetable Program – Maintains Fresh Fruit and Vegetable Program authorization and baseline funding at $150 million per year. ◦◦ Creates a one-year evaluation (established by USDA) for schools in at least five states that may offer canned, frozen, and dried, along with fresh fruits and vegetables as part of the program. ◦◦ The pilot program implementation would begin at the start of the 2014 school year. ◦◦ Approximately $5 million in funding is allocated for the evaluation to develop a report to Congress which is due by January 1, 2015.

Title VII – Research

• Specialty Crop Committee – Requires greater consultation with industry as part of the annual report and establishes a citrus disease subcommittee. The annual report should include recommendations regarding the improvement of quality and taste of processed specialty crops, programs that would improve remote sensing, and an analysis of alignment of committee recommendations with specialty crop research grants.

• Specialty Crop Research Initiative – $80 million per year in mandatory funding with $25 million per year reserved to address emergency citrus greening research. Strengthens the merit review process for SCRI grant awards.

Title X – Horticulture

• Provides for the collection and dissemination of market news for specialty crops.

• Farmers’ Market and Local Food Promotion program – reauthorized at $30 million per year.

• Food Safety Education Initiatives – Reauthorizes USDA efforts to educate fresh produce industry personnel and consumers on ways to reduce pathogens in fresh produce. Authorizes $1 million each year through 2018.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Prepared by the National Council of Farmer Cooperatives Based on best interpretation of legislation and accompanying managers’ report. Subject to agency rulemaking. SPECIALTY CROP PROGRAMS

• Plant Pest and Disease Program –Mandatory funding of $62.5 million for FY 2014-2017 and $75 million in FY2018. Also includes a minimum of $5 million dedicated to the National Clean Plant Network.

• Provides for the inspection and certification of U.S. apples before entering foreign commerce.

• Specialty Crop Block Grants – Funded at $72.5 million for FY 2014-2017 and $85 million in FY 2018. It also includes a multi-state program established and administered by USDA. The programs will focus on food safety, plant pest and disease, research, and crop-specific projects addressing common issues.

• Labor Standards – Requires consultation with USDA before the Department of Labor can conduct additional seizures of goods.

Title XI – Crop Insurance

Title XII – Miscellaneous

• Requires FDA to analyze the economic impact of produce safety standards on farms of varying sizes. The study would be included with the final rule.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Overview: • Permanently authorizes the Livestock Indemnity Program, the Livestock Forage Disaster Program and Emergency Assistance for Livestock, Honeybees and Farm-raised Fish Program, providing nearly $4 billion of disaster assistance over the next 10 years • Maintains livestock commitment under EQIP and expands opportunities for grazing under CRP • Prioritizes pollinator protection research to ensure a sustainable population of native and managed pollinators, including managed honey bees • Authorizes Veterinary Services Grants to address workforce shortages • Continues animal health and disease research programs, instructing USDA to better focus resources on key animal science priorities • Maintains USDA catfish inspection program

Animal Agriculture Programs and Provisions: Title I – Commodities

• Livestock Indemnity Program (LIP) – Makes permanent and requires LIP payments to eligible producers starting with FY 2012 livestock losses in excess of normal mortality due to adverse weather or attacks by federally reintroduced animals. ◦◦ Payments are made at 75% of market value of the applicable livestock on the day before the date of death of the livestock, as determined by the Secretary. ◦◦ Excludes assistance for grazing losses on land used for haying or grazing under a CRP contract. In the case of drought, a payment rate for a single month is to be equal to 60% of the lesser of the monthly feed cost for covered livestock, owned or leased, or the monthly feed cost calculated by using the normal carrying capacity of the eligible grazing land.

• Livestock Forage Disaster (LFD) Program – For the 2012 and each succeeding fiscal year, the LFD program must provide compensation for losses to eligible livestock producers due to grazing losses on account of prescribed drought conditions or fire. ◦◦ An eligible producer may receive assistance only for grazing losses for covered livestock on land that is native or improved pastureland with permanent vegetative cover or is planted to a crop for the purpose of providing grazing for covered livestock. ◦◦ Excludes assistance for grazing losses on land used for haying or grazing under a CRP contract.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Prepared by the National Council of Farmer Cooperatives Based on best interpretation of legislation and accompanying managers’ report. Subject to agency rulemaking. ANIMAL AGRICULTURE PROGRAMS

◦◦ Establishes that in the case of drought, a payment rate for a single month is to be equal to 60% of the lesser of the monthly feed cost for covered livestock, owned or leased, or the monthly feed cost calculated by using the normal carrying capacity of the eligible grazing land. ◦◦ Requires a payment rate of 80% of the aforementioned payment rate in the case of an eligible livestock producer that sold or disposed of livestock due to drought in one or both of the two production years prior to the current production year. ◦◦ Prescribes the means by which monthly feed costs, feed grain equivalents, and corn price per pound are determined.

• Emergency Assistance for Livestock Producers – For fiscal year 2012 and each succeeding fiscal year, $20 million is made available provide emergency relief to eligible producers of livestock, honey bees, and farm-raised fish to aid in the reduction of losses due to disease (including cattle tick fever), feed or water shortages, adverse weather, or other conditions, such as blizzards and wildfires, as determined by the Secretary.

Title II – Conservation

• Environmental Quality Incentives Program (EQIP) – Maintains commitment to livestock producers with 60% of the funds made available for payments under the program allocated to practices relating to livestock production. Individuals and legal entities may not collect payments in excess of $450,000 between fiscal years 2014 through 2018.

• Conservation Reserve Program (CRP) – grazing grasslands of up to 2 million acres is designated as an eligible land use.

Title VII – Research

• Veterinary Services Grant program – New initiated created to award competitive grants to develop, implement and sustain veterinary services enabling large animal veterinarians to apply on a competitive basis for educational loan repayment assistance in exchange for their commitment to practice in shortage areas.

• Animal Health and Disease Research Programs – Reauthorized and expanded to enable USDA to better focus resources on key animal science priorities.

• Pollinator protection research – reauthorized and amended to include health and population status surveillance to ensure a healthy, sustainable population of native and managed pollinators. Continued authorization for research on pollinator protection with a consideration for honey bee health disorders and best management practices related to colony collapse disorder is required in the Secretary’s annual report to Congress.

• The bill repeals the authorization $500,000 appropriated in the Food, Agriculture, Conservation, and Trade Act of 1990 for the purposes in the establishment of a facility to be known as the Agricultural Turkey Research Center to be located in Pelican Rapids, Minnesota, and operated in cooperation with the North Dakota State University.

• Authority for the National Swine Research Center is repealed.

Title XII – Miscellaneous

• National Sheep Industry Improvement Center – Authority for the center is amended and $1.5 million for FY2014 is provided until expended. Administrative expenditures are capped at 10%.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Prepared by the National Council of Farmer Cooperatives Based on best interpretation of legislation and accompanying managers’ report. Subject to agency rulemaking. ANIMAL AGRICULTURE PROGRAMS

• No amendment to restrict the activities of the Packers and Stockyards Act of 1921 was adopted.

• Country of Origin Labeling (COOL) – USDA to conduct an economic analysis of the final rule of the impact on consumers, producers, and packers of the United States. No changes were made to the underlying authority providing for COOL.

• Food Safety and Inspection Service (FSIS) and the Food and Drug Administration (FDA) are required to enter into a memorandum of understanding so that duplicative inspection oversight of catfish is avoided and to improve interagency cooperation regarding dual jurisdictional facilities. The definition of “catfish” is clarified.

• National Poultry Improvement Plan – USDA to administer surveillance program for low pathogenic avian influenza for commercial poultry and requires funding to stay at FY2013 levels.

• New pilot program established to study the level of damage caused by feral swine and develop methods to eradicate or control and restore damage caused by feral swine. Federal cost-share of 75% is included as well as $2 million in appropriated funds for each fiscal years 2014 through 2018.

• Amends the Animal Welfare Act to prohibit knowingly attending an animal fighting venture or causing a minor under the age of 16 to attend, an also provides that a dealer or exhibitor shall not be required to obtain a license if the size of the business is determined to be de minimus by the Secretary.

NATIONAL COUNCIL OF FARMER COOPERATIVES

Prepared by the National Council of Farmer Cooperatives Based on best interpretation of legislation and accompanying managers’ report. Subject to agency rulemaking. NATIONAL COUNCIL OF FARMER COOPERATIVES 50 F Street, NW Suite 900 Washington, DC 20001 t: (202) 626-8700 f: (202) 626-8722 CONNECT WITH NCFC AT WWW.NCFC.ORG

Facebook: www.Facebook.com/Farmercoop Twitter: @FarmerCoop Flickr: www.flickr.com/people/farmercoop National Council of Farmer Cooperatives Representing the Business Interest of Agriculture Farm Bill Framework

Farmer Co-ops: Providing for America NCFC strongly recommends that the next farm bill strengthen the nation’s farmer cooperatives by: Farmer-owned cooperatives are central to America’s abundant, safe and affordable food, feed, fiber and fuel • Promoting the continued viability of the Capper- supply. Through their cooperatives, farmers are able to Volstead Act and other cooperative statutes; improve their income from the marketplace, manage • Promoting farmer cooperatives and their ability to risk, and strengthen their bargaining power, allowing enhance competition in the agricultural marketplace individual producers to compete globally in a way that by acting as bargaining agents for their members’ would be impossible to replicate as individual producers. products; providing market intelligence and pricing By pooling the buying power of hundreds or thousands information; providing competitively priced farming of individual producers, farmer cooperatives are able to supplies; and vertically integrating their members’ supply their members—at a competitive price—with production and processing. nearly every input necessary to run a successful farming • Supporting the cooperative Farm Credit System; operation, including access to a dependable source of • Ensuring farmer cooperatives remain eligible under credit. Furthermore, farmer cooperative members also federal programs for the benefit of their farmer are able to capitalize on new marketplace opportunities, members. including value-added processing, to meet changing • Expanding U.S. agriculture exports and global consumer demand. competitiveness, including through substantially improved access to foreign markets. Public policy should continue to protect and strengthen • Supporting a responsive safety net, together with the ability of farmers and ranchers to join together in adequate funding, that incorporates improved, cooperative efforts that maintain and promote the comprehensive risk management tools and programs economic well-being of farmers, ensure access to for producers and their cooperatives. competitive markets, and help capitalize on market opportunities. Additionally, trade is vital to the continued prosperity of co-ops and their farmer and rancher members. With over General Principles 95 percent of the world’s population living outside of the United States, our agricultural producers need foreign Recent farm bills have worked well for producers and markets to grow demand and programs that serve as consumers alike by serving a variety of purposes, catalysts to increased market access. including: working to meet the food, fuel and fiber needs of consumers worldwide; strengthening farm As was the case with the 2008 farm bill, the upcoming income; improving our balance of trade; promoting rural farm bill debate will be presented with the challenge development; and creating needed jobs here at home. to be fiscally responsible. Farmer co-ops are mindful of NCFC will continue to work with farm and commodity this challenge. At the same time, it is imperative that groups and other allied interests in support of farm Congress recognize the continued importance of farm legislation, together with needed funding, that builds on bill policies that promote a healthy and competitive U.S. the success of the 2008 farm bill. agricultural sector. That recognition starts with providing

National Council of Farmer Cooperatives 50 F Street NW, Suite 900 Washington, DC 20001 Tel: (202) 626-8700 Fax: (202) 626-8722 www.ncfc.org adequate resources to support policies in the next farm delivery of crop insurance for the specialty crop bill that will preserve the productive capacity of our industry. farms in times of poor production or prices. • Oppose efforts to link crop insurance with conservation compliance. Finally, recent estimates by the United Nations show • Promote initiative for farmer cooperatives to offer world population growing to 9.3 billion people by 2050; forward contracts and risk-mitigation to producers, a vibrant, productive U.S. agricultural economy will be particularly in times of high crop and crop input key to feeding and clothing a growing world. The next prices. farm bill must be written to ensure that American farmers • Support polices that enhance the ability of U.S. and ranchers have the tools and technologies needed to farmers to produce food, feed, fiber and fuel using meet this challenge. technologies that are based on proven science, including biotechnology. Commodities and Risk Management Conservation • Maintain and strengthen the ability of farmers to participate in federal farm and other programs, • Support the continuation of voluntary, locally-led including commodity purchase programs, by programs which recognize the uniqueness of the preserving the ability of farmers to access these agricultural community and which operate under programs through their cooperatives. the parameters of the nationally determined general • Support a responsive safety net, together with priorities. adequate funding, that meets the varying needs of • Maintain mandatory funding at the current U.S. producers while ensuring the long-term viability, authorized levels for USDA working lands health and competitiveness of U.S. agriculture. conservation programs, including the Environmental • Support dairy policy that reduces extreme volatility Quality Incentives Program. and establishes a viable and effective domestic • Strengthen working lands conservation programs safety net for producers with a focus on protecting to place greater emphasis on helping producers the operating margin experienced by producers meet their pressing federal and state regulatory as reflected by milk price and input costs. Support compliance needs, especially as agriculture’s nexus efforts to revise Federal Milk Marketing Orders with environmental laws continues to grow and to promote a pricing system that compensates become more burdensome. producers fairly and creates a more dynamic industry • Seek improvements to the application and ranking by moving away from end-product pricing formulas processes for conservation programs, creating a less and make allowances. burdensome signup process and encouraging greater • Provide improved risk management tools and participation. programs for farmers, including crop insurance, and • Target programs and funding to achieve real ensure that farmer cooperatives are able to be part of solutions for real problems. the delivery system. • Support improvements and funding for technical • Seek improvements in the scope, availability and assistance programs for public and private providers,

National Council of Farmer Cooperatives 50 F Street NW, Suite 900 Washington, DC 20001 Tel: (202) 626-8700 Fax: (202) 626-8722 www.ncfc.org allowing NCFC member cooperatives to provide eligibility for farmer cooperatives to access MAP technical service to their service areas. directly. • Strengthen USDA Natural Resources Conservation • Expand market analysis and other research activities Service’s (NRCS) science-based data collection at USDA with the goal of increasing the agricultural abilities through programs like the Conservation trade surplus. Effects Assessment Program (CEAP) to help show • Advocate the continuation of viable USDA Export how conservation measures are working to improve Credit Guarantee Programs, consistent with existing environmental conditions. WTO obligations. • Support efforts to provide cooperatives and their members’ preference in conservation programs. Credit and Rural Development • Support changes in the Conservation Reserve Program (CRP) to ensure it maximizes environmental • Reauthorize USDA’s Value-Added Producer Grants benefits for the most environmentally sensitive lands, Program. such as field borders and filter and buffer strips, and • USDA rural development programs should prioritize other areas needed for conservation, and has the modern production agriculture as essential to rural flexibility to be used for agricultural production. development. • Support enhancements to conservation • Farmer cooperatives should receive preference in programs that provide sound incentives for the recognition of their abilities to aggregate producers implementation of additional environmental best and deliver the greatest benefit. management practices and provide assurances to • Improve USDA farmer cooperative programs, farmers and ranchers that taking such steps will including research, education and technical meet expectations for agriculture’s contribution assistance. Provide additional direction to USDA’s to improving water quality in regions like the Rural Business Cooperative Service program area in Chesapeake Bay. support of farmer cooperatives. • Encourage expansion of broadband service Trade to rural areas through programs that ensure rural telecommunications providers, especially • Enhance USDA international programs and provide cooperatives, are not disadvantaged. the resources necessary to meet current and • Coordinate with the Farm Credit Institutions as they projected needs over the life of the 2012 farm bill. develop system-wide priorities for the next farm bill. • Advocate the importance of USDA’s Foreign Agricultural Service and export programs to enhance Food and Nutrition Programs our ability to expand agricultural exports. This includes providing no less than $200 million for the • Support USDA food and nutrition programs, Market Access Program (MAP) and $34.5 million for including Section 32 and commodity purchase the Foreign Market Development Program annually. programs, together with needed funding, to help • Continue to advocate preferences for cooperatives achieve their important objectives. in USDA’s export programs and ensure continued • Maintain the ability of farmers who cooperatively

National Council of Farmer Cooperatives 50 F Street NW, Suite 900 Washington, DC 20001 Tel: (202) 626-8700 Fax: (202) 626-8722 www.ncfc.org market their products and their cooperatives to limiting the marketing options of the cooperative and continue to be eligible under USDA commodity its members. purchase programs. • Support dairy policy that reduces extreme volatility and establishes a viable and effective domestic Specialty Crops safety net for producers, with a focus on protecting the operating margin experienced by producers as • Support funding for specialty crop research to reflected by milk price and input costs. Additionally, enhance competitiveness and further document support efforts to revise Federal Milk Marketing health benefits. Orders to promote a pricing system that compensates • Ensure eligibility of all forms of cooperatively grown producers fairly and creates a more dynamic industry and marketed fruits, vegetables, and tree nuts in Farm by moving away from end-product pricing formulas Bill specialty crop programs. and make allowances. • Support funding and increased coordination between federal, state, and local government Energy agencies and industry stakeholders, including farmers and their cooperatives, in the prevention and • Support expanded federal fleet requirements and use treatment of plant pests and diseases that could harm of biofuels and procurement programs for biobased domestic production and/or international trade. products. • Support the use of technologies and advances in • Support USDA loan and grant programs, including science to treat plant pest and disease. special provisions for farmer cooperatives, to • Support funding for specialty crop promotion, both encourage production, utilization and distribution of domestically and abroad. renewable energy, including from crops and livestock. • Support increased research relating to production, Animal Agriculture utilization and distribution of renewable energy, including from biomass, animal waste and • Support policies that enhance the ability of byproducts. cooperative members to raise animals for food and • Support federal programs to enhance public fiber using practices and technologies that are based awareness, education, and promotion efforts to on proven science, are economically sound, provide encourage utilization of renewable fuels. for the proper care and well-being of the animals, and ensure the safety of animal agriculture products. • Support policies to enhance business opportunities for livestock and poultry producers, as well as their farmer-owned livestock marketing associations, by Connect with NCFC at www.ncfc.org providing the freedom and flexibility to engage in Facebook: www.Facebook.com/Farmercoop new market innovations. Twitter: @FarmerCoop • Oppose federal policies that negatively impact Flickr: www.flickr.com/people/farmercoop producer-owned livestock marketing associations by

National Council of Farmer Cooperatives 50 F Street NW, Suite 900 Washington, DC 20001 Tel: (202) 626-8700 Fax: (202) 626-8722 www.ncfc.org Tel: 202-626-8700 Fax: 202-626-8722 50 F Street, NW Suite 900 Washington, DC 20001 www.ncfc.org

October 24, 2013

The Honorable Frank Lucas The Honorable Debbie Stabenow Chairman Chairwoman Committee on Agriculture Committee on Agriculture, Nutrition & Forestry United States House of Representatives United States Senate Washington, DC 20515 Washington, DC 20510

The Honorable Collin Peterson The Honorable Thad Cochran Ranking Member Ranking Member Committee on Agriculture Committee on Agriculture, Nutrition & Forestry United States House of Representatives United States Senate Washington, DC 20515 Washington, DC 20510

Dear Farm Bill Conference Committee Leadership:

On behalf of the more than two million farmers and ranchers who belong to farmer cooperatives, the National Council of Farmer Cooperatives (NCFC) commends you for your relentless pursuit of a comprehensive five-year farm bill. As negotiations commence to resolve the differences between the House and Senate versions of the farm bill, we offer the following recommendations and observations.

Of primary importance, the farm bill must preserve the long-standing rural-urban alliance that reinforces the fact that food security, investment in rural America and a safety net for those in need are priorities benefitting the entire nation. Adding to the importance of this effort is the fact that rural America’s population is, by its very nature, smaller than that of urban and suburban America. As such, it is ill- advised to seek a separation of nutrition programs from the farm bill, especially at a time when the agriculture industry is seeking to better connect with its consumers.

Key to the success of this conference committee will be emphasizing those issues that unite producers, regardless of commodity or location, rather than those issues that divide agriculture. This begins with preserving the productive capacity of our farms by supporting a meaningful and equitable safety net for producers across all commodities, including dairy reform provisions that are contained in S. 954 (Agriculture Reform, Food, and Jobs Act of 2013) and supported by dairy producers of all sizes and all regions of the country. This also includes preserving a strong crop insurance program that is not arbitrarily constrained by payment limits or means testing of those who can participate.

In addition, we seek your continued commitment to the following:

• Protecting and strengthening the ability of farmers and ranchers to join together in cooperative efforts that maintain and promote the economic well-being of farmers, ensure access to competitive markets and help capitalize on market opportunities;

• Continuation of the current sugar program;

Representing the Business Interests of Agriculture

• Restoring the Livestock Indemnity Program, Livestock Forage Program and the Tree Assistance Program, all of which provide those producers with basic risk management tools;

• Continuation of voluntary, locally-led conservation programs and in particular maintaining robust workings lands programs like the Environmental Quality Incentives Program, which helps producers meet their pressing federal and state regulatory compliance needs;

• Sustaining export programs, like the Market Access Program, which are vital to maintaining and expanding U.S. agricultural exports, countering subsidized foreign competition, protecting American jobs and strengthening farm income;

• Investing in specialty crop infrastructure to keep U.S. production strong, including research to enhance competitiveness and further document health benefits, provisions that require transparency and analyze potential market impacts before the development of new risk management tools, creation of a pilot crop insurance program allowing coverage for food safety and quarantine issues, and prevention and treatment of plant pests and diseases that could harm domestic production or international trade;

• Allowing schools to serve more fruits and vegetables in all forms (e.g. fresh, frozen, dried and shelf- stable) as well as nuts under the United States Department of Agriculture’s (USDA) Fresh Fruit and Vegetable Program; and

• Preserving the integrity of the Value-Added Producer Grant program, and recognizing the ability of farmer cooperatives to spread the benefits of the program to a large number of producers.

Additionally, NCFC strongly urges the conference committee to include provisions that address costly and unnecessary regulatory burdens placed on producers. In particular, NCFC strongly supports Section 9013 of the House farm bill which corrects duplicative permitting requirements by specifying that Clean Water Act National Pollutant Discharge Elimination System permits are not needed for the lawful application of pesticides already regulated under the Federal Insecticide, Fungicide, and Rodenticide Act. This legislative language is nearly identical to the Senate’s bipartisan Sensible Environmental Protection Act of 2013 (S. 802). We ask you to include this language in the final version of the farm bill.

Likewise, we appreciate both the House and Senate recognizing the need to protect the private information of farmers and ranchers by including provisions that prohibit the U.S. Environmental Protection Agency (EPA) from procuring or disclosing such information to the public. We encourage the conference committee to maintain such provisions in the final conference report.

NCFC also seeks inclusion of other regulatory provisions contained in the Federal Agriculture Reform and Risk Management Act (H.R. 2642/H.R. 6083) in the final conference report, including:

• Modification of EPA’s Spill Prevention, Control and Countermeasure (SPCC) regulations for farmers and ranchers;

• Clarification that treated seeds shall not be considered a pesticide or device under special import restrictions;

• Instructions to EPA to consult with the Natural Resources Conservation Service (NRCS) with respect to water quality and nutrient management modeling for the Chesapeake Bay watershed;

2 NCFC Letter to Farm Bill Conferees October 24, 2013

• Consultations between USDA and the Department of Labor to ensure a transparent and equitable process related to labor disputes that impact perishable commodities;

• Requirements for scientific and economic analysis of the Food Safety Modernization Act regulation prior to final regulations being finalized; and

• Enhancements to federal coordination to improve the health and long-term sustainability of managed and native pollinators.

Finally, farmer co-ops strongly encourage the conference committee to oppose provisions that could potentially impact farm bill reauthorizations in the years ahead. The changes that we have seen on our farms and ranches and at our co-ops in the last three decades will almost certainly continue in the future. There is no way that we can predict today what American agriculture will look like in the year 2018, 2023 or beyond. Removing the motivation to address an evolving agricultural economy in future farm bills would impact a number of programs vital to producers and communities across the country, with the result likely being inaction.

American farmers and ranchers and the co-ops they own must have the certainty of a comprehensive five- year farm bill that provides the flexibility, resources, tools and technologies needed to meet the challenges of a growing world. Farm bills need to be forward looking, ensuring that we plan for tomorrow, when times may not be so good, rather than for today. This farm bill should not be our last.

The differences between the House and Senate bills are not insurmountable, and we encourage quick resolution to achieve support of a broad consensus of farm bill stakeholders. We stand ready to work with you, your staff, and the other conferees toward realizing this common goal.

Sincerely,

Charles F. Conner President & CEO cc: Farm Bill Conferees

3 NCFC Letter to Farm Bill Conferees October 24, 2013

U.S. Baseline Estimates and Projections for Agricultural and Biofuel Markets

The following analysis and projections were taken from the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri (MU) U.S. Baseline Briefing Book, Projections for Agricultural and Biofuel Markets, March 2016, FAPRI‐MU Report #02‐16. It was prepared by the Integrated Policy Group, Division of Applied Social Sciences. To view the entire report, visit https://www.fapri.missouri.edu/wp- content/uploads/2016/03/FAPRI-MU-Report-02-16.pdf.

Summary

Lower agricultural commodity prices have contributed to a sharp reduction in net farm income. The outlook for the next several years suggests continued pressure on farm finances is likely.

These baseline projections for agricultural and biofuel markets were prepared using market information available in January 2016. Macroeconomic assumptions are based primarily on forecasts by IHS Global Insight which suggest moderate growth in the U.S. and global economies. The baseline incorporates 2014 farm bill provisions and assumes a continuation of current agricultural and biofuel policies.

The world is an uncertain place and commodity markets will continue to be volatile. We use our models to develop a range of projected market outcomes that takes into account some major sources of uncertainty about future supply and demand conditions. In some of the resulting 500 outcomes, prices, quantities and values are much higher or much lower than the averages reported here.

Some key results: • Large global crops of grains and oilseeds in 2014 and 2015 have increased carryover stocks and contributed to lower prices for corn, wheat, soybeans and other crops.

• In 2016, modest projected increases in acreage planted to corn, soybeans and cotton offset reduced wheat and sorghum acreage.

• Projected corn prices average $3.75 per bushel for the 2016/17 marketing year, up only slightly from 2015/16. Corn prices average less than $4.00 per bushel for the 2017-2025 period.

• Other crop prices also remain well below recent peak levels. Soybean prices average $8.73 per bushel in 2016/17, while wheat averages $4.97 per bushel and upland cotton averages 56.9 cents per pound.

• Cattle, hog, chicken and milk prices all peaked in 2014 and then declined in 2015 in response to increased production and weak export demand.

• Projected livestock, poultry and milk prices all decline again in 2016 as supplies continue to increase. Projected cattle prices fall further in 2017 and 2018 as recent increases in cow numbers translate into more calves and increased beef production.

• Net farm income in 2015 was less than half the 2013 record level, as farm receipts declined much more rapidly than costs. Projected 2016 net farm income of $56 billion is near the 2015 level, and the modest increases projected for later years leave real, inflation-adjusted net farm income at about the same level in 2025 as it was in 2015.

• With farm income well below recent peak levels and if interest rates increase as forecasted, there will be continued pressure on farm finances and farm real estate values.

• Payments under the commodity provisions of the 2014 farm bill increase for the 2015/16 crop year, causing federal spending to peak in fiscal year 2017.

• Agricultural risk coverage (ARC) payments are expected to decline rapidly after 2015/16, largely because of reduced guarantees tied to moving averages of past market prices.

• Crop insurance net outlays are projected to average about $8 billion per year for fiscal years 2017-2025.

• Projected food price inflation drops to 0.7 percent in 2016, and averages 2.3 percent per year from 2017-2025.

Key results

2010/11‐2014/15 2017/18‐2025/26 Marketing year average 2015/16 2016/17 average

Crop prices Corn farm pric e, dollars per bushel 5.29 3.60 3.75 3.96 Soybean farm pric e, do llars per bushel 12.26 8.82 8.73 9.76 Wheat farm pric e, do llars per bushel 6.71 4.99 4.97 5.32 Upland cotton farm pric e, cents per pound 76.3 59.2 56.9 63.3

Crop area planted, million acres Corn 92.7 88.0 89.7 90.9 Soybeans 78.0 82.7 83.0 83.5 Wheat 55.1 54.6 51.7 53.1 Upland cotton 11.7 8.4 9.4 8.8 12 majo r crops* 257.7 257.0 256.4 257.9

2010‐2014 2017‐2025 Calendar year except as noted average 2015 2016 average

Livestock sector prices Fed steers, 5‐area dire c t, dollars per cwt 122.68 148.12 133.41 125.15 Barrows and gilts, 51‐52% lean, do llars per cwt 64.43 50.23 46.59 52.29 National wholesale broiler, cents per pound 90.70 90.50 84.53 90.15 All milk, do llars per cwt 19.87 17.13 16.11 18.20

Biofuel production, billion gallons Ethanol 13.6 14.8 14.8 15.4 Corn starch‐based ethanol 13.4 14.4 14.4 15.1 Biomass‐based diesel 1.2 1.6 1.7 1.9

Government outlays, billion dollars, fiscal year Commodity Credit Corporation net outlays 9.6 7.0 9.3 8.6 Major c o mmo dity programs 5.3 1.4 6.2 5.8 CRP, disaste r and all other CCC net outlays 4.3 5.5 3.0 2.8 Crop insurance net outlays 7.7 7.4 5.6 8.1

Net farm income, billion dollars 100.3 56.4 56.0 64.0

Annual consumer food price inflation 2.2% 1.9% 0.7% 2.3%

*Includes corn, soybeans, wheat, upland cotton, sorghum, barley, oats, ric e, peanuts, sunflowers, sugarcane and sugar beets.

Note: The estimates are based on marke t information available in January 2016. Projections are averages ac ro ss 500 outcomes.

FAPRI-MU Report #02-16 - 2016 U.S. Baseline Briefing Book - Page 2 Trade Outlook Trans-Pacific Partnership Agreement

NCFC Position: NCFC urges Congress to pass the Trans-Pacific Partnership (TPP). For agriculture, the TPP offers tremendous opportunity to farmers and their co-ops to expand exports and generate additional economic activity across farm country. The agreement contains meaningful reductions in barriers erected by other countries to U.S. agricultural exports by lowering tariffs and working to ensure that sanitary and phytosanitary (SPS) standards are based on science. Current Status: TPP negotiations concluded with the U.S., Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam in October, 2015. The President signed the TPP Agreement on February 4, 2016. Ratification rules in the TPP require that six countries, representing 85 percent of combined GDP, approve the agreement before it enters into force. Therefore, to meet this threshold both the U.S. Congress and Japan’s Legislature must pass the agreement. Background: TPP would benefit the agriculture sector primarily from market access provisions, such as reduced or eliminated tariffs and tariff-rate quotas (TRQs). In addition, TPP includes a chapter on SPS measures that build on the WTO’s SPS Agreement, provisions specific to trade in products of biotechnology, and addresses rules around the use of Geographic Indications (GIs). Tariffs: In addition to providing overall increased market access by lowering/eliminating tariffs, in a number of cases it will level the playing field for U.S. agriculture versus competing exporters. U.S. products are often at a competitive disadvantage in certain TPP markets due to tariff preferences provided through other agreements that the U.S. is not party to, such as the Japan-Australia Economic Partnership. Tariff disparities will continue to widen in those instances the longer TPP goes without being implemented. Sanitary and Phytosanitary (SPS) Standards: The SPS provisions would require TPP countries to maintain science-based SPS measures and to clarify and build on provisions of the WTO’s SPS Agreement. The cooperative technical consultations process, along with the dispute settlement provisions in the TPP, represents an important advancement over the WTO SPS Agreement. Biotechnology Provisions: TPP is the first U.S. agreement to include provisions specific to trade in products of modern biotechnology. The agreement would commit parties to provide transparency on government measures related to biotechnology trade, and provide information-sharing procedures for parties to follow when the low-level presence (LLP) of biotech material is detected in a food or agricultural shipment. It would also establish a biotech working group under the Committee on Agricultural Trade that would encourage information exchange and cooperation on trade-related matters.

Geographic Indications: Particularly important to the U.S. dairy sector, the TPP’s GI provisions would create an improved set of tools to combat the use of GIs in the future to block U.S. exports from TPP members. New due- process and transparency provisions governing the recognition of GIs, particularly GIs that may conflict with common food names in TPP markets, will significantly strengthen the ability of the U.S. to combat barriers and help to preserve market access opportunities for U.S. companies. Future Opportunities: The additional market access gains for the U.S. under TPP will largely come from Japan and Vietnam since the U.S. currently has FTAs with Australia, Canada and Mexico, Chile, Japan, Peru, and Singapore. However, a number of countries that have significant market potential for U.S. agricultural exports have signaled their interest in joining the TPP in the future – Indonesia, Thailand, and the Philippines, to name a few. In addition to the overall benefits to the U.S. agriculture sector, it will assist farmer cooperatives in their essential role in helping farmers gain financially from the global marketplace. Individual producers, who largely do not have the resources or production volume to export on their own, are able to use their numbers through co-ops to gain access to foreign markets. Co-ops use the earnings from these overseas sales to increase the patronage dividends paid directly to farmers. In this way, individual producers can profit directly from increased export opportunities that result from TPP.

November 2016

NATIONAL COUNCIL OF FARMER COOPERATIVES 50 F Street NW, Suite 900 Washington, DC 20001 Tel: (202) 626-8700 Fax: (202) 626-8722 www.ncfc.org | facebook: www.facebook.com/FarmerCoop | twitter: @FarmerCoop 2016 MAP, FMD Study Results Promotional Opportunities Major Study Infographic Highlights MAP/FMD = 15% of Export Revenue Increased Income Multiplied Job Creator Rate of Return/BRC Economic Development Programs Immigration Reform Immigration Reform

NCFC Position: U.S. agriculture faces a critical shortage of workers every year, as citizens are largely unwilling to engage in these rigorous activities and guestworker programs are unable to respond to the marketplace. This situation makes our farms and ranches less competitive with foreign farmers and less reliable for the American consumer. NCFC supports legislative reform that includes both a program to provide access to a legal workforce into the future and an adjustment for current experienced, unauthorized agricultural workers. Action: NCFC and the Agriculture Workforce Coalition (AWC) remain steadfast in our advocacy of immigration reform that meets the needs of all of agriculture and provides a lasting solution to the issue of current and future agricultural labor in the U.S. Agriculture’s crisis must be addressed through legislative reform which includes an adjustment for current agricultural workers who lack proper work authority and a new guestworker program to meet future needs. Immigration reform and border security have been a highly visible issue throughout the Presidential campaign. While the candidates have a distinct difference of opinion as to the critical components of reform, both have indicated it will be a top priority for their Administration in its first 100 days. For this reason, the AWC has been deliberating how best to engage in any policy discussions on immigration reform with the new Trump Administration’s transition team following the election. While the actual mechanism for engagement with the new Administration’s transition team is still under deliberation, the coalition agrees that now more than ever we must work together to ensure immigration reform is a top priority for the new Administration and Congress. Current Status: In November 2014, President Obama released a series of Executive Actions on immigration. The two most significant elements for employers involve deferred deportation for certain unauthorized immigrants currently in the U.S. and a change in enforcement prioritization for U.S. Citizenship and Immigration Services (USCIS). Under the Actions, an unauthorized immigrant who has been in the country continuously since before January 1, 2010, and who is the parent of a U.S. citizen or legal permanent resident, is eligible to apply for deferred deportation. If the individual still qualifies after a background check and his or her family ties can be verified, the individual will be allowed to stay and work in the U.S. for a 3-year period. USCIS will shift enforcement priorities to the border instead of workforce raids and I-9 audits, focusing on apprehending terrorists, criminal aliens and those trying to cross the border illegally.

The President’s Actions were quickly challenged by 26 states, which filed suit to prevent their implementation. In February 2015 a U.S. district court judge blocked the Executive Actions on procedural grounds, and on May 26, 2015 the Fifth Circuit denied the Administration’s request to allow the Executive Actions to go into effect pending appeal of the district court’s ruling. On November 9, 2015, the U.S. Court of Appeals for the 5th Circuit ruled 2-to-1 in favor of upholding the lower court’s injunction blocking the Obama administration from executing the deferred action program. The Department of Justice appealed to the U.S. Supreme Court and oral arguments were heard in April 2016. With Justice Scalia’s seat unfilled, the decision by the Supreme Court was split 4-4, which means the Circuit Court’s decision stands. In the meantime, the Executive Actions remain on hold until the case is resolved, which may not occur before the end of President Obama’s term. President Obama’s Executive Action may help the agriculture industry to a very limited extent, but could also harm the industry through workforce attrition. Regardless, the only true fix to agriculture’s workforce crisis is a legislative solution. Background: Farmers and ranchers have long experienced difficulty in obtaining workers who are willing and able to work on farms and in fields. Jobs in agriculture are physically demanding, conducted in all seasons and are often transitory. To most U.S. residents seeking employment, these conditions are not attractive. Yet, for many prospective workers from other countries, these jobs present real economic opportunities. Past legislative proposals (e.g. AgJOBS, HARVEST Act, BARN Act and other bills) have attempted to reform the H-2A program to ensure a future workforce in agriculture. However, it is apparent that those proposals are no longer viable. Agriculture needs a program that functions as efficiently as the current free market movement of migrant farm workers while providing the security of a contractual relationship in areas where there is little migration. The new approach outlined above will ensure a legal, reliable and long-term workforce for all sectors of the industry.

November 2016

NATIONAL COUNCIL OF FARMER COOPERATIVES 50 F Street NW, Suite 900 Washington, DC 20001 Tel: (202) 626-8700 Fax: (202) 626-8722 www.ncfc.org | facebook: www.facebook.com/FarmerCoop | twitter: @FarmerCoop Issues Wrap-Up Tel: 202-626-8700 Fax: 202-626-8722 50 F Street, NW Suite 900 Washington, DC 20001 www.ncfc.org

October 25, 2016

The Honorable XX U.S. House of Representatives Washington, DC 20515

Re: Protect Farmer Cooperative Multiple-Employer Pension Benefits Plans: Include the Senate Finance Committee Passed “Retirement Enhancement and Savings Act of 2016” in Year-end Package.

Dear Representative:

I’d like to bring to your attention an issue of great importance to more than 400 farmer cooperatives across the country today, which is addressing the overcharging of premiums by the Pension Benefit Guaranty Corporation (PBGC) for “multiple-employer” pension plans in which those cooperatives participate. To address this inequity, we urge you and your colleagues to include the Retirement Enhancement and Savings Act of 2016 in any year-end budget/tax package.

The Retirement Enhancement and Savings Act of 2016, which was unanimously approved by the Senate Finance Committee on September 21, will have a significant impact on the ability of many smaller farmer-owned cooperatives to prevent the unnecessary diversion of scarce investment and operating capital to pension funding requirements intended for other types of plans under the Pension Protection Act of 2006 (PPA). The vast majority of farmer cooperatives participating in multiple-employer plans have fewer than 100 employees.

As you know, the Cooperative and Small Employer Charity Pension Flexibility Act of 2014 (Pub. L. No. 113- 97) recognized that rural cooperative multiple-employer plans are different than other types of plans, and by their nature pose virtually no risk of default to the PBGC. However, the Act did not address the overcharging of PBGC premiums for those retirement plans. Adjusting the premiums now to better reflect the low risk of those plans would allow additional stability for farmer cooperatives that provide retirement benefits to their employees under such plans.

On behalf of farmer cooperatives, I hope you will work with your colleagues to ensure the Retirement Enhancement and Savings Act of 2016 becomes law this year. Thank you for your consideration of supporting farmers, the cooperative businesses they own, and their employees.

Sincerely,

Chuck Conner President & CEO

Representing the Business Interests of Agriculture

Overtime Rulemaking

NCFC Position: NCFC opposes drastically increasing the salary threshold for determining overtime pay and automatic updates to salary and compensation levels. Instead of imposing a new, unnecessarily high overtime threshold that will be costly and burdensome for employers, NCFC supports allowing the market to dictate an employee’s compensation based on the individual’s role, skillset and experience. Action: NCFC calls on Congress to pass the Protecting Workplace Advancement and Opportunity Act (H.R. 4773; S. 2707) that would halt the Department of Labor’s (DOL) Overtime Final Rule and require the Agency to conduct a comprehensive impact analysis of its effects on business, including human resource costs, employee benefits and flexibility. The legislation would also restrict automatic increases to the overtime threshold and would necessitate any changes to the “duties test” be done through a transparent process with the opportunity for public comment. Lastly, the bill would ensure stakeholders have ample time to comment on future proposed rules and guarantee a minimum of one year to comply with future regulations. The Protecting Workplace Advancement and Opportunity Act does not preclude an increase in the salary threshold. The bill simply requires DOL to analyze the impact these new regulations would have before the Agency proceeds. This reasonable request is supported by the Administration’s own Small Business Administration’s Office of Advocacy which believes DOL’s economic analysis significantly underestimated the affect the rulemaking would have on business. NCFC also supports two additional bills that would phase-in increases to salary thresholds; the Overtime Reform and Enhancement Act (H.R. 5813) and the Overtime Reform and Review Act (S. 3463). The Overtime Reform and Enhancement Act, introduced by Rep. Kurt Schrader (D-OR), would phase in DOL’s salary threshold over a period of three years, starting with an increase to $36,000 on December 1, 2016 with the final increase taking place in 2019.The Overtime Reform and Review Act, introduced by Sen. Alexander (R-TN), would phase-in the threshold over a period of five years with an initial adjustment to $36,000 on December 1, 2016, followed by a “pause” year for employers to adjust to the new requirements of the rule. Increases to the salary level would continue each subsequent year until the threshold reaches $47,476 on December 1, 2020. Current Status: The controversial final Overtime Rule was published in the Federal Register on May 23, 2016.The finalized rule will increase the salary threshold from $455 per week to $913 per week (or $47,476 annually), a 100 percent increase. It will mandate an automatic update of the salary threshold every three years. The update will be indexed to the salary growth in the South, the lowest income region of the country. Each update will raise the threshold to the 40th percentile which is estimated to be $51,168 in 2020.

The rule also changes the “salary basis test” by permitting employers to use nondiscretionary bonuses and incentive payments (e.g. commissions) to satisfy up to 10 percent of the new standard salary level. However, the rule does not alter the “duties test” for executive, administrative and professional employees. The final rule will go into effect on December 1, 2016. If these changes are implemented, 4.2 million employees will become eligible for overtime pay. These new requirements will likely affect employers’ ability to hire new employees and reduce current workers’ hours, pay, flexibility, benefits and bonuses. Given the problematic nature of this regulation, members of Congress in both chambers introduced legislation on March 17, 2016, that would require the Department to perform a detailed impact analysis prior to implementing these changes. In the House, Reps. Tim Walberg (R-MI) and John Kline (R-MN) introduced H.R. 4773, the Protecting Workplace Advancement and Opportunity Act, which currently has over 201 cosponsors. In the Senate, Sens. Tim Scott (R-SC) and Lamar Alexander (R-TN) introduced a companion bill, S. 2707, the Protecting Workplace Advancement and Opportunity Act, which has over 45 cosponsors. Additional pieces of legislation proposing a phase-in approach to the salary threshold were introduced in the House and Senate. In the House, the Overtime Reform and Enhancement Act (H.R. 5813) introduced on July 14, 2016 by Rep. Kurt Schrader (D-OR-5) currently has 17 cosponsors. In the Senate, the Overtime Reform and Review Act (S. 3464) introduced on September 29, 2016, by Sen. Lamar Alexander (R-TN), currently has 4 cosponsors. Background: In 2014, President Obama drafted a Presidential Memorandum instructing DOL to change the overtime regulations. DOL published the Defining and Delimiting the Exemptions for Executive,Administrative, Professional, Outside Sales and Computer Employees Proposed Rule in July 2015 and accepted public comment until early September 2015. The final rule was announced May 18, 2016, after receiving over 270,000 comments.

November 2016

NCFC ISSUE UPDATE

TO: NCFC Government Affairs Committee FROM: NCFC Staff DATE: 09/22/2016

ISSUE: DC Circuit Court Rules OSHA Violated OSH Act Regarding PSM Interpretation

OVERVIEW: Yesterday, the DC Circuit Court ruled that the Occupational Safety and Health Administration (OSHA) violated the Occupational Safety and Health (OSH) Act and the Administrative Procedures Act (APA) when it issued a memo on July 22, 2015, revising its longstanding policy for retail facility exemptions under the Process Safety Management (PSM) Standard (29 CFR 1910.119).

This decision comes after The Fertilizer Institute and the Agricultural Retailers Association filed suit against OSHA for failure to follow APA procedures requiring a notice-and-comment period when redefining a retail facility. As a result of this ruling, agriculture retailers will continue to be exempt from PSM compliance standards unless OSHA completes a formal rulemaking process including public comment period.

A copy of the Court’s decision is attached.

BACKGROUND: On July 22, 2015, OSHA bypassed the rulemaking process and issued a revised policy for retail facility exemptions under the PSM Standard (29 CFR 1910.119). This move had significant implications for agriculture, impacting approximately 3,800 fertilizer retailers and costing the industry in excess of $100 million to comply.

Under OSHA’s original exemption policy, an agricultural retailer was exempt from PSM coverage if it derived more than 50 percent of its income from direct sales of highly hazardous chemicals to the end user. However, the new policy states: “Only facilities, or the portions of facilities, engaged in retail trade, as defined by the current and any future updates to sectors 44 and 45 of the North American Industry Classification System (NAICS) Manual, may be afforded the retail exemption at 29 CFR 1910.119(a)(2)(i).”

Most agricultural retailers are registered under NAICS code 424910 (Farm Supplies Merchant Wholesale). The 2015 memo indicated if an agricultural retailer operates under anything but NAICS 44 or 45 and holds more than threshold quantities of a highly hazardous chemical (10,000 lbs of anhydrous ammonia), PSM requirements would apply to their operations.

# # #

This communication is for use by the intended recipient and contains information that may be privileged, confidential or copyrighted under applicable law. If you are not the intended recipient, you are hereby formally notified that any use, copying or distribution of this e-mail, in whole or in part, is strictly prohibited. Please notify the sender by return e-mail and delete this e-mail from your system. USCA Case #15-1326 Document #1637299 Filed: 09/23/2016 Page 1 of 11

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Submitted May 16, 2016 Decided September 23, 2016

No. 15-1326

AGRICULTURAL RETAILERS ASSOCIATION AND THE FERTILIZER INSTITUTE, PETITIONERS

UNITED STATES DEPARTMENT OF LABOR AND OCCUPATIONAL SAFETY & HEALTH ADMINISTRATION, RESPONDENTS

Consolidated with 15-1340

On Petitions for Review of a Memorandum of the Occupational Safety & Health Administration

Gary H. Baise, Stewart D. Fried, Chris S. Leason, Mark C. Dangerfield, and Andrew E. Dudley were on the joint briefs for petitioners. Anson M. Keller Sr. entered an appearance.

Ann S. Rosenthal, Associate Solicitor, Occupational Safety & Health Administration, Charles F. James, Counsel, U.S. Department of Labor, and Lauren S. Goodman, Senior

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2 Attorney, U.S. Department of Labor, were on the brief for respondents.

Randy S. Rabinowitz was on the brief for movant- intervenor for respondents.

Before: ROGERS, SRINIVASAN and MILLETT, Circuit Judges.

Opinion for the Court filed by Circuit Judge SRINIVASAN.

SRINIVASAN, Circuit Judge: The Occupational Safety and Health Administration, part of the Department of Labor, aims to secure “safe and healthful working conditions” for the Nation’s workers. 29 U.S.C. § 651(b). To that end, OSHA in 1992 issued the so-called Process Safety Management Standard to protect the safety of those who work with or near highly hazardous chemicals. From its inception, the standard has exempted retail facilities from its requirements. The exemption rests on an assumption that the retail setting involves diminished risks of a substantial release of toxic chemicals. Recently, after a catastrophic chemical explosion at a Texas fertilizer company that qualified as an exempt retail facility, OSHA narrowed the scope of the retail-facility exemption so that the safety standard’s requirements would now apply to formerly exempt facilities like the Texas plant.

The question we confront is whether, when OSHA narrowed the scope of the exemption for retail facilities, the agency issued a safety “standard” within the meaning of the Occupational Safety and Health Act (OSH Act). If so, we have jurisdiction to review OSHA’s action, and the OSH Act would have required the agency to adhere to procedural notice-and-comment requirements, which it concededly did not do. If, however, OSHA’s action did not amount to

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3 issuance of a “standard,” we would lack jurisdiction to review it and the OSH Act would have imposed no obligation to follow notice-and-comment procedures.

Under our decisions, when an action by OSHA corrects a particular hazard, as opposed to adjusting procedures for detection or enforcement, it amounts to a “standard.” Applying that understanding, we conclude that the agency’s narrowing of the substantive scope of the exemption for retail facilities qualified as issuance of a “standard.” We therefore have jurisdiction, and OSHA was required to adhere to notice- and-comment procedures. Consequently, we grant the petitions for review and vacate OSHA’s action.

In 1992, OSHA promulgated the Process Safety Management (PSM) Standard in an effort to “provide safe and healthful employment and places of employment for employees in industries which have processes involving highly hazardous chemicals.” Process Safety Management of Highly Hazardous Chemicals; Explosives and Blasting Agents, 57 Fed. Reg. 6356, 6359 (Feb. 24, 1992), codified at 29 C.F.R. § 1910.119 (2016). The PSM Standard “contains requirements for preventing or minimizing the consequences of catastrophic releases of toxic, reactive, flammable, or explosive chemicals.” 29 C.F.R. § 1910.119.

From the outset, OSHA exempted “[r]etail facilities” from the requirements of the PSM Standard. Id. § 1910.119(a)(2)(i). The exemption, OSHA explained in the preamble of the final standard, was rooted in an understanding that “chemicals in retail facilities are in small volume packages, containers and allotments, making a large release [of toxic chemicals] unlikely.” 57 Fed. Reg. at 6369. OSHA

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4 identified “gasoline stations” as prototypical examples of retail facilities. Id. Shortly after promulgating the PSM Standard, OSHA issued a letter defining an exempt retail facility as “an establishment . . . at which more than half of the income is obtained from direct sales to end users.” See Letter from Patricia K. Clark, Dir. of Enf’t Programs, OSHA, to Gary Myers, President, The Fertilizer Inst. (June 19, 1992). The “50 percent test” remained the rule for more than two decades.

In April 2013, a catastrophic chemical explosion at a fertilizer company in West, Texas, resulted in the deaths of 15 persons and injured many others. Although the company stored large quantities of a highly hazardous chemical (anhydrous ammonia) for bulk distribution as fertilizer to farmers, it had been exempt from the PSM Standard under the 50 percent test for retail facilities. That test had enabled establishments to claim the exemption even if they stored large amounts of hazardous chemicals for distribution in wholesale quantities to commercial end users (including farmers), as long as the distributions went directly to the end users.

After the explosion at the West, Texas, fertilizer facility, President Obama issued an executive order that, among other things, directed the Secretary of Labor to “identify any changes that need to be made in the retail . . . exemption[] in the PSM Standard” so as to “meet the goal of preventing major chemical accidents.” Improving Chemical Facility Safety and Security, 78 Fed. Reg. 48029, 48032 (Aug. 1, 2013). OSHA responded in 2015 by issuing the Memorandum at issue in this case. OSHA, Memorandum on Process Safety Management of Highly Hazardous Chemicals and Application of the Retail Exemption (29 C.F.R. § 1910.119(a)(2)(i)), July 22, 2015.

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5 The Memorandum “rescind[ed] all prior policy documents, letters of interpretation, and memoranda related to the retail exemption and the 50 percent test.” Id. OSHA explained that the “50 percent test allows employers who sell or distribute large, bulk quantities of highly hazardous chemicals directly to end consumers to claim the exemption, even if the end users are themselves commercial establishments.” Id. That result was “directly contrary to OSHA’s original intent,” i.e., “to exclude retail facilities from PSM coverage because the small container, package, or allotment sizes of the chemicals typically found at these facilities do not present the same safety hazards as establishments that handle large, bulk quantities of materials.” Id. Concluding that the retail exemption “should never have been interpreted to cover facilities engaged in distinctly wholesale activities,” OSHA announced that retail facilities would instead be defined by a Department of Commerce manual classifying types of businesses. Id. Under that definition, retail facilities must be “organized to sell merchandise in small quantities to the general public.” Id. Because farm supply establishments like the West, Texas, facility sell chemical fertilizers in bulk to farmers, they fall outside the revised definition of retail facilities. Id. Under the new definition, those facilities thus would become subject to the PSM Standard’s requirements for managing highly hazardous chemicals.

II.

The Agricultural Retailers Association, the Fertilizer Institute, and a number of individual businesses brought petitions for review in this court to challenge OSHA’s narrowed definition of retail facilities. According to petitioners, the OSH Act required the agency to adhere to

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6 notice-and-comment procedures in promulgating its new definition. We agree with petitioners.

The OSH Act authorizes the Secretary of Labor, through OSHA, to promulgate “occupational safety [and] health standard[s].” 29 U.S.C. § 655(b). The Act provides for pre- enforcement review in the courts of appeals of any such “standard” issued by OSHA. Id. § 655(f). The Act also authorizes the promulgation of “regulation[s]” (and other rules falling short of “standards”), which are governed by a different means of judicial review: challenges to regulations are brought under the Administrative Procedure Act (APA), which calls for initial review in federal district court rather than in a court of appeals. Id. § 657(c)(1); see also Edison Elec. Inst. v. OSHA, 411 F.3d 272, 277 (D.C. Cir. 2005); Workplace Health & Safety Council v. Reich, 56 F.3d 1465, 1467 (D.C. Cir. 1995).

The OSH Act provides for distinct treatment of “standards” in another pertinent respect as well. When promulgating or modifying a “standard,” OSHA must adhere to notice-and-comment procedures set forth in the OSH Act. 29 U.S.C. § 655(b). OSHA concedes that, when it promulgated its Memorandum redefining “retail facility,” it did not satisfy the procedural requirements for standards. The agency instead argues that the Memorandum did not issue or modify a standard. In the agency’s view, the Memorandum only interpreted an existing standard, and it therefore was subject neither to the procedural requirements set out in the OSH Act, id., nor to direct review in this court under that Act, id. § 655(f).

The existence of jurisdiction in this court, as well as the applicability of the OSH Act’s notice-and-comment procedures, both turn on the same question: whether OSHA’s

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7 Memorandum amounted to issuance (or modification) of an “occupational safety and health standard.” The OSH Act defines an “occupational safety and health standard” as “a standard which requires conditions, or the adoption or use of one or more practices, means, methods, operations, or processes, reasonably necessary or appropriate to provide safe or healthful employment and places of employment.” Id. § 652(8).

Our decisions construing that definition have established a framework for differentiating between OSHA standards and regulations. A standard within the meaning of that definition is “a remedial measure addressed to a specific and already identified hazard, not a purely administrative effort designed to uncover violations of the Act and discover unknown dangers.” Workplace Health & Safety Council, 56 F.3d at 1468 (quoting La. Chem. Ass’n v. Bingham, 657 F.2d 777, 782 (5th Cir. 1981)). Standards, that is, are designed for “correction rather than mere inquiry into possible hazards.” Id. They focus on “correct[ing] a particular significant risk,” not on “general enforcement.” Id. (quotation and internal quotation marks omitted).

In Workplace Health & Safety Council, we applied that understanding to find that a rule requiring employers to report workplace deaths and hospitalizations was a regulation rather than a standard. 56 F.3d at 1468. The “basic function of the rule [was] administrative,” in that it principally served to enable “collect[ing] information about unknown hazards.” Id. We distinguished “information-gathering” measures of that kind from the “correction of a particular significant risk.” Id. (quotation and internal quotation marks omitted).

When we later applied the same framework in Chamber of Commerce of the United States v. U.S. Department of

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8 Labor, 174 F.3d 206 (D.C. Cir. 1999), we reached the opposite outcome with regard to the OSHA rule at issue in that case. We determined that a compliance program subjecting businesses to extra inspections if they did not engage in specified safety measures amounted to a standard rather than a regulation. That program aimed at “correcting, rather than merely uncovering,” workplace safety hazards. Id. at 210. It therefore could not “be described as merely an enforcement or detection procedure.” Id. (quotation and internal quotation marks omitted). Whereas the rule held to be a regulation in Workplace Health & Safety Council was “procedural,” the “basic function of the rule” in Chamber of Commerce was “substantive,” in that it “impose[d] upon employers new,” and “more demanding,” “safety standards” than those in existence beforehand. Id. at 210-11.

Under the principles set forth in those decisions, we conclude that OSHA’s new definition of a retail facility, like the compliance program in Chamber of Commerce, amounts to a standard. The “basic function” of OSHA’s new definition is to address a “particular significant risk,” id. at 209: the risk associated with storing large quantities of highly hazardous chemicals for distribution to end users in bulk quantities, as had been the case at the West, Texas, fertilizer company. OSHA’s Memorandum aims not just to gather data about that risk or otherwise serve a general detection or enforcement function, but instead to correct the risk by subjecting facilities such as farm supply companies to the preventative measures in the PSM Standard. OSHA estimates that its revised definition would subject up to 4,800 facilities to “new,” and necessarily “more demanding,” substantive standards for the management of highly hazardous chemicals. Id. at 211.

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9 Of course, the Memorandum itself does not require new preventative measures of its own accord; it does so in conjunction with the PSM Standard. But we do not look at the Memorandum in strict isolation. We consider the Memorandum’s “practical effect,” not “its formal characteristics.” Id. at 209. And the essential effect and object of the Memorandum is to expand the substantive reach of the PSM Standard by narrowing an exemption from that standard. As OSHA describes the measure, it aims to eliminate “policy and regulatory gaps” so as to help “prevent incidents like the West Fertilizer explosion.” OSHA, Questions and Answers—PSM Retail Exemption Policy, July 22, 2015. By redefining retail facilities, the Memorandum, in purpose and effect, subjects a substantial number of businesses previously classified as exempt retail facilities to additional safety standards in order to address a “particular significant risk.” Given those specific circumstances, the measure, under our decisions, qualifies as a standard within the meaning of the OSH Act.

OSHA argues that the Memorandum cannot be a standard because it would constitute an interpretive rule under the APA. But nothing in the OSH Act or APA establishes that the standard/non-standard distinction under the OSH Act must directly track the legislative/interpretive rule distinction under the APA. The OSH Act and the APA prescribe different procedural requirements, and those requirements do not necessarily apply to the same subset of rules. Unlike some other statutes, the OSH Act does not adopt the “interpretive rule” terminology, but instead uses a vocabulary distinct from the APA’s. Compare 29 U.S.C. § 655, with 42 U.S.C. § 1395hh(c) (using the term “interpretive rules” in the Medicare Act). And petitioners’ principal submission is that they are entitled to relief under the OSH Act’s governing

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10 standards, a result that, in their view, renders the APA irrelevant. Petitioners’ Reply Br. at 1-3.

We thus need not decide whether the rule at issue here would constitute an interpretive rule for purposes of the APA. Because the Memorandum amounts to a standard within the meaning of the OSH Act, we have jurisdiction to review it and to vacate it for failure to comply with the procedural requirements established by that Act. Of course, nothing in our decision necessarily calls into question the substance of OSHA’s decision to narrow the exemption for retail facilities and correspondingly to expand the scope of the PSM Standard. We hold only that, insofar as OSHA does so, it must follow the notice-and-comment procedures for standards set forth in the OSH Act.

Finally, we consider the motion of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (the Union) to intervene in support of OSHA. Mot. to Intervene Out of Time Filed on Behalf of [the Union], Nov. 5, 2015. We deny the motion because the Union has failed to establish its standing to intervene. The Union submitted a declaration saying that certain Union members “may” be affected by OSHA’s action insofar as there are members whose employers previously fit within the retail facility exemption under the 50 percent rule but would no longer do so under the Memorandum’s revised definition. Decl. of Michael J. Wright ¶¶ 4-5 (attachment to Br. of Union). But because nothing in the Union’s declaration establishes that the Union does have such members, the Union has failed to demonstrate standing. See Summers v. Earth Island Inst., 555 U.S. 488, 498 (2009). Although we deny the Union’s motion to intervene for that reason, we grant the Union’s alternative request to accord it amicus curiae status, and we thus have

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11 given full consideration to the Union’s arguments. See Rio Grande Pipeline Co. v. FERC, 178 F.3d 533, 539 (D.C. Cir. 1999).

* * * * *

For the foregoing reasons, we grant the petitions for review and vacate OSHA’s Memorandum for failure to abide by the OSH Act’s procedural requirements. We also deny the Union’s motion to intervene but grant it amicus status.

So ordered.

Help prepare your customers for Jan. 1, 2017

OAK BROOK, IL: On January 1, 2017, livestock producers, veterinarians and feed suppliers will face a new regimen for administering medically-important antibiotics via feed or water to food-producing animals.

There is extensive concern that producers with small livestock operations, or who may keep food- producing animals as pets, may not be aware of the changes being made by the U.S. Food and Drug Administration (FDA). In some cases, these producers may not have an established relationship with a veterinarian.

Farm Foundation, NFP and the Animal Health Institute have partnered to develop a point-of-sale tool that rural retailers can use to help their customers better understand the changes that will take effect on Jan. 1. The informational card is designed to alert producers to the changes and direct them to a website—www.farmfoundation.org/VFDrules—that offers resources from a variety of sources, including FDA, Extension, species groups, animal pharmaceutical manufacturers, veterinary groups and media. The card can be placed in the feed department or at a cash register. The card can also be used by educators and other professionals when they discuss the revised VFD with producers.

The card is provided in an electronic format so the user can print as many copies as needed. Print copies are also available. Both are available free of charge. To request the electronic file, or print copies, contact Mary Thompson, Farm Foundation Vice President of Communication, [email protected].

Stewardship of antimicrobial drugs in food-producing animals is a complex issue with far-reaching implications for the nation’s consumers, food industry and agricultural production sector. FDA’s Guidance for Industry #209 and #213 require companies to change labels of medically-important antibiotics administered in feed and water to only therapeutic use (prevention, control and treatment of disease). In addition, under the revised Veterinary Feed Directive (VFD) rule, use of these drugs will require a veterinarian’s directive before a livestock producer can buy medicated feed.

The Animal Health Institute represents companies that make medicine for animals. Farm Foundation, NFP is a non-partisan, non-profit that for 83 years has served as a catalyst for sound public policy by providing objective information to foster a deeper understanding of issues shaping the future of agriculture, food systems and rural communities.

For more information: Mary Thompson, Vice President Communications, Farm Foundation, NFP (630) 601-4152 [email protected]

November 8, 2016

To: Kelsey Billings, National Council of Farmer Cooperatives

From: Constance Cullman, Farm Foundation, NFP, [email protected]

RE: Preparing for the Revised Veterinary Feed Directive

A few weeks ago we visited about the revised Veterinary Feed Directive Rule and the need to reach small livestock producers with information on the upcoming changes.

We wanted to update you on the work Farm Foundation, NFP has done in partnership with the Animal Health Institute to help retailers prepare their customers for the changes that will take place in just a few months.

As you may know, the National Cattlemen’s Beef Association and the Livestock Marketing Association have collaborated on a campaign to reach producers through sale and auction barns. For that reason, Farm Foundation and AHI focused efforts on rural retailers, where small producers may buy feed and other livestock supplies.

We have focused on three information tools. The first is a website—www.farmfoundation.org/vfdrules —where information on the revised VFD rule is available from a plethora of sources, including Farm Foundation, FDA, species groups, universities and Extension. If you know of other resources we should add, please let us know.

We have also prepared a point-of-sale card, which is designed to alert producers to the Jan. 1 deadline and the need to prepare. It refers people to the website for more detailed information. The card can be placed in the feed section and/or at a checkout counter. We are making it available in three formats: the first prints one card (file attached), while the second is set up to print two cards per page. The third is a Word file of the information, to which the retailer can add a company name and/or logo. It can also be copied into an e-mail message. We also have a limited number of printed copies of the informational card available.

The third tool we are using is a series of informational radio interviews being circulated through the news service of the National Farm Broadcasters Association. Farm Foundation Vice Chair Joe Swedberg, a retired Hormel executive who chaired our Project Advisory Committee, did the first interviewed which aired in mid-October. Subsequent interviews, which will air through December, are with Bill Flynn of FDA/CVM, John Hallberg of Zoetis, Dr. Gatz Riddell of the American Association of Bovine Practitioners, and Farm Foundation President Constance Cullman. We plan also to include a feed industry representative.

We greatly appreciated your assistance in reaching out on this issue. If we can provide additional materials or information, please contact us at 630-571-9393.

You need to prepare now!

On January 1, 2017, new regulations take effect on the use of medically-important antibiotics in feed and water for food-producing animals.

Go to this website to learn how to prepare: www.farmfoundation.org/vfdrules

Hogan Lovells US LLP Columbia Square 555 Thirteenth Street, NW Washington, DC 20004 T +1 202 637 5600 F +1 202 637 5910 www.hoganlovells.com

MEMORANDUM

From: Joseph A. Levitt Maile Gradison Hermida Elizabeth Barr Fawell Kaitlin Welborn

Date: November 1, 2016

Re: FDA Issues Draft Guidance on FSMA Written Disclosure Statements

The Food and Drug Administration (FDA) recently published draft guidance regarding written disclosure statements required by four of the seven major FDA Food Safety Modernization Act (FSMA) final rules. 1/ The draft guidance addresses provisions in the Preventive Controls for Human Food, Preventive Controls for Animal Food, Foreign Supplier Verification Program (FSVP), and Produce Safety rules. As explained in more detail below, each of these rules includes requirements related to disclosing to the next entity downstream the presence of hazards that have not been controlled. This draft guidance provides FDA’s recommendations for how to describe the identified hazard and what type of documentation is appropriate for making the disclosure. Comments on the draft guidance should be submitted by May 1, 2017. As with all draft guidance, this document is nonbinding, but does reflect FDA’s current thinking on what is necessary to comply with the regulation.

Background and Regulatory Requirement

Each of the affected FSMA regulations includes a provision relating to disclosing the presence of hazards that have not been controlled and receiving a corresponding written assurance that the hazards will be controlled. For example, 21 CFR § 117.136 in the Preventive Controls for Human Food rule provides that a manufacturing or processing facility is not required to implement a preventive control if it identifies a hazard requiring a preventive control and this hazard is controlled downstream by a commercial customer, provided the facility:

(1) Discloses to its direct customer “in documents accompanying the food, in accordance with the practice of the trade,” that the food is “not processed to control [identified hazard]” (i.e., the disclosure statement requirement); and

(2) Annually receives written assurance from its customer that the customer or an entity further down the supply chain will control the hazard (i.e., the customer assurance requirement).

There are parallel provisions in the Preventive Controls for Animal Food rule (§ 507.36) and FSVP rule (§ 1.507). Similarly, the Produce Safety rule provides that farms are exempt from the produce safety regulations if the produce later receives commercial processing that adequately reduces the

1/ Available at http://tinyurl.com/zh3n5be. - 1 -

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presence of microorganisms of public health significance, provided that similar disclosure statement and customer assurance requirements are met (§ 112.2).

In August 2016, FDA extended the compliance dates for the customer assurance requirements in each of these rules by 2 years. 2/ FDA is using the extended compliance period to consider the best approach to address industry’s feasibility concerns with the customer assurance requirements. However, FDA has not extended any of the compliance deadlines for the disclosure statement requirements. The Preventive Controls for Human Food disclosure requirement for companies with 500 or more full-time equivalent employees took effect on September 19, 2016.

FDA’s Recommendations for FSMA Disclosure Statements

The draft guidance first provides background on the disclosure statement requirements under each of the four rules. It then provides recommendations regarding (1) how to describe identified hazards and (2) what constitutes “documents accompanying the food, in accordance with the practice of the trade.” The agency’s recommendations are explained below.

A. How to Describe the Hazard

The Preventive Controls and FSVP regulations require that the statement disclose that the food is “not processed to control [identified hazard].” FDA explains its expectation that, in practice, the disclosure statements will be used mostly for biological hazards, rather than chemical or physical hazards, because chemical and physical hazards typically are handled by the first manufacturing/processing facility in the supply/distribution chain. With respect to disclosure statements for biological hazards, FDA provides some flexibility by acknowledging that for biological hazards, the “identified hazard” can be described using a “general term (e.g., ‘microbial pathogens,’ ‘microorganisms of public health significance’)” rather than naming a specific biological hazard (e.g., Salmonella or Listeria monocytogenes).

FDA also explains that entities that receive food accompanied by such a disclosure statement bear responsibility for taking appropriate steps to ensure that the applicable biological hazards are controlled before the food reaches the consumer. The draft guidance emphasizes that this responsibility applies regardless of whether the receiving establishment is subject to Preventive Controls, the current Good Manufacturing Practice regulations, or both.

For chemical and physical hazards, FDA expects a facility to describe the identified chemical or physical hazard using a specific term (e.g., “mycotoxins,” “aflatoxin,” “stones”) that adequately communicates the key safety information regarding the chemical or physical hazard that needs to be controlled. FDA does not consider using general terms describing chemical and physical hazards to be adequate because they do not provide a customer with sufficient information to address the hazard.

The regulatory requirement under the Produce Safety rule is slightly different than the requirement under the other three rules. It requires a disclosure that the food is “not processed to adequately reduce the presence of microorganisms of public health significance.” FDA explains that it will consider a farm to be in compliance if it discloses that its produce is “not processed to adequately reduce the presence of microbial pathogens,” or uses similar phrases.

2/ 81 Fed. Reg. 57784 (Aug. 24, 2016); see HL Memorandum, FDA Extends Several FSMA Compliance Dates, Sept. 7, 2016. - 2 -

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B. How to Communicate the Hazard

The regulations each provide that the disclosure statements must be made in documents “accompanying” the food, “in accordance with the practice of the trade.” In the draft guidance, FDA explains that this terminology allows the disclosure statement to be provided using a wide variety of types of documents that accompany the food, “such as labels, labeling, bill of lading, shipment- specific certificates of analysis, and other documents or papers associated with the shipment that a food safety manager for the customer is likely to read.”

FDA’s position is that it is not sufficient to reference a website in a document of the trade without including the disclosure statement, itself, in the document of the trade. It would, however, be permissible to use labeling that includes a disclosure statement such as “not processed to control microbial pathogens” and then direct the recipient to a website for additional information about those microbial pathogens.

Furthermore, FDA does not recommend that documents such as contractual agreements, letters of guarantee, specifications, or terms and conditions be used to communicate the information required in the disclosure statement. FDA’s position is that such documents generally are not specific to a particular shipment, and some of these documents may not be available to the customer’s food safety manager.

* * *

We will continue to monitor FDA’s implementation of FSMA. Should you have any questions, please do not hesitate to contact us.

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\\DC - 708441/000300 - 9241088 v2 Contains Nonbinding Recommendations Draft-Not for Implementation Describing a Hazard That Needs Control in Documents Accompanying the Food, as Required by Four Rules Implementing the FDA Food Safety Modernization Act: Guidance for Industry

Draft Guidance This guidance is being distributed for comment purposes only.

Although you can comment on any guidance at any time (see 21 CFR 10.115(g)(5)), to ensure that FDA considers your comment on this draft guidance before we begin work on the final version of the guidance, submit either electronic or written comments on the draft guidance within 180days of publication in the Federal Register of the notice announcing the availability of the draft guidance. Submit electronic comments to http://www.regulations.gov. Submit written comments to the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852. All comments should be identified with the docket number FDA-2016-D-2841 listed in the notice of availability that publishes in the Federal Register.

For questions regarding this draft document as it relates to our regulation entitled “Current Good Manufacturing Practice and Hazard Analysis and Risk-Based Preventive Controls for Human Food,” contact the Center for Food Safety and Applied Nutrition (CFSAN) at 240-402-2166.

For questions regarding this draft document as it relates to our regulation entitled “Current Good Manufacturing Practice and Hazard Analysis and Risk-Based Preventive Controls for Food for Animals,” contact the Center for Veterinary Medicine (CVM) at 240-402-6246.

For questions regarding this draft document as it relates to our regulation entitled “Standards for the Growing, Harvesting, Packing, and Holding of Produce for Human Consumption,” contact the Center for Food Safety and Applied Nutrition (CFSAN) at 240-402-1636.

For questions regarding this draft document as it relates to our regulation entitled “Foreign Supplier Verification Programs (FSVP) for Importers of Food for Humans and Animals,” contact the Office of Policy, Food and Drug Administration at 301-796-4576.

U.S. Department of Health and Human Services Food and Drug Administration Center for Food Safety and Applied Nutrition Center for Veterinary Medicine Office of Policy October, 2016 Contains Nonbinding Recommendations Draft-Not for Implementation

Table of Contents

Table of Contents I. Introduction II. Background on the Four Foundational Rules A. Part 117 1. Framework of part 117 2. “Disclosure statement” required in the “customer provisions” of part 117 B. Part 507 1. Framework of part 507 2. “Disclosure statement” required in the “customer provisions” of part 507 C. Produce Safety Regulation 1. Framework of the produce safety regulation 2. “Disclosure statement” required in the “commercial processing exemption” of the produce safety regulation D. Foreign Supplier Verification Regulation 1. Framework of the FSVP regulation 2. “Disclosure statement” required in the “customer provisions” of the FSVP regulation III. Discussion A. FDA’s Recommendations Regarding the Part 117 Disclosure Statement 1. How to describe the identified hazard 2. Documents of the trade B. FDA’s Recommendations Regarding the Part 507 Disclosure Statement C. FDA’s Recommendations Regarding the Produce Safety Regulation Disclosure Statement 1. How to describe the identified hazard 2. Documents of the trade D. FDA’s Recommendations Regarding the FSVP Regulation Disclosure Statement 1. How to describe the identified hazard 2. Documents of the trade

2 Contains Nonbinding Recommendations Draft-Not for Implementation Describing a Hazard That Needs Control in Documents Accompanying the Food, as Required by Four Rules Implementing the FDA Food Safety Modernization Act: 1 Guidance for Industry

This draft guidance, when finalized, will represent the current thinking of the Food and Drug Administration (FDA or we) on this topic. It does not establish any rights for any person and is not binding on FDA or the public. You can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations. To discuss an alternative approach, contact FDA’s Technical Assistance Network by submitting the form available at http://www.fda.gov/Food/GuidanceRegulation/FSMA/ucm459719.htm.

I. Introduction

This guidance concerns four of the seven foundational rules that we have established in Title 21 of the Code of Federal Regulations (21 CFR) as part of our implementation of the FDA Food Safety Modernization Act (FSMA; Pub. L. 111–353). Table 1 lists these four rules.

Table 1. Four Foundational Rules Providing the Framework for Implementing FSMA Title Regulatory Abbreviation for the Publication Codification Purpose of This Guidance Current Good Manufacturing Practice, 21 CFR part 117 Part 117 80 FR 55908, Hazard Analysis, and Risk-Based September 17, 2015 Preventive Controls for Human Food Current Good Manufacturing Practice, 21 CFR part 507 Part 507 80 FR 56170, Hazard Analysis, and Risk-Based September 17, 2015 Preventive Controls for Food for Animals Standards for the Growing, Harvesting, 21 CFR part 112 Produce safety 80 FR 74354, Packing, and Holding of Produce for regulation November 27, 2015 Human Consumption Foreign Supplier Verification Programs 21 CFR part 1, FSVP regulation 80 FR 74226, (FSVP) for Importers of Food for subpart L November 27, 2015 Humans and Animals

1 This guidance has been jointly prepared by the Office of Food Safety in the Center for Food Safety and Applied Nutrition, the Office of Surveillance and Compliance in the Center for Veterinary Medicine, and the Office of Policy in the Office of the Commissioner at the U.S. Food and Drug Administration.

3 Contains Nonbinding Recommendations Draft-Not for Implementation

This guidance is intended for any entity that is subject to certain provisions (in part 117, part 507, the produce safety regulation, or the FSVP regulation) that require a disclosure statement, in documents accompanying food, that certain hazards have not been controlled by that entity. This guidance is not intended to address other requirements of part 117, part 507, the produce safety regulation, or the FSVP regulation.

FDA's guidance documents, including this guidance, do not establish legally enforceable responsibilities. Instead, guidances describe our current thinking on a topic and should be viewed only as recommendations, unless specific regulatory or statutory requirements are cited. The use of the word should in FDA guidances means that something is suggested or recommended, but not required. II. Background on the Four Foundational Rules A. Part 117

1. Framework of part 117

In part 117, we have established our regulation entitled “Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Human Food.” Among other things, the rulemaking to establish part 117 amended our current good manufacturing practice (CGMP) regulation for manufacturing, packing, or holding human food to modernize it and establish it in new part 117, subparts A, B, and F. Part 117 also includes new requirements for domestic and foreign facilities that are required to register under section 415 of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. 350d)2 in subparts A, C, D, E, F, and G to establish and implement hazard analysis and risk-based preventive controls for human food (the human food preventive controls requirements). The human food preventive controls requirements in part 117 implement the provisions of FSMA, established in section 418 of the FD&C Act (21 U.S.C. 350g), for human food.

Part 117 includes some exemptions from the CGMP requirements and the human food preventive controls requirements. See 21 CFR 117.5 for those exemptions.

Among other requirements, subpart C of part 117 requires a facility that manufactures/processes human food to conduct a hazard analysis to determine whether there are any hazards that require a preventive control (21 CFR 117.130) and identifies several types of possible preventive controls, including process controls (21 CFR 117.135(c)(1)), food allergen controls (21 CFR 117.135(c)(2)), sanitation controls (21 CFR 117.135(c)(3)), and supply-chain controls (21 CFR 117.135(c)(4).

2 The requirements for domestic and foreign facilities to register under section 415 of the FD&C Act are established in 21 CFR part 1, subpart H. In this document, we refer to those requirements as “the section 415 registration regulation.”

4 Contains Nonbinding Recommendations Draft-Not for Implementation 2. “Disclosure statement” required in the “customer provisions” of part 117

Subpart C of part 117 includes several provisions (referred to collectively as “customer provisions”) that apply when a manufacturer/processor of human food identifies a hazard requiring a preventive control (“identified hazard”), does not control the identified hazard, and relies on an entity in its distribution chain to address the hazard (21 CFR 117.136(a)(2), (3), and (4)). A manufacturer/processor that complies with the customer provisions is not required to implement a preventive control for the identified hazard. (In these provisions, “customer” means a commercial customer, not a consumer.)

One aspect of the customer provisions is a requirement for the manufacturer/processor to disclose, in documents accompanying the food, in accordance with the practice of the trade, that the food is “not processed to control [identified hazard]” ((21 CFR 117.136(a)(2)(i), (3)(i), and (4)(i)). In this guidance, we refer to this required disclosure as the “part 117 disclosure statement.”

B. Part 507

1. Framework of part 507

In part 507, we have established our regulation entitled “Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Food for Animals.” Among other things, the rulemaking to establish part 507 established new requirements for CGMPs in subparts A, B, and F (CGMP requirements) and also established requirements for hazard analysis and risk-based preventive controls for food for animals in subparts A, C, D, E, and F (the animal food preventive controls requirements). The part 507 requirements apply to domestic and foreign facilities that are required to register under the section 415 registration regulation. The animal food preventive controls requirements in part 507 implement the provisions of FSMA, established in section 418 of the FD&C Act (21 U.S.C. 350g), for animal food.

Part 507 includes some exemptions from the CGMP requirements and the animal food preventive controls requirements. See 21 CFR 507.5 for those exemptions.

Among other requirements, subpart C of part 507 requires a facility that manufactures/processes food for animals to conduct a hazard analysis to determine whether there are any hazards that require a preventive control (21 CFR 507.33) and identifies several types of possible preventive controls, including process controls (21 CFR 507.34(c)(1)), sanitation controls (21 CFR 507.34(c)(2)), and supply-chain controls (21 CFR 507.34(c)(3)).

2. “Disclosure statement” required in the “customer provisions” of part 507

As with part 117, subpart C of part 507 includes “customer provisions” that apply when a manufacturer/processor of food for animals identifies a hazard requiring a preventive control (“identified hazard”), does not control the identified hazard, and relies on an entity in its distribution chain to address the hazard (21 CFR 507.36(a)(2), (3), and (4)). A manufacturer/processor that complies with the customer provisions is not required to implement a preventive control for the identified hazard.

5 Contains Nonbinding Recommendations Draft-Not for Implementation As with part 117, one aspect of the customer provisions applicable to manufacturing/processing food for animals is a requirement for the manufacturer/processor to disclose, in documents accompanying the animal food, in accordance with the practice of the trade, that the animal food is “not processed to control [identified hazard]” ((21 CFR 507.36(a)(2)(i), (3)(i), and (4)(i)). In this guidance, we refer to this required disclosure as the “part 507 disclosure statement.”

C. Produce Safety Regulation

1. Framework of the produce safety regulation

In part 112 (21 CFR part 112), we have established our regulation entitled “Standards for the Growing, Harvesting, Packing, and Holding of Produce for Human Consumption”. Among other things, the rulemaking to establish the produce safety regulation set forth in a new part 112 procedures, processes, and practices that minimize the risk of serious adverse health consequences or death, including those reasonably necessary to prevent the introduction of known or reasonably foreseeable biological hazards into or onto produce and to provide reasonable assurances that the produce is not adulterated on account of such hazards. The produce safety regulation applies to certain produce farms, and does not apply to activities of facilities that are subject to part 117 (as established in part 117). The produce safety regulation established in part 112 implements the provisions of FSMA established in section 419 of the FD&C Act (21 U.S.C. 350h).

2. “Disclosure statement” required in the “commercial processing exemption” of the produce safety regulation

The produce safety regulation applies to “covered produce” as set forth in 21 CFR 112.1 and 112.2. Produce that would otherwise be covered is eligible for an exemption from the requirements of the produce safety regulation if it receives commercial processing that adequately reduces the presence of microorganisms of public health significance and certain other conditions are met, including the disclosure statement that is the subject of this guidance document (21 CFR 112.2(b)). Examples of commercial processing that adequately reduces the presence of microorganisms of public health significance are processing in accordance with the requirements of 21 CFR part 113, 114, or 120; treating with a validated process to eliminate spore-forming microorganisms (such as processing to produce tomato paste or shelf-stable tomatoes); and processing such as refining, distilling, or otherwise manufacturing/processing produce into products such as sugar, oil, spirits, wine, beer or similar products. In this document, we refer to this exemption as the “commercial processing exemption” from the produce safety regulation.

For the commercial processing exemption to be satisfied, the farm that produces the produce must, among other things, disclose in documents accompanying the produce, in accordance with the practice of the trade, that the food is “not processed to adequately reduce the presence of microorganisms of public health significance.” In this guidance, we refer to this required disclosure as the “produce safety regulation disclosure statement.”

6 Contains Nonbinding Recommendations Draft-Not for Implementation D. Foreign Supplier Verification Regulation

1. Framework of the FSVP regulation

In part 1, subpart L (21 CFR part 1, subpart L), we have established our regulation entitled “Foreign Supplier Verification Programs for Importers of Food for Humans and Animals”. The FSVP regulation requires importers to establish foreign supplier verification programs to verify that their foreign suppliers are using processes and procedures that provide the same level of public health protection as those required under the provisions on hazard analysis and risk-based preventive controls and standards for produce safety in the FD&C Act, that the imported food is not adulterated, and that food is not misbranded with respect to food allergen labeling. The FSVP regulation established in part 1, subpart L implements the provisions of FSMA established in section 805 of the FD&C Act (21 U.S.C. 384a.).

2. “Disclosure statement” required in the “customer provisions” of the FSVP regulation

The FSVP regulation includes “customer provisions” that apply when an importer imports a food that cannot be consumed without the hazards being controlled or for which the hazards are controlled after importation (21 CFR 1.507). One aspect of these provisions is a requirement for the importer to disclose to customers that the food is “not processed to control [identified hazard]” (21 CFR 1.507(a)(2)(i), (a)(3)(i), and (a)(4)(i)). In this guidance, we refer to this required disclosure as the “FSVP regulation disclosure statement.” III. Discussion A. FDA’s Recommendations Regarding the Part 117 Disclosure Statement

1. How to describe the identified hazard

We believe that, in practice, the part 117 disclosure statement will be required mostly for biological hazards, because the part 117 disclosure statement only applies when a manufacturing/ processing facility has identified a hazard requiring a preventive control, but has not applied that preventive control. In the case of most chemical and physical hazards, a chemical or physical hazard that a manufacturing/processing facility identifies as requiring a preventive control would most likely be controlled by the first manufacturing/processing facility in the supply/distribution chain. For example, a corn miller that is the first manufacturer/processor could identify the chemical hazard aflatoxin in corn that it receives from a supplier and use physical sorting techniques to remove aflatoxin-contaminated corn (or moldy, damaged corn that could potentially be contaminated) during processing. Therefore, the miller controls the aflatoxin hazard and would not pass the chemical hazard on to a subsequent manufacturer/processor for control. Likewise, a manufacturing/processing facility that receives produce RACs likely would establish and implement a control for physical hazards such as stones that get into the RACs as a result of harvesting.

7 Contains Nonbinding Recommendations Draft-Not for Implementation For biological hazards, we will consider a manufacturing/processing facility that describes the “identified hazard” using a general term (e.g., “microbial pathogens,” “microorganisms of public health significance”) rather than a specific biological hazard (e.g., Salmonella or Listeria monocytogenes) to be in compliance with the requirements for the part 117 disclosure statement. Such a statement adequately communicates the key safety information. Regardless of whether the establishment that receives food accompanied by such a disclosure statement is subject to the CGMP requirements, the human food preventive controls requirements, or both the CGMP and human food preventive controls requirements in part 117, that establishment is responsible for taking appropriate steps to ensure that biological hazards applicable to that food are controlled before the food reaches the consumer.

For chemical and physical hazards, a manufacturing/processing facility that chooses to not control chemical and physical hazards and to rely on its customers to do so, would be subject to the requirements of the part 117 disclosure statement. We expect such a facility to describe the identified chemical or physical hazard using a specific term (e.g., “mycotoxins,” “aflatoxin,” “stones”) that adequately communicates the key safety information regarding the chemical or physical hazard that needs to be controlled. Referring to physical or chemical hazards using a general term only does not provide a customer with sufficient information to address the hazard.

2. Documents of the trade

The requirements for the part 117 disclosure statement specify that the disclosure must be made in “documents accompanying the food, in accordance with the practice of the trade.” See 21 CFR 117.136(a)(2)(i), (a)(3)(i), and (a)(4)(i). This allows for the disclosure statement to be provided using a wide variety of types of documents that accompany the food, such as labels, labeling, bill of lading, shipment-specific certificates of analysis, and other documents or papers associated with the shipment that a food safety manager for the customer is likely to read.

However, it is not sufficient to reference a website in a document of the trade without including the disclosure statement, itself, in the document of the trade. It is permissible, for the purposes of the requirements of the part 117 disclosure statement, to use labeling that includes a disclosure statement such as “not processed to control microbial pathogens” and then directs the recipient to a website for additional information about those microbial pathogens.

We do not recommend documents such as contractual agreements, letters of guarantee, specifications, or terms and conditions be used to communicate the information required in the part 117 disclosure statement. Such documents generally are not specific to a particular shipment, and some of these documents may not be available to the customer’s food safety manager.

B. FDA’s Recommendations Regarding the Part 507 Disclosure Statement

See the discussion in section III.A of our recommendations regarding the part 117 disclosure statement. The same discussion and recommendations apply to the part 507 disclosure statement.

8 Contains Nonbinding Recommendations Draft-Not for Implementation C. FDA’s Recommendations Regarding the Produce Safety Regulation Disclosure Statement

1. How to describe the identified hazard

Because both part 117 and part 507 define the term “pathogen” to mean “microorganism of public health significance,” and because some disclosure statements in accordance with the requirements of part 117 or the requirements of part 507 likely will use terms such as “microbial pathogens,” we will consider a farm that discloses “not processed to adequately reduce the presence of microbial pathogens,” or similar phrases, to be in compliance with the requirements for the produce safety regulation disclosure statement.

2. Documents of the trade

See the discussion in section III.A of our recommendations regarding the part 117 disclosure statement. The same discussion and recommendations apply to the produce safety regulation disclosure statement.

D. FDA’s Recommendations Regarding the FSVP Regulation Disclosure Statement

1. How to describe the identified hazard

We believe that, in practice, the FSVP regulation disclosure statement will be required mostly for biological hazards, because the FSVP regulation disclosure statement only applies when an importer has identified a hazard requiring a control, but that control has not been applied prior to importation, or by the importer if the importer is a manufacturer or processor. In the case of most chemical and physical hazards, a chemical or physical hazard that an importer identifies as requiring a control would most likely be controlled by the first manufacturing/processing facility in the supply/distribution chain. For example, an animal food vitamin pre-mix manufacturer that is a foreign supplier could identify the chemical hazard “nutrient toxicity” in the vitamin ingredients it receives from its supplier. The pre-mix manufacturer would evaluate the potency of the individual vitamin ingredients prior to manufacturing the pre-mix, controlling the nutrient toxicity hazard by combining the vitamin ingredients at an appropriate ratio. In this scenario, the pre-mix manufacturer would not pass the chemical hazard on to a future customer for control. Likewise, an importer that is a manufacturing/processing facility that receives produce RACs from a foreign supplier likely would establish and implement a control for physical hazards such as stones that get into the RACs as a result of harvesting.

For biological hazards, we will consider an importer that describes the “identified hazard” using a general term (e.g., “microbial pathogens,” “microorganisms of public health significance”) rather than a specific biological hazard (e.g., Salmonella or Listeria monocytogenes) to be in compliance with the requirements for the FSVP regulation disclosure statement. Such a statement adequately communicates the key safety information. Regardless of whether the establishment that receives food from the importer accompanied by such a disclosure statement is subject to the CGMP requirements, the preventive controls requirements, or both the CGMP

9 Contains Nonbinding Recommendations Draft-Not for Implementation and preventive controls requirements in part 117 or part 507, that establishment is responsible for taking appropriate steps to ensure that biological hazards applicable to that food are controlled before the food reaches the consumer.

For chemical and physical hazards, an importer that chooses to rely on its customers to control chemical and physical hazards (instead of controlling the hazards itself or verifying that the hazards have been controlled prior to importation) would be subject to the requirements of the FSVP regulation disclosure statement. We expect such an importer to describe the identified chemical or physical hazard using a specific term (e.g., “mycotoxins,” “aflatoxin,” “stones”) that adequately communicates the key safety information regarding the chemical or physical hazard that needs to be controlled. Referring to physical or chemical hazards using a general term only does not provide a customer with sufficient information to address the hazard.

2. Documents of the trade

See the discussion in section III.A of our recommendations regarding the part 117 disclosure statement. The same discussion and recommendations apply to the FSVP regulation disclosure statement.

10 Regulatory Improvement and Reform: A priority for American Agriculture

RECOMMENDATION:

The undersigned agricultural organizations recommend that the new Administration and Congress make reform of the regulatory development process a top priority. The Administration should pledge to work with Congress in a bipartisan, bi-cameral fashion to craft a package of reforms that can be signed into law by the summer of 2018. The President should designate the Director of OMB and the Attorney General as the principal Administration officials charged with interfacing with Congress.

The bipartisan leadership of Congress should establish a working group to join with the Administration in crafting a bipartisan package of reforms that update, improve, strengthen and reform the existing regulatory process.

Agricultural Retailers Association Agri-Mark, Inc. American Farm Bureau Federation AmericanHort American Seed Trade Association American Soybean Association American Sugar Alliance American Sugar Cane League American Sugarbeet Growers Association California Association of Winegrape Growers California Specialty Crops Council CropLife America Dairy Producers of New Mexico Dairy Producers of Utah Delta Council Exotic Wildlife Association Federal Forest Resource Coalition The Fertilizer Institute Idaho Dairymen’s Association Milk Producers Council Missouri Dairy Association National Agricultural Aviation Association National Alliance of Forest Owners National Aquaculture Association National Association of State Departments of Agriculture National Association of Wheat Growers National Corn Growers Association National Cotton Council National Council of Agricultural Employers National Council of Farmer Cooperatives National Grain and Feed Association National Milk Producers Federation National Potato Council National Sorghum Producers Northeast Dairy Farmers Cooperatives Oregon Dairy Farmers Association Society of American Florists South East Dairy Farmers Association Southwest Council of Agribusiness St. Albans Cooperative Creamery, Inc. United Fresh Produce Association U.S. Apple Association USA Rice U.S. Cattlemen’s Association U.S. Rice Producers Association Upstate Niagara Cooperative, Inc Western Peanut Growers Association Western United Dairymen

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Regulatory Improvement and Reform: A priority for American Agriculture

I. Overview

All Americans have a vested interest in a regulatory process that is open, transparent, grounded on facts, respectful of our system of Federalism, that faithfully reflects and implements the will of Congress and adheres to the separation of powers in the Constitution. Particularly in the field of environmental law, all affected stakeholders – businessmen and women, farmers, environmentalists, agribusinesses small and large, university researchers, scientists, economists, taxpayers, lawmakers and state and Federal regulators – benefit from a process that is fair, generates support and respect from diverse viewpoints, and achieves policymakers’ goals. Farmers and ranchers across the country are uniquely affected by Federal laws and the regulations based on those laws; rural agribusinesses also are challenged on the regulatory front. While farm bill programs such as crop insurance and conservation programs are most readily recognizable as affecting agriculture, producers confront numerous other regulatory challenges. A list that is by no means exclusive includes lending and credit requirements; interpretations of the tax code; health care provisions; energy policy; labor and immigration laws; environmental statutes ranging from air and water quality concerns to designations of critical habitat and other land uses. For farmers and ranchers, regulations don’t just impact their livelihood. Unlike nearly any other economic enterprise, a farm is not simply a business: it’s often a family’s home. When a government regulation affects the ability of a farmer to use his or her land, that regulatory impact ‘hits home’ – not just figuratively but literally. That happens because the farm often is home and may have been passed down in the family for generations. If the regulatory demand is unreasonable or inscrutable, it can be frustrating. If it takes away an important crop protection tool for speculative or even arguable reasons, it can harm productivity or yield. If it costs the farmer money, he or she will face an abiding truth – farmers, far more often than not, are price takers, not price makers: with little ability to pass costs on to consumers, farmers are often forced to absorb increased regulatory costs. And when, under the rubric of ‘environmental compliance,’ the regulation actually conflicts with sound environmental methods the farmer is already practicing, the result can be met with resistance and ultimately a lack of respect for the process itself. We believe a fair, transparent, open and updated regulatory process will benefit not just farmers and ranchers: it will reinvigorate public respect for the important and critical role regulations must and do play while benefiting taxpayers, environmentalists, small businessmen and women and people in all walks of life.

II. The Current Situation

The regulatory process today is the product of decisions made over decades, often done without any effort to integrate those decisions into a coherent system. Such a system should

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Regulatory Improvement and Reform: A priority for American Agriculture

assure stakeholders a fair outcome, further congressional intent, safeguard our environment, take into account modern social media, respect the role of the states, and reinforce public confidence in the integrity of the system. That is not the case today. Regulatory agencies, with judicial approval, increasingly exercise legislative functions – and they are encroaching on judicial functions as well, creating an imbalance that needs correction. Consider that:

• The primary statutory authority governing the rulemaking process, the Administrative Procedure Act (APA), is over 70 years old and was enacted before many Federal regulatory agencies were even in existence. Although the law is little changed from what it was seven decades ago, statutes and programs that utilize the APA process have proliferated: the Clean Air Act; Superfund; the Energy Independence and Security Act of 2007; Highway bills; the Consumer Product Safety Act; the Clean Water Act; Swampbuster and Sodbuster; the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA); the Endangered Species Act (ESA); the Food Quality Protection Act; the Food Safety Modernization Act, and many, many more. Consider:

 EPA, under the new Clean Power Plan, is literally restructuring the nation’s energy sector – and along with it much of our economy – through an APA rulemaking. The agency has done this even though Congress in 2009 failed to enact legislation to approve such profound changes. Thus, one agency has embarked on a sweeping program using a framework established nearly three-quarters of a century ago that was simply not designed to manage such profound policy changes. (This initiative of the agency, in fact, would likely not have occurred but for a 5-4 decision by the Supreme Court in 2007.)

• In the 1970’s, Congress increasingly authorized the use of citizen lawsuits, particularly in environmental statutes. Nearly concurrently (i.e., United States v. Students Challenging Regulatory Agency Procedures, 412 U.S. 669 (1973)), the Supreme Court broadened the ability of parties to sue in Federal court. Those two steps significantly increased the number and range of policy decisions decided by the courts. Given the relatively few cases that are ultimately decided by the Supreme Court, many policies now are decided by a handful of judges on appellate courts or even single judges in federal district courts. Consider:

 Perhaps the most litigated provision in the Clean Water Act is how to determine the scope of the term ‘waters of the US.’ Over the past 44 years, that single provision has been the subject of numerous lawsuits and ever-changing regulations and guidance documents (as well changes to the Army Corps of Engineers’ wetlands manuals) – even though Congress itself has not altered the language it wrote in 1972. Indeed, in response to the U.S. Supreme Court decision in Rapanos (2006), environmental activists advocated for legislation to overturn the court’s ruling and broaden the scope of the Clean Water Act; legislation was introduced in both the Senate and House to accomplish that goal. Those bills, however, met resistance from Democrats and Republicans alike and no proposal was even scheduled for debate on the floor of

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Regulatory Improvement and Reform: A priority for American Agriculture

either the House or Senate. Nevertheless, EPA proposed and finalized the new “WOTUS” rule that effectively ignored Congress and expanded Federal jurisdiction even though Congress had not done so. Within the last year, bipartisan majorities in both the House of Representatives and the Senate voted to reject EPA’s interpretation of the law. Once again, however, the courts, not the people’s elected representatives, will decide the outcome.

• Coupled with the expansion of litigation, the U.S. Supreme Court has expanded agencies’ powers by entrenching the principle that when interpreting what laws and regulations mean, judges must give deference to agencies:

 In Chevron U.S.A. v. Natural Resources Defense Council (1984), the Supreme Court required federal judges to defer to an agency’s reasonable interpretation of a statute – even if the regulation differs from what the judge believes to be the best interpretation. This principle applies if the statute in question is within the agency’s jurisdiction to administer; the statute is ambiguous on the point in question; and the agency’s construction is reasonable.  In Auer v. Robins (1997), the Court again expanded agencies’ authority. In that case, the Court held that it would give deference not only to an agency’s interpretation of a statute but to an agency’s interpretation of its own regulations as well. At another layer of regulation, agencies may often use handbooks and field manuals in guiding decisions that affect landowners; yet these guidance documents are not subject to public notice-and-comment, and they can even vary from region to region and often change on a whim. Yet, courts are increasingly deferring to those guidance documents and even to individual agency employee interpretations of those guidance documents. Given the breadth of deference afforded to agencies, they have a strong incentive to issue ambiguous rules and then ask courts for deference when the rules are challenged in court. Our nation’s judges no longer play the role assigned them by the Constitution – to decide what the law actually means.

• With the expansion of citizen lawsuits, disbursements of public funds from the Judgment Fund have taken on increased significance. Additionally, in 1980 Congress enacted the Equal Access to Justice Act. The statute has the laudable goal of seeking to assure that no stakeholder is foreclosed from access to the court system; but its implementation has been unequal, even arguably unfair (see example below). Moreover, particularly for western states, there are increasing complaints that the EAJA has been used to pursue an activist agenda through the courts when such policies fail to win approval on Capitol Hill. This has often occurred in disputes over logging on public lands.

• Over the last several decades, economic and scientific models have played an increasingly important role in how regulatory agencies decide policy questions. Use of models per se is not wrong; they can be valuable tools. But models should not be relied upon exclusively, nor should model results be a substitute for hard facts and data when

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Regulatory Improvement and Reform: A priority for American Agriculture

the two conflict . President Obama noted the critical role science plays at the start of his Administration when he issued his Memorandum for the Heads of Executive Departments and Agencies on March 3, 2009. That memorandum, enunciating many aspects of the importance science plays in the rulemaking process, has generated bipartisan support. But some question how faithful agencies are to the policy; and in any event, if agencies depart from these science guidelines in rulemaking, aggrieved parties have little recourse and none in the courts.

• Some statutes, like the Clean Air Act, significantly limit whether or how agencies can consider costs when reaching policy decisions; other statutes, such as the Clean Water Act and FIFRA, allow either some weighing of costs-and-benefits or grant greater flexibility to agencies in making determinations. Yet even the Clean Air Act requires the agency to take into account the impact its regulations will have on jobs. Other statutes, like the Regulatory Flexibility Act and the Small Business Regulatory Fairness Act, are designed to assist small businesses in the regulatory process yet agencies too often find ways to circumvent their requirements. For example, the ‘social cost of carbon’ template is being used to ‘quantify’ certain economic benefits; there may be cases where such an approach is useful. But rulemakings with significant, extensive economic implications should rely if at all possible on quantifiable, real world data whenever it is available. Rulemakings should not devolve into a game of manipulated statistics or theoretic qualifications to justify preferred policy outcomes.

• Internal agency guidance is being developed to make fundamental changes in how regulations are implemented even when explicit authority from Congress is absent. In November 2015, the President issued a memorandum to EPA, the Department of Interior and other select agencies that it shall be their policy “to avoid and then minimize harmful effects to land, water, wildlife, and other ecological resources caused by land- or water- disturbing activities…” The agriculture community is attempting to learn how such a sweeping directive may affect the issuance of permits under the Clean Water Act, grazing permits under the Taylor Act, injurious wildlife listings under the Lacey Act and other programs where any activity requires Federal assent or permission. This memorandum raises fundamental legal, even constitutional, questions; foremost among them is to what extent, if any, agencies in the Executive Branch have the authority to direct, limit or even prohibit conduct in the absence of Congress granting them such authority.

III. The Current System Poses Challenges for Agriculture Regulations have a direct impact on America’s farms and ranches. But agricultural producers are affected uniquely: for the overwhelming majority, as stated earlier, their businesses are their homes. Thus, when a new or revised Federal regulation takes effect, more than likely it will affect how a grower can manage his or her land – what crops to grow, or where or how to grow them; how to manage them before or after harvest; how to house, feed or care for the livestock under their care; and – most significantly – how to make sure

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that farming and ranching operations are sustainable and productive for their children, the extended family, and future generations. When the Constitution was ratified over two centuries ago, more than 90 percent of Americans lived on family farms. Today, fewer than 2 percent of Americans live on the farm. But American agriculture today – as it was 240 years ago – remains, at heart, a family enterprise.

Farmers and ranchers across the country have shared stories about the impact regulations have on their lives and businesses. Additionally, agricultural facilities like grain elevators and commodity processing facilities have been subjected to unreasonable, costly and lengthy battles over Federal rules. One of the realities of life in rural America is the ‘mission creep’ that increasingly brings farmers, ranchers and related agricultural businesses face-to-face with Federal regulators. Consider the following real-life examples:

(a) A West Virginia farmer was told by EPA that dust and feathers blown to the ground from her chicken growing operation constituted a violation of the Clean Water Act. It required tens of thousands of dollars for her to defend her farm in court (as well as intervention in the suit by the American Farm Bureau Federation). The court sided with her and rejected EPA’s allegations and the agency’s interpretation of the Clean Water Act. EPA subsequently ignored the decision and publicly stated its intent to go after more farmers for the same activity. (b) A Washington state grower was told by the Department of Homeland Security that the farmer had to dismiss certain workers because the workers supplied improper documentation under the Immigration Act. Subsequently, the Department of Labor told the same farmer he had to hire the same workers because it was required by Federal law.

(c) A California farmer faces an enforcement action from the Army Corps of Engineers for violating the Clean Water Act. The agency alleges that the farmer created “mini mountain ranges” by plowing 4-7 inches deep in a wetland – even though Clean Water Act regulations explicitly state that plowing in a wetland is permitted. (d) Idaho ranchers were forced to go to court to fight the Bureau of Land Management in an effort to protect their state water rights from takings by the federal government. The BLM had threatened the ranchers to sign over their water rights to the government or face a drawn out (and costly) legal battle. The ranchers won on every point of the lawsuit all the way to the Idaho Supreme Court, but only after incurring considerable expenses during the litigation. In the end, the court ruled that it did not have authority under EAJA to require the federal government to pay attorney fees – even though a court in another state reached the opposite conclusion. The rancher now faces litigation expenses of over $1 million because one court has ruled he cannot recover costs that other courts have said are reimbursable.”

(e) Ranchers grazing livestock on public lands in Utah and other states are required to have Federal grazing permits for their activities. Frequently, they have separately acquired

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water rights they hold that have been adjudicated under state law. Federal law and Supreme Court precedents reaffirm those rights. Yet Federal officials, without any authority from Congress and without public notice, have attempted to require those ranchers to share or hand over their private water rights to the Federal government as a condition of their permit.

(f) The US Department of Labor proposed an agricultural child labor regulation in 2012. The department subsequently withdrew the proposal after it was found that the Department’s characterization of the family farm exemption in the proposal differed from its own statements in its Field Manual. (g) Many specialty crops benefit from chlorpyrifos as an insecticide. EPA has proposed revoking tolerances for the product (effectively eliminating its use in agriculture). In doing so, EPA is relying in part on an epidemiological study. Although the agency has requested raw data from the study those requests have been rejected by the researchers. Yet EPA continues to employ the study despite the fact that the agency’s own Science Advisory Panel has expressed concern with how EPA is using the study.

(h) EPA has published a controversial draft ecological assessment of atrazine. Atrazine has been used for decades and currently is employed on over 44 million acres of corn; millions of more acres in sorghum and sugar cane also use the product. Despite its widespread use and decades of data demonstrating its safety and efficacy, EPA appears to be relying on methodological errors and disputed scientific studies in this draft assessment in order to eliminate use of the chemical.

(i) The U.S. Fish and Wildlife Service recently added native salamanders under an interim rule as ‘injurious wildlife’ to prevent the importation or interstate movement of a foreign animal disease. The Lacey Act does not authorize animal disease regulation, Congress did not intend native species listings and a recent court ruling has found the Act does not authorize the Service to regulate interstate trade (U.S. Association of Reptile Keepers, Inc. v. Sally Jewell et al., Memorandum of Opinion, May 12, 2016)

(j) The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) revised its hazard communication standard and classified whole grain (i.e. corn, soybean and wheat) as a “chemical hazard,” basing this on the view that when the grain is processed, it produces dust which can be combustible under certain conditions. As a result, commercial grain facilities now are classified as “chemical manufacturing facilities.” OSHA made this change unilaterally in the final rule, without proposing it in the proposed rule.

IV. Regulatory Missteps

Reform of the rulemaking process is critically needed. Listed below are examples of how the system has failed to deliver for stakeholders.

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(a) Waters of the US (WOTUS) rule

Perhaps no regulatory proceeding in recent memory more graphically underscores where the system is failing: (1) EPA violated the prohibition on lobbying

The Government Accountability Office (GAO) found that EPA violated the Anti- Deficiency Act by essentially generating comments in support of its own proposal.

(2) Use/misuse of science

EPA and the Army Corps of Engineers undertook a compilation of scientific research on the subject of connectivity of waters as a means of validating the agency’s proposal to expand Federal jurisdiction. The agency, however, unveiled its regulatory proposal before the study was even complete and available for comment; in fact, before the ‘study’ itself was final, EPA was defending its rule, attempting to garner public support for it and then finalized the rule itself before finalizing the ‘study.’ Not surprisingly, the study appeared to ratify the agency’s pre-existing view that nearly all waters are somehow connected and therefore almost all “waters” – including “waters” that are actually dry land – should be regulated under the Clean Water Act. EPA has based its legal and scientific underpinning of this rule based on a misreading of the concurring opinion of a single Supreme Court Justice in Rapanos: that the agency could only regulate waters that had a ‘significant nexus’ to navigable waters. The agency took the view that virtually any connection was significant. (3) Use/misuse of economics

EPA publicly stated and re-stated claims that were almost contradictory. In some forums, the agency claimed its proposed regulation had a negligible impact on its jurisdiction, extending it only by 3% or 4%. Such a claim allowed the agency to elide its obligations under the Regulatory Flexibility Act. Yet in other forums, the agency made the assertion that its ‘clean water’ rule would extend protection to 60% of the nation’s flowing streams and millions of acres of wetland.

(4) Subversion of the APA notice-and-comment procedure

The APA required the agency to receive, evaluate and respond to comments received during the comment period on the proposed rule. Yet the agency manifestly used the comment period not only to defend its rule – it also used the period to attack and reject comments made by those who had criticized the rule and to generate comments in support of its own point of view. The agency went on to

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claim that it received over a million favorable comments (some being nothing more than signatures on petitions generated on the agency’s behalf through social media efforts undertaken by the agency and paid for by U.S. taxpayers).

(5) Lack of State-Federal consultation

The Clean Water Act (§1251) states that “It is the policy of the Congress to recognize, preserve, and protect the primarily responsibility and rights of States to prevent, reduce, and eliminate pollution…” Yet dozens of states have sued the agency over its proposal, demonstrating that the agency is not following congressional intent to work with states in implementing the law. (6) Refusal to respect the intent of Congress

Both houses of Congress, by bipartisan votes contemporaneous with EPA’s proposal, voted for legislation overturning the agency’s regulation. Yet the agency has refused to acknowledge that its judgment is secondary to the Congress.

(b) U.S. Forest Service Groundwater Directive (federal taking of private property water rights)

A U.S. Court rejected an effort by the U.S. Forest Service (USFS) to coerce Federal permit holders to relinquish or share water rights permit holders had lawfully gained through state adjudication proceedings; the USFS was attempting to do this by conditioning permits on the transfer or sharing of such rights. Many western ranchers also hold water rights and have been pressured by the Bureau of Land Management (BLM) to concede their rightful ownership. Similarly, BLM appears to be increasingly moving away from the multiple-use concept authorized by Congress; rather, the agency is injecting its own preferred policy approaches to the management of public lands, often for the single use of environmental and species protections. (c) EPA draft ecological assessment of atrazine

Atrazine is an important herbicide for corn farmers and others; it is used today on more than half of all corn acres and has a long history of use and study (by some estimates, nearly 7,000 studies). Yet EPA has published a draft ecological assessment of atrazine that, if left unchallenged, could eliminate its use by farmers. In its assessment, the agency has adopted an approach that has raised significant scientific questions and apparently disregarded the advice of multiple SAPs over the years.

(d) Worker Protection Standards rule

EPA in the last year has finalized changes to its worker protection standards (WPS) rule.

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The new regulation imposes new recordkeeping, training and other requirements on farmers that will cost millions of dollars. EPA claimed that the rule was justified because it would confer safety benefits to workers – even though in numerous instances in the proposal it admitted it could not quantify or justify its assertion of increased benefits.

(e) The traditional definition of wetlands uses three criteria – hydrology, vegetation and the presence of hydric soils. Yet Federal regulators increasingly try to reduce or eliminate one or more of the criteria as a means of expanding Federal regulations; those policy choices are made largely without the benefit of APA procedures. (f) Planning Rule for National Forest Management

In 2012, the USDA Forest Service adopted new planning rules that radically restructured the purposes of the National Forest System. These planning rules advance ‘ecological integrity’ over congressionally authorized outputs, such as timber, water, forage, and recreation. The forest industry, ranchers, and recreation groups filed suit, arguing that the rules represented a fundamental departure from legislative mandates but courts dismissed the suit on the grounds that there was no concrete injury from a rule that simply guides planning. Yet the exact outcomes alleged by the plaintiffs are coming to pass: reduced timber outputs, less grazing, and more complex rules that promise to stymie needed forest management projects.

V. A Bipartisan Approach Given this set of facts – an administrative statute that is 70 years old; an explosion of Federal laws and requirements; greater Federal demands on state governments with fewer resources to accomplish them; an increase in the amount and scope of litigation; expanded ability of parties to sue; the development and use of computer models to simulate or sometimes substitute for real-world conditions; the broadening scope of environmental statutes to affect and sometimes override economic considerations and property rights; the judicial principle that courts must defer to agencies rather than interpret the law themselves – it is no surprise that the impacts of regulations on agriculture have increased. Coupled with this set of facts is another critical component: the increasing difficulty of Congress in finding agreement on bipartisan solutions. In truth, over the past few decades we have seen executive/regulatory and judicial activities increase to the point that those branches are deciding policy questions at the expense of Congress – where the Constitution explicitly vested policy decisions. At the heart of regulatory reform should be a bipartisan effort to rectify this imbalance.

In recent years, Congress has sought to address shortcomings in the existing system, considering legislative proposals to make improvements in the Administrative Procedure Act. Unfortunately, to date such efforts have failed to gain sufficient bipartisan support. We do believe, however, that there are common principles on which both parties agree.

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The striking feature on regulatory reform that gives us cause for optimism is that, for years, even decades, we have seen both Democratic and Republican presidents enunciate a set of principles that are strikingly similar. While clearly there are different emphases and priorities, we believe Republican and Democratic Presidents alike have reiterated the desirability and need for an honest, transparent, open and credible regulatory process. Note the statements below taken from Executive Orders and other presidential documents, some nearly four decades old, that speak to these questions:

Regulations … shall not impose unnecessary burdens on the economy, on individuals, on public or private organizations, or on State and local governments. …Regulations shall be developed through a process which ensures that … the need for and purposes of the regulations are clearly established; meaningful alternatives are considered and analyzed before the regulations is issued; and compliance costs, paperwork and other burdens on the public are minimized. President Jimmy Carter, Executive Order 12044 (March 23, 1978)

Regulatory action shall not be undertaken unless the potential benefits to society for the regulation outweigh the potential costs to society; regulatory objectives shall be chosen to maximize the net benefits to society; among alternative approaches to any given regulatory objective, the alternative involving the least net cost to society shall be chosen. President Ronald Reagan, Executive Order 12291 (February 17, 1981)

Federal regulatory agencies should promulgate only such regulations as are required by law, are necessary to interpret the law, or are made necessary by compelling public need, such as material failures of private markets to protect or improve the health and safety of the public, the environment, or the well-being of the American people. … In choosing among alternative regulatory approaches, agencies should select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity) unless a statute requires another regulatory approach. President Bill Clinton, Executive Order 12866 (September 30, 1993)

National action limiting the policymaking discretion of the States shall be taken only where there is constitutional and statutory authority for the action and the national activity is appropriate in light of the presence of a problem of national significance. President Bill Clinton, Executive Order 13132 (August 4, 1999)

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The public must be able to trust the science and scientific process informing public policy decisions. Political officials should not suppress or alter scientific or technological findings and conclusions. If scientific and technological information is developed and used by the Federal Government it should ordinarily be made available to the public. To the extent permitted by law, there should be transparency in the preparation, identification and use of scientific and technological information policymaking President Barack Obama, Memorandum for the Heads of Executive Departments and Agencies (March 3, 2009)

Our regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation. … This order…reaffirms the principles, structures, and definitions governing contemporary regulatory review that were established in Executive Order 12866 of September 30, 1993. As stated in that Executive Order and to the extent permitted by law, each agency must, among other things: (1) propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing that some benefits and cost are difficult to quantify; (2) tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations … President Barack Obama, Executive Order 13563 (January 18, 2011)

In the 2016 presidential election campaign, Donald Trump has spoken to the need to address over-regulation. In response to questions from the American Farm Bureau Federation, Mr. Trump said:

As President, I will work with Congress to reform our regulatory system. … We will increase transparency and accountability in the regulatory process. Rational cost-benefit tests will be used to ensure that any regulation is justified before it is adopted. Unjustified regulations that are bad for American farmers and consumers will be changed or repealed.

Similarly, in response to the same question, Hillary Clinton’s campaign responded:

As president, she will always engage a wide range of stakeholders, including farmers and ranchers, to hear their concerns and ideas for how we can ensure our agriculture sector remains vibrant. If there are implementation challenges with a particular regulation, Hillary will work with all stakeholders to address them.”

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VI. Proposals to Consider Members of America’s farm and ranch community call on the new Administration and Congress to initiate a process that will draw upon the best of ideas from a broad range of stakeholders. Republicans and Democrats should invite comments from the broadest range of perspectives. As stated earlier, we firmly believe that all affected parties have a fundamental interest in a process that commands respect; that is transparent; that reflects congressional intent; and that seeks to fairly and evenly balance the interests of all affected parties. We do not believe the system that exists today exhibits those characteristics.

Listed below are some provisions that in our view deserve consideration. There are undoubtedly others; they should all be up for discussion, consideration and debate. We pledge our readiness to work with the new Administration and all members, on both sides of the aisle, in an effort to strengthen the existing system to protect our environment, the agricultural landscape, and to reinvigorate the American economy. 1. Review Chevon and Auer deference policies. Congress should consider: a. To what extent deference should apply b. What is the appropriate way to acknowledge agency expertise c. Whether the existing system fairly treats the regulated community d. How best to re-establish equilibrium among Congress, agencies and the courts

2. Review agency use of science. Congress should consider: a. How to assure the President’s memorandum on science is implemented b. How the Information Quality Act is implemented c. How agencies can assure transparency in the science they use

3. Review agency use of economic data. Congress should consider a. How agencies utilize economic data and economic models b. How agencies implement executive orders on least-cost alternatives c. How well agencies implement SBRFA

4. Review agency transparency in rulemaking. Congress should consider a. How well the APA promotes transparency b. What further steps can promote agency openness c. How well the APA respects Federalism and the role of the states

5. Review Federal-state cooperation. Congress should review a. How well agencies implement the Clinton EO on federalism b. How well agencies respect state authority c. Whether agencies are unduly burdening state governments with regulatory costs

6. Review the Administrative Procedure Act. Congress should a. Undertake a comprehensive review of the APA b. Mandate a minimum 60-day comment period for major rules 13 | Page

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c. Establish special procedures for rules that have significant impact on the economy or certain sectors d. Examine ways to promote advance notice to states and regulated parties about upcoming regulatory initiatives e. Explore ways to assure the APA reflects Presidential Executive Orders on rulemaking f. Explore the appropriateness of cost-benefit considerations in rulemaking

7. Re-affirm the public’s right to know. Congress should a. Mandate greater transparency of disbursements from the Judgment Fund b. Assure the Equal Access to Justice Act is fairly and impartially implemented c. Assure that settlement decrees that affect the regulated community are disclosed in advance

8. Review the impact of judicially-driven policy and regulation. Congress should a. Review the issue of standing and how it impacts regulations b. Review the scope of matters subject to judicial review c. Review need for narrowing scope of judicial interpretation

9. Review Congress’ role in rulemaking. Congress should a. Examine the need or appropriateness for congressional approval of major rules b. Examine the need for greater congressional oversight of agency rulemaking

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NCFC Priorities & Policy Resolutions National Council of Farmer Cooperatives 2016 Priorities & Policy Resolutions 2 | National Council of Farmer Cooperatives Who we are…

Since 1929, the National Council of Farmer Cooperatives (NCFC) has been the voice of America’s farmer cooperatives. Farmer cooperatives are businesses owned and controlled by farmers, ranchers, and growers. Cooperatives differ from other businesses because they are member-owned and operated for the benefit of members.

Farmer cooperatives handle, process, and market almost every type of agricultural commodity; furnish farm supplies; and provide credit and related financial services, including export financing. Farmer cooperatives offer the best opportunity for America to realize the farmer-focused ideal of an enduring, competitive agricultural industry because they allow individual farmers the ability to own and lead organizations essential for continued competitiveness in both the domestic and international markets.

Through their cooperatives, farmers are able to:

• Improve their income from the marketplace • Strengthen their bargaining power • Maintain access to competitive credit sources • Compete effectively in the global economy • Capitalize on new marketplace opportunities, including value-added processing • Manage risk • Access technical assistance and other services

NCFC members are regional and national farmer cooperatives, which in turn are comprised of nearly 3,000 local farmer cooperatives across the country. They contribute to a vibrant rural economy, providing jobs for over 250,000 Americans. The majority of America’s 2 million farmers and ranchers belong to at least one farmer cooperative. NCFC members also include 22 state and regional councils of cooperatives. 2016 Priorities & Policy Resolutions | 3 NCFC 2016 Priorities Numerous legislative and regulatory issues arise during the course of a year, and NCFC will work to ensure the value of farmer cooperatives is recognized by Congress and the Administration. In 2015, NCFC will focus its efforts on key priority issues for farmer cooperatives, including:

1. Support the Capper-Volstead Act antitrust protections for farmer cooperatives and protect the rights of farmers to join or form cooperatives to market their products and improve their income from the marketplace. 2. Maintain Internal Revenue Code Subchapter T tax provisions for farmer cooperatives and promote favorable tax treatment for farmer cooperatives. 3. Support legislative and regulatory efforts that promote the Farm Credit System’s unwavering mission to provide credit and related services to the agricultural sector and rural America. 4. Maintain and promote farmer cooperative eligibility and access under USDA and other federal programs and initiatives. 5. Maintain support and funding for USDA farm bill programs consistent with NCFC principles. 6. Support immigration reform to meet agriculture’s labor needs and to ensure a dependable supply of high quality food and fiber. 7. Support modernization of U.S. transportation infrastructure to maintain and enhance U.S. agriculture’s global competitiveness. 8. Broaden support for enhanced U.S agricultural trade and increased market access. 9. Support efforts to ensure regulations implementing financial regulatory market reforms do not impair farmer cooperatives’ ability to use and provide essential risk management tools. 10. Support conservation programs and environmental regulations that are locally driven and based on scientifically and economically sound practices, recognizing the unique nature of farmer cooperatives and production agriculture. 11. Support efforts to ensure farmer-owned cooperatives, their employees, and the producers they serve are presented with affordable and varied options as part of any reforms to the nation’s health care system. 12. Support the development of a comprehensive national energy strategy that meets our nation’s energy needs and maximizes a role in energy independence for American agriculture and farmer cooperatives. 13. Support nutrition policy based on best available science and promote healthful consumption of meat, farm-raised aquaculture, dairy products, grains, and fruits, vegetables, and nuts, based on their nutritional value. 14. Support efforts to reduce the climate of uncertainty created by burdensome regulations, including those that are pending. 15. Support the development and use of technologies for efficient, safe production of affordable food, fiber and fuel.

As Approved by the NCFC Council, February 11, 2016, and as amended on May 3, 2016. 4 | National Council of Farmer Cooperatives NCFC Policy Resolutions Legal, Tax and Accounting Background: Farmer-owned cooperatives are central to America’s abundant, safe and affordable food, fuel and fiber supply. NCFC strongly supports public policy that continues to protect and strengthen the ability of farmers and ranchers to join together in cooperative efforts to maintain and promote the economic well- being of farmers, ensure access to competitive markets, and help capitalize on market opportunities. The heart of farmer co-op policy lies with the protections afforded by the Capper-Volstead Act’s limited antitrust immunity for farmers and their cooperatives. Without those protections, many farmer cooperatives would cease to exist and the farmers and communities they serve would suffer irreparable harm. Policy Resolutions: 1. Oppose any action that would limit the effectiveness and efficiency of farmer cooperatives and as such action would harm American agriculture and rural communities, resulting in a less reliable food, fuel and fiber supply. 2. Maintain Capper-Volstead Act protections and coordinate industry response to recent legal challenges regarding the scope and applicability of the Act. 3. Maintain Internal Revenue Code Subchapter T tax provisions for farmer cooperatives. 4. Promote tax and accounting policies that allow farmer cooperatives and their members to compete in today’s challenging marketplace and to pass on their operations to the next generation. 5. Monitor implementation of Uniform Law for Cooperatives. Farm Credit Background: The Farm Credit System is a cooperatively-owned network of financial institutions established by Congress to serve as the reliable supplier of competitively priced credit to U.S. farmers, ranchers, agricultural cooperatives, rural utilities, and other rural businesses. The cooperative structure of the Farm Credit System ensures that profits are returned to customer-owners through patronage distributions or are used to support new, mission-related lending activities. Policy Resolutions: 1. Support initiatives ensuring that the Farm Credit System remains a reliable and competitive source of credit to farmers, ranchers, agricultural cooperatives and rural infrastructure. 2. Support the Agriculture Committees’ continued jurisdiction over the Farm Credit System and regulatory oversight by the Farm Credit Administration. 3. Support initiatives that promote the ability of farmer cooperatives to offer forward contracts and risk- mitigation tools to producers, particularly in times of high crop and crop input prices. 4. Support efforts by the Farm Credit System to modernize its lending authorities to reflect the changing rural and farm economy, including the development of new generation cooperatives, if such opportunities arise. 2016 Priorities & Policy Resolutions | 5

Agriculture Policy Background: NCFC strongly supported passage and implementation of the 2014 Farm Bill to meet the needs of U.S. producers, ensure the long-term viability, health and competitiveness of U.S. agriculture, and to help meet domestic and international food, fiber, feed, and energy needs. Additionally, NCFC is following closely the appropriations process in Congress. Programs that are authorized but never funded are of no help. Likewise, programs that are deprived during the appropriations process never reach their full potential. Policy Resolutions: 1. Maintain and promote farmer cooperative eligibility and access under USDA and other federal programs and initiatives. 2. Maintain support and funding for USDA farm bill programs consistent with NCFC principles. 3. Support efforts to maintain a budgetary baseline, thus minimizing potential budget cuts, to ensure adequate funding for policies and programs to meet the needs of U.S. agriculture. 4. Maintain and promote a needed income safety net for producers, while helping to meet the food and fiber needs of consumers at home and abroad. 5. Support dairy policy that reduces extreme volatility and establishes a viable and effective domestic safety net for producers with a focus on protecting the operating margin experienced by producers as reflected by milk price and input costs. 6. Promote improved comprehensive risk management tools and programs for farmers, especially the Federal Crop Insurance program. 7. Support strengthening the specialty crop industry through viable and economical systems that enhance the value, ensure the safety, and promote consumption of specialty crop products. 8. Maintain and promote needed agricultural research. 9. Support policies that enhance the ability of U.S. farmers to produce food, fuel and fiber using technologies that are based on proven science, including biotechnology. 10. Support and maintain expanded pest and disease research programs, improved exclusion and eradication programs, and continue to protect the tools which are vital in these efforts. 11. Support correcting the current imbalance in the specialty crop industry caused by the USDA Standard Reinsurance Agreement (SRA) which puts specialty crop farmers at a disadvantage. 12. Increase federal funding to protect against the introduction of pests at ports of entry. 13. Support federally authorized and producer supported research, marketing and promotion programs, commonly known as check-offs, which are established and approved in referenda by producers who fund the programs with their own money.

As Approved by the NCFC Council, February 11, 2016, and as amended on May 3, 2016. 6 | National Council of Farmer Cooperatives

Animal Agriculture Background: NCFC supports animal agriculture policies that provide market transparency, reduce unnecessary government regulations, and increase availability of market information for livestock, poultry and egg producers. Federal policies must recognize the unique and important role farmer-owned livestock and poultry marketing associations play in the success of American agriculture and in providing farmers the best opportunity to compete in an increasingly challenging marketplace. NCFC also continues to work with industry partners to improve communications among farmers, ranchers, processors, food retailers and consumers, helping people better understand the role animal agriculture plays in providing a safe, abundant food supply. Policy Resolutions: 1. Support strengthening the livestock industry through viable and economical systems that enhance the value and ensure the safety of animal agriculture products, promoting consumer confidence. 2. Support policies that enhance the ability of cooperative members to raise animals for food and fiber consistent with best management practices, herd health objectives and available technologies based on proven science, are economically sound, and that ensure the safety of animal agriculture products. 3. Support policies that promote the responsible use of production practices by producers in order to maintain the health of their animals and to continue to provide the American consumer with a high- quality source of protein. 4. Support the use of antimicrobials in an approved herd health program to promote animal well-being and to provide healthy and safely produced food for consumers. 5. Support policies to enhance business opportunities for livestock and poultry producers as well as their farmer-owned livestock marketing associations by providing the freedom and flexibility to engage in new market innovations. 6. Oppose federal policies that negatively impact farmer-owned livestock marketing associations by limiting the marketing options of the cooperative and its members. 7. Oppose activities and extreme policies that lack basis or scientific evidence and negatively impact the ability of farmer-owned cooperatives and their producer members to produce a safe and affordable food supply. Commodity Derivatives Background: As processors and marketers of commodities and suppliers of farm inputs, cooperatives are commercial end-users of over-the-counter derivatives (commodity swaps). Cooperatives use swaps to effectively minimize risks associated with price movements in commodities, such as grain, dairy products, livestock, energy, and fertilizer. In addition, swaps give cooperatives the ability to offer customized products to producers that help them better manage their risk and returns and, provide more predictable profitability. Policy Resolutions: 1. Promote improved comprehensive risk management tools and programs for farmers. 2. Support efforts to ensure Commodity Futures Trading Commission regulations do not impair farmer cooperatives’ ability to use and provide their members essential risk management tools. 3. Support the development of risk management products to ensure a reliable and affordable supply of fertilizers and other inputs. 2016 Priorities & Policy Resolutions | 7

Rural Development Background: Farmer cooperatives have increased their presence in rural communities, and have a vested interest in the economic well-being of these areas. Their activities, earnings, and patronage dividends directly support the rural American economy. Federal policies must continue providing rural communities with the tools necessary to sustain and promote economic well-being. Policy Resolutions: 1. Encourage and promote rural development, including through farmer-owned businesses. 2. Strengthen programs to better enable farmers and their cooperatively-owned businesses to capitalize on new value-added market opportunities. 3. Maintain Value-Added Producer Grants, including farmer cooperative eligibility, and full funding. 4. Ensure USDA’s Cooperative Services is able to meet the needs of our nation’s farmer cooperatives by providing relevant and timely information, statistics and research in addition to effective program administration. Labor and Immigration Background: The agriculture industry faces unique employment needs and challenges, and the current H-2A guest worker program is unworkable and cannot be fixed. Production agriculture requires sufficient farm labor resources in order to continue to supply the nation and the world with high quality food, fiber and fuel. For production to continue in this country, agriculture must be supported by federal programs that allow for their labor needs to be met. Federal policies now and in the future must recognize the unique nature of agricultural work and our international competitiveness issues that require access to a flexible workforce. Additionally, farm safety is of the highest importance. Policy Resolutions: 1. Support immigration reform that meets the unique needs of all segments of agriculture, in terms of visa length and addressing agricultural workers currently in the country. 2. Support shifting the administration of agricultural worker visas from the Department of Labor to the U.S. Department of Agriculture. 3. Oppose mandatory E-Verify without a workable, legislative solution for agriculture’s current and future workforce. Oppose any efforts to exempt agriculture from the use of E-Verify which would likely lead to an increase in industry workforce audits. 4. Support efforts to ensure that immigration regulation and enforcement procedures, including by the Department of Homeland Security, do not impose unreasonable costs and over burdensome obligations on agricultural employers. 5. Support simplifying the methods for small seasonal employers to determine whether they are subject to the employer mandate under the Affordable Care Act, and defining “seasonal employee” as a worker who is employed on a seasonal basis for six months or less during the calendar year, consistent with Department of Treasury regulations. 6. Oppose Card Check legislation, recognizing that the card check procedure increases the risk of coercion by removing workers’ ability to cast a secret ballot regarding union organization. 7. Support responsible and cost-effective regulatory policies that provide a safe and productive work environment while promoting our economic competitiveness. Oppose federal efforts that do not adequately recognize the diversity of agricultural production and processing. 8. Oppose policies that unnecessarily diminish the ability of young people to seek employment in agricultural operations and related fields. 9. Farms with 10 or fewer employees should not be regulated by the Occupational Safety and Health Administration. As Approved by the NCFC Council, February 11, 2016, and as amended on May 3, 2016. 8 | National Council of Farmer Cooperatives

Energy Background: NCFC supports an energy policy that maximizes a role for American agriculture and farmer cooperatives in energy independence. Farmer cooperatives are vital players in this country’s quest for energy independence and in ensuring that producers are able to capitalize on expanded market opportunities. Renewable energy sources, along with conservation, are important tools in securing a more affordable and accessible domestic renewable energy supply. NCFC encourages passage of a comprehensive energy bill recognizing the contributions of the American farmer and rancher in the renewable energy industry. Policy Resolutions: 1. Support legislative and regulatory action to meet U.S. and agriculture’s energy needs. 2. Promote expanded development and use of renewable fuels and other energy sources as part of a comprehensive energy policy to help meet U.S. agriculture and our nation’s energy needs. 3. Support a consistent and reliable policy of renewable fuels incentives and other provisions encouraging production of renewable fuels. New approaches to federal investment in the renewable fuels industry should encourage innovation and market stability. 4. Support voluntary policies promoting the development of technologies to further utilize manure as a feedstock to produce gas, fuel, or electricity, especially if these projects are cost-effective and provide an economic benefit to farmers and/or farmer-owned cooperatives. 5. Recognize the importance of, and continuing role for, traditional energy sources, especially for the agriculture industry and rural America. 6. Promote affordable technology advances for cleaner utilization of fossil-based fuel sources. Transportation & Infrastructure Background: Improving our transportation infrastructure must be a national priority deserving urgent attention – sooner rather than later. Capacity constraints, structurally deficient bridges, deteriorating roads, and locks and dams long past their expected useful life require our full attention as a nation. Policy Resolutions: 1. Support modernization of U.S. transportation infrastructure to maintain and enhance U.S. agriculture’s global competitiveness. 2. Support legislation to fully fund construction of new locks on the Upper Mississippi and Illinois River System. 3. Support improvements in rail capacity, competition, service and accessibility in rural America. 4. Support expansion of key trucking routes on the interstate system. 5. Maintain and expand agricultural hours of service exemption. 6. Pass long-overdue trucking productivity improvements, including increased allowable weights for hauling agricultural commodities. 7. Support policies that promote the construction of pipelines in the United States to accommodate increased domestic energy production, improve the reliability and flexibility of our country’s energy delivery networks and to complement rail lines, highways and waterways. 8. Support measures that facilitate increased U.S. port efficiencies and policies that prevent port disruptions that cause economic harm to agricultural shippers and producers. 2016 Priorities & Policy Resolutions | 9

International Trade Background: NCFC seeks a level playing field for U.S. agriculture in the global marketplace. Market development and promotion programs are vital to maintaining and expanding U.S. agricultural exports, countering subsidized foreign competition, protecting American jobs and strengthening farm income. Accordingly, NCFC supports strong market development and promotion programs in pursuit of increased agricultural exports and the farm-level benefits they generate. Additionally, over the past decade, the resources for both FAS and APHIS have come under significant pressure due to budget issues. This pressure has come at a time when competition in key foreign markets has only increased. These resources, including personnel and infrastructure, are extremely valuable in ensuring that overseas markets remain open and efficient for U.S. agricultural exports. We recognize the benefits of multilateral negotiations. However, in the absence of an active multilateral round of trade negotiations, the U.S. should continue to engage in bilateral and regional negotiations to improve foreign market access for U.S. agricultural products. Policy Resolutions: 1. The U.S. trade remedy law process should be strictly adhered to so as to maintain it as a viable tool for American agriculture. 2. Support passage of the Trans-Pacific Partnership agreement. 3. Support the negotiation of a comprehensive and ambitious Transatlantic Trade and Investment Partnership that addresses tariffs, sanitary and phytosanitary (SPS) and other non-tariff trade barriers, including geographic indicators. 4. Market Access a. Maintain and expand U.S. agriculture exports and global competitiveness, including substantially improved access to foreign markets. b. Maintain and strengthen USDA Export Programs and funding; and ensure continuation of the branded program and current cooperative eligibility in the Market Access Program. c. Support increased market access for U.S. agriculture exports, including to Cuba. 5. Support enhanced resources for USDA’s Foreign Agricultural Service (FAS) and Animal and Plant Health Inspection Service (APHIS) in support of U.S. agriculture exports.

As Approved by the NCFC Council, February 11, 2016, and as amended on May 3, 2016. 10 | National Council of Farmer Cooperatives

Conservation and the Environment Background: NCFC is involved with a wide variety of conservation and environmental issues from implementation of farm bill conservation programs to pesticide registrations to wetlands regulations. While the issues vary, our principles remain: NCFC believes conservation programs and environmental regulations should be locally driven and based on scientifically and economically sound practices, and should recognize the unique nature of farmer cooperatives and production agriculture. Additionally, we work to promote the value of farmer cooperatives in the context of the growing dialogue about social responsibility and sustainability. However, the U.S. Environmental Protection Agency (EPA) has multiple, aggressive regulatory and enforcement initiatives underway that ignore the role of states and affect nearly every aspect of U.S. agriculture. Water quality, air quality, pesticide use, and climate change are all subject to major actions, and farms and ranches of all sizes can expect to be affected. Policy Resolutions:

1. Promote environmental stewardship, recognizing the unique role that farmer cooperatives can play as a part of the delivery system relating to environmental programs. 2. Oppose environmental legislation or regulatory actions that cause adverse impacts to farmer-owned cooperatives and their farmer members, including increased costs of production, that hinder their ability to produce food, fuel and fiber for the world. 3. Support full funding for working lands conservation programs, including the Environment Quality Incentives Program (EQIP), in order to maximize conservation program benefits and better achieve important environmental objectives. 4. Encourage EPA to assist producers with implementation tools and guidelines in order to comply with the Spill Prevention, Control, and Countermeasure (SPCC) regulations. 5. Support efforts to ensure access to critically needed crop protection products for agriculture. 6. Support Endangered Species Act reform. 7. Support efforts to ensure producers participating in cost-share conservation programs can engage in opportunities in environmental services markets. 8. Support implementation of science-based environmental policies that achieve clean air and clean water while minimizing cost and regulatory burdens on farmer cooperatives and their member owners. 9. Oppose expansion of the jurisdictional reach of the Clean Water Act. Food Safety Background: America’s farmers and ranchers are committed to providing a safe and affordable food supply for consumers globally. NCFC urges that any actions by Congress be based on best available science and prudent risk assessment. American consumers need to have confidence that their food is safe and that the best science is being used to ensure that the most wholesome products possible. Policy Resolutions: 1. Support food safety legislation and regulations based on best available science, and that are risk- based, commodity specific, and applied equitably. 2. Ensure food safety regulations enhance our nation’s food safety while avoiding negative impacts to farmer cooperatives and their producer members. 2016 Priorities & Policy Resolutions | 11

Nutrition & Labeling Background: A large and increasing number of federal dollars are spent to ensure nutritious food is available for our nation’s individuals, families, and children who rely on federal nutrition programs. America’s farmers and ranchers supply the nation and the world with nutritious and wholesome food. NCFC urges that any actions by Congress to update or change nutrition policy be based on best available science and USDA’s Dietary Guidelines. Policy Resolutions: 1. Support USDA food and nutrition programs and the continuation of USDA commodity purchases using Section 32 funds. 2. Encourage USDA’s food and nutrition programs to provide all forms of fruits, vegetables, and tree nuts as outlined in the Dietary Guidelines. 3. Ensure that federal nutrition policy is consistent with the Buy American provisions and encourages healthful consumption of meat, farm-raised aquaculture, dairy products, grains, and fruits, vegetables, and nuts, based on best available science. 4. Support the healthful consumption of higher fat content milk and milk products through federal nutrition programs. 5. Support the use of agricultural production technologies, such as the production and use of biotechnology, as long as they are proved safe and do not pose a risk to public health. 6. Support legislative and regulatory efforts to grant federal preemptive authority on all food labeling requirements, including: a. the formation of one standardized nutritional labeling system for food labels and grocery store shelf markers that is based on best available science and criteria that is public and readily available to consumers, and b. a clear definition of “all natural.” 7. Oppose state and local food labeling initiatives that conflict with science and increase food costs without achieving any substantiated benefits. 8. Support the reauthorization of federal child nutrition programs, recognizing the need for flexibility while building on advancements made to ensure students have access to healthy, nutritious food.

As Approved by the NCFC Council, February 11, 2016, and as amended on May 3, 2016. NATIONAL COUNCIL OF FARMER COOPERATIVES 50 F Street NW, Suite 900 Washington, DC 20001 t: (202) 626-8700 f: (202) 626-8722 CONNECT WITH NCFC AT WWW.NCFC.ORG

Facebook: www.Facebook.com/Farmercoop Twitter: @FarmerCoop Committee Elections Government Affairs Committee Leadership Positions 2015-2016

Government Affairs Committee Chair: Rich Hudgins, California Canning Peach Association Vice Chair: Caroline Rydell, Farm Credit Bank of Texas NCFC Staff Contact: Lisa Van Doren ([email protected])

Environment & Energy Subcommittee Subcommittee Focus: Environmental Regulations, USDA Conservation Programs, Energy, Climate Change, etc. Chair: Emily Rooney, Agricultural Council of California Vice Chair: David Salmen, South Dakota Wheat Growers NCFC Staff Contact: Lisa Van Doren ([email protected]) and Kelsey Billings ([email protected])

International Affairs Subcommittee Issue Areas: International Trade, Trade Promotion Authority, Market Access, Export Programs, SPS Issues, etc. Chair: Bill Reed, Riceland Vice Chair: Rayne Thompson, Sunkist Growers, Inc. NCFC Staff Contact: Kevin Natz ([email protected]) and Lisa Van Doren ([email protected])

Fruit, Veg & Nut Subcommittee Issue Areas: Specialty Crop Block Grant Program, Specialty Crop Research Initiative, DOD Fresh, USDA Snack Program, TASC Program, etc. Chair: Bill Frantz, Ocean Spray Cranberries, Inc. Vice Chair: Lorrie Merker, MBG Marketing NCFC Staff Contact: Mary Nowak ([email protected]) and Lisa Van Doren ([email protected])

Animal Agriculture Subcommittee Subcommittee Focus: USDA Dairy Programs, Animal Health, Animal Welfare, Animal ID, Competition/Packers and Stockyards Act, etc. Chair: Vacant Vice Chair: Wally Knock, South Dakota Wheat Growers NCFC Staff Contact:) Kelsey Billings ([email protected]) and Lisa Van Doren ([email protected]) Labor & Infrastructure Subcommittee Subcommittee Focus: Immigration, Workplace Safety (OSHA, NLRB), Transportation, Rural Development, Credit/Finance, Broadband, etc. Chair: Jackie Klippenstein, Dairy Farmers of America Vice Chair: Julian Heron, Tuttle, Taylor & Heron NCFC Staff Contact: Mary Nowak ([email protected]), Kelsey Billings ([email protected]), Kevin Natz ([email protected]) and Lisa Van Doren ([email protected])

Food & Nutrition Subcommittee Subcommittee Focus: Food Safety, Food Labeling, Nutrition, etc. Chair: Autumn Veazey, Land O'Lakes, Inc. Vice Chair: Vaughn Koligian, Sun-Maid Growers of California NCFC Staff Contact: Mary Nowak ([email protected]), Kelsey Billings ([email protected]) and Lisa Van Doren ([email protected])

NCFC Government Affairs Committee Hyatt Regency Hill Country San Antonio, Texas November 14-16, 2016

ELECTION BALLOT

______Subcommittee – Vice Chair

The Chair and Vice Chair of each subcommittee can serve a maximum of two terms (four years). In no event shall more than two individuals appointed by any one NCFC member serve as a Subcommittee Chair or Vice Chair at the same time.

Nominations will be made by the Committee. Elections will be held in November and will take effect the following January.

For the term of Office: January 1, 2017 – December 31, 2018

Vice Chair: ______

NCFC Government Affairs Committee Hyatt Regency Hill Country San Antonio, Texas November 14-16, 2016

ELECTION BALLOT

______Subcommittee – Chair

Nominations will be made by the Committee. Elections will be held in November and will take effect the following January.

For the term of Office: January 1, 2017 – December 31, 2018

Chair: ______

NCFC Government Affairs Committee Hyatt Regency Hill Country San Antonio, Texas November 14-16, 2016

ELECTION BALLOT

Government Affairs Committee – Vice Chair

The Government Affairs Committee shall elect two of its members to serve as Chair and Vice Chair. The Chair and Vice Chair will serve a two-year term that coincides with the Congressional cycle. The Chair and Vice Chair can serve a maximum of two terms (four years).

Nominations will be made by the Committee. Elections will be held in November and will take effect the following January.

For the term of Office: January 1, 2017 – December 31, 2018

Vice Chair: ______

NCFC Government Affairs Committee Hyatt Regency Hill Country San Antonio, Texas November 14-16, 2016

ELECTION BALLOT

Government Affairs Committee – Chair

Nominations will be made by the Committee. Elections will be held in November and will take effect the following January.

For the term of Office: January 1, 2017 – December 31, 2018

Chair: ______

Future Meetings NCFC Future Meetings Schedule

2017 2017 Annual Meeting February 15 – 17 • Marriott Harbor Beach • Fort Lauderdale, FL Executive Council Meeting April 19 – 20 • NCFC Office • Washington, DC 2017 Washington Conference June 26 – 28 • Hyatt Regency • Washington, DC Executive Council Meeting September 20 – 21 • NCFC Office • Washington, DC LTA Subcommittee Chairs-Vice Chairs September 27 – 29 • The Lodge at Ballantyne • Charlotte, NC Government Affairs Meeting November 8 – 10 • TBD 2018

2018 Annual Meeting February 7 – 9 • Hilton New Orleans Riverside • New Orleans, LA 2018 Washington Conference June 25 – 27 • Hyatt Regency • Washington, DC 2019

2019 Annual Meeting February 13 – 15 • Westin Kierland • Phoenix, AZ 2019 Washington Conference June 24 – 26 • Hyatt Regency • Washington, DC Notes NOTES

NOTES

NATIONAL COUNCIL OF FARMER COOPERATIVES 50 F Street NW, Suite 900, Washington, DC 20001 Tel: (202) 626-8700 Fax: (202) 626-8722 www.ncfc.org www.facebook.com/FarmerCoop @Farmer Co-op