National Council of Farmer Cooperatives Government Affairs Meeting November 12-14, 2018 • Santa Fe, NM
www.ncfc.org
Government Affairs Committee La Fonda on the Plaza Santa Fe, New Mexico November 12-14, 2018
AGENDA
November 12th
All Day Arrival and Check-in
6:00 pm Reception & Dinner La Terraza Room La Fonda on the Plaza 100 E San Francisco St (505) 982-5511
November 13th
8:00 am Breakfast (Santa Fe Room)
8:30 am Welcome & Introductions (New Mexico Room) • Chairman's Welcome & Meeting Overview • Self-Introductions • Approval of the Minutes
8:35 am Political Assessment – What just happened?
Speaker: David Wasserman House Editor Cook Political Report
9:30 am Political Assessment – An Agriculture Perspective
Speaker: Chris Clayton Ag Policy Editor DTN/The Progressive Farmer
10:15 am Break
10:30 am State of the Economy & Pressures on Agriculture
Speaker: Brian Cavey Senior Vice President, Government Affairs CoBank
Representing the Business Interests of Agriculture
11:00 am Policy Implications of a Changing Agricultural Landscape
Speaker: Scott Caine Chief Operating Officer Aimpoint Research
12:00 pm Lunch (Santa Fe Room)
1:00 pm Trade Outlook – Roundtable Discussion
2:00 pm Legal, Tax & Accounting Update • Tax Reform Implementation • Tax Reform 2.0 • FDII – A New Opportunity for Co-ops?
2:30 pm Wage Inflation and Worker Scarcity
Speaker: Ben Laine Knowledge Exchange Division CoBank
3:15 pm Break
3:30 pm Regulating Emerging Technologies: Cultured Meats?!
Speaker: Danielle Beck Director of Governmental Affairs National Cattlemen’s Beef Association
4:00 pm Policy Round-up – Status of Key Issues • Farm Bill • Environmental Regulations • Biotech Labeling Regulation • Product Labeling • Immigration Reform • Pension Relief
5:00 pm Adjourn
6:00 pm Transportation to Dinner Departs Hotel
6:30 pm Reception & Dinner Gabriel’s Restaurant 4 Banana Lane (505) 455-7000
November 14th
8:00 am Breakfast (Santa Fe Room)
8:30 am NCFC CO-OP/PAC Report (New Mexico Room) • 2018 Cycle Overview • Improving our Reach • Annual Meeting Preparation
9:00 am Strategic Assessment of Committee Structure & Elections • Committee and Subcommittee Elections • Subcommittee Organization & Participation • Addressing Your Priority Issues • Future Meeting Topics
10:00 am BREAK
10:30 am Review & Update NCFC Priorities & Policy Resolutions
11:30 am Other Business
11:45 am Adjourn
12:00 pm Lunch Provided La Plazuela Restaurant La Fonda On the Plaza
June 2018 Meeting Minutes NCFC Government Affairs Committee Meeting Washington, D.C. June 25, 2018
Minutes
CALL TO ORDER Committee Chairman, Chuck Spencer, called the meeting to order, giving an overview of the meeting and supporting materials.
BUSINESS MEETING The Committee proceeded with its business meeting.
• APPROVAL OF THE MINUTES – A motion to approve the February 2018 meeting minutes was made by Rich Hudgins, President & CEO, California Canning Peach Association. The motion was seconded by Wally Knock, Board Director, Agtegra Cooperative.
• BYLAWS CHANGE – Marlis Carson reported that in order to promote increased communication and membership participation, a change to NCFC’s bylaws regarding the Individual Membership category has been proposed. The Executive Council reviewed this change and recommended it for the Council’s consideration of the change.
The proposed change would expand the Individual Membership category to include consultants such as attorneys and government relations professionals who work for NCFC members and participate in NCFC’s LTA and Government Affairs Committees. Individual Members receive NCFC publications, reduced conference rates, annual recognition at NCFC meetings, and eligibility for NCFC CO-OP/PAC’s restricted class.
Individual Members do not have a vote on the Council and the NCFC President & CEO is authorized to approve or reject applications for individual membership. The change was to be discussed in the next Executive Council Meeting.
• NCFC CO-OP/PAC REPORT – Kelsey Billings reported that NCFC CO-OP/PAC began the year with a balance of $74,445.00. As of June 15, 2018, contributions to the PAC totaled $102,110.00. Individual PAC contributions accounted for $43,500.00 and member PAC contributions accounted for $58,610.00 of the total. The annual goal for the PAC for 2018 is $233,500.00. As of June 15, 2018, the PAC reached 70 percent of its goal.
Mrs. Billings announced that the multiple fundraisers will be held during the conference, including a coffee with Senator John Boozman of Arkansas; a reception with Representative Kurt Schrader of Oregon; and a breakfast with Representative Jim Costa.
Finally, Mrs. Billings reported that as of June 15, 2018, the PAC supported 28 members of Congress for a total of $45,500.00 in contributions to candidates. As of June 30, 2018, the PAC had an ending balance of $142,795.76.
• LEGAL, TAX & ACCOUNTING UPDATE – Marlis Carson gave an update on Legal, Tax & Accounting matters. She first discussed the antitrust case involving egg producers, taking place in the Eastern District of Pennsylvania.
After nine years of litigation and a trial that consumed most of the month of May, a jury found that egg producers Rose Acre Farms, Ohio Fresh Eggs, and Sauder, Inc. did not engage in unlawful market restraints and did not violate the Sherman Act.
The case arose out of allegations in over a dozen separate lawsuits asserting that sixteen egg farmers and their cooperative, United Egg Producers, engaged in a conspiracy to raise the price of shell eggs and egg products by reducing egg supply. Over the years at least eight egg producers and their cooperative settled with the direct purchaser plaintiff class for approximately $150 million. With $3 billion in damages at stake, the three national egg producers achieved a significant victory.
Jurors found that Rose Acre Farms was part of a conspiracy involving United Egg Producers to reduce the supply of eggs. However, the conspiracy did not impose an unreasonable restraint on supply, so the producers did not incur any antitrust liability. It is likely that the plaintiffs will appeal the ruling. If that happens, the egg producers could cross-appeal and raise an earlier, problematic ruling by the judge, in which the judge said land ownership is a requirement for qualifying for Capper-Volstead protections. NCFC believes that ruling is wrong, as Capper-Volstead does not impose any land ownership requirements on producers.
Ms. Carson also discussed the cyclical interest that lawmakers, regulators, and the American Bar Association take in the Capper-Volstead Act every five to ten years. The Department of Justice held a series of roundtables on regulations and antitrust law this spring. The first roundtable focused on antitrust immunities and exemptions. American Bar Association (ABA) representatives participated and submitted a statement consistent with the ABA’s traditional views on antitrust immunities and exemptions. The ABA asserted that the Capper-Volstead Act is flawed and needs to be reformed.
At a separate roundtable, Assistant Attorney General Makan Delrahim said the milk pricing system is the type of market distortion and anticompetitive activity that should be reviewed by the Antitrust Division. And a participant from the Cato Institute commented on sugar policy, labeling it as an anticompetitive intervention in the market. The Cato Institute recommended that DOJ target this sort of policy.
Ms. Carson also reported that in South Dakota v. Wayfair, Inc., in which the Supreme Court held that a state can tax internet sales even though the seller does not have a physical presence in the state.
Next, Ms. Carson gave a short update on the Tax Cuts and Jobs Act, particularly on issues associated with Section 199A. The IRS has reported that they are working diligently to provide regulations as soon as possible. The Department of Treasury has stated that they are considering regulations from the old Section 199, which hopefully will make the transition easier for all involved.
Finally, Ms. Carson recommended for everyone to go to the IRS website and complete the IRS “pay- check check-up” to make sure that everyone’s taxes are correct after passage of the Tax Cuts and Jobs Act.
GUEST SPEAKERS
The Committee was joined by a number of guest speakers on hot topic issues, including the following:
• The Administration’s Outlook for Agriculture; with guest speaker Mr. Gregg Doud, Chief Agricultural Negotiator, Office of the U.S. Trade Representative.
Ambassador Doud described the current state of trade relations with regard to recent actions the administration has taken by imposing tariffs. Trading partners currently are retaliating, or threatening to retaliate, by imposing tariffs on $29 billion of U.S. agricultural exports due to the U.S. imposition of Section 232 steel and aluminum tariffs. He explained that this policy has been developed by the President himself. While his office is working to advocate within the administration for the agriculture community since they are taking the brunt of the retaliation, it doesn’t appear there will be quick resolution to withdraw the retaliation given the priority that the president has put on imposing tariffs.
Ambassador Doud further explained the other Section 301 tariffs being put into place against China due to their unfair trading practices with respect to intellectual property and forced technology transfer policies. China’s retaliation by imposing tariffs targeting the U.S. agricultural community is an attempt to get the president’s supporters from the agriculture community to oppose his trade policy and weaken his negotiating stance. However, Ambassador Doud stressed that the president was adamant about using tariffs as a tool to change China’s behavior and that, again, no one should think this will be resolved in the near term.
He also noted that the administration intends to be more offensive in opening markets for U.S. agriculture, as well as encouraged that the NAFTA renegotiation would be concluded in the near future.
• Labor & Immigration – Lots of activity; any action?; with guest panelist Ms. Kristi Boswell, Senior Advisor to the Secretary, United States Department of Agriculture; Mr. Charlie Garrison, President of the Garrison Group LLC., a Federal Affairs Lobbyist for Western United Dairymen, and former Director of Industry Relations at Dairy Management Inc.; and moderated by Mary Nowak, National Council of Farmer Cooperatives
The Committee heard first from Ms. Kristi Boswell, Senior Advisor to the Secretary, United States Department of Agriculture. Mary Nowak with the National Council of Farmer Cooperatives served as the moderator.
Ms. Boswell began by explaining Secretary Perdue’s focus at USDA – to be one unified agency, and to make customer service the top priority. The USDA is also focusing on three distinct issues: trade, regulation reform, and labor. The Secretary’s goal is to have USDA be a more adequate player in each of these conversations.
Ms. Boswell explained that in labor and immigration discussions, agriculture often falls in the crosshairs. USDA wants to be an advocate to ensure farmers across the country have the workforce they need and are committed to labor reform. Specifically, USDA is working closely with Secretary Acosta at the Department of Labor to bring change to current H-2A policy. While the Department of Labor and Department of Homeland Security oversee most of H-2A reform and are undergoing notice and comment rulemaking, USDA has been able to provide technical assistance wherever necessary as it relates to agriculture.
Ms. Boswell stated that the USDA would like to expand access of H2A to enable more types of agriculture to qualify, such as those with year-round labor needs, however USDA does not have statutory authority. Therefore, USDA is perusing legislative measures and providing as much technical assistance to Congress as possible.
Further, IT modernization is an important change needing to be made. USDA recognized that a significant amount of overlap exists among the agencies. After completing a “discovery sprint” in which USDA officials talked with farmers, analysts, other agency officials, and state governments across the country, USDA has completed a full report on the status of IT modernization and is working on development of what steps to take next.
Finally, Ms. Boswell assured Committee members that they have never had a stronger ally than Secretary Perdue. The Secretary is working hard to avoid touchback provisions and advocate for farms that need year-round help. The Secretary is also a proponent of the Buy American Executive Order and wants to advocate for U.S. agriculture in every way possible.
Ms. Nowak then introduced Mr. Charlie Garrison, President of the Garrison Group LLC., a Federal Affairs Lobbyist for Western United Dairymen, and former Director of Industry Relations at Dairy Management Inc.
Ms. Nowak provided some background on the legislative conversation regarding immigration and labor reform. House Leadership scheduled two immigration bills to be voted on, the Securing America’s Future Act, sponsored by House Judiciary Committee Chairman Bob Goodlatte, and the Border Security and Immigration Reform Act. The Goodlatte sponsored bill did include an agriculture provision, however failed to pass in the House. Ms. Nowak explained that Chairman Goodlatte is pushing for agriculture to be included in any legislation that gets passed. However, the Goodlatte sponsored bill included caps on how many visas would be permitted in a year, which is a major concern to the agriculture community.
Mr. Garrison gave a short update on the current status legislation moving in the House. He explained it is clear that House Leadership is looking for agriculture to go with a DACA fix. For example, Representative Denham is proposing a generous DACA fix along with agriculture provisions. Mr. Garrison feels that agriculture has a lot of cards to play in the conversation but must be strategic about how to use them. For example, he stated that agriculture must be included if mandatory e- verify provisions are included in order to be a workable bill that has a chance of passing.
• Outlook for the Farm Bill; with guest speaker Ms. Helena Bottemiller Evich, Senior Food and Agriculture Reporter, POLITICO Pro; and moderated by Justin Darisse, National Council of Farmer Cooperatives
Ms. Bottemiller Evich provided her insight as to the current state of the farm bill in the Senate. She explained that many fear that the Senate will fail in passing a bill, but all in the agriculture community sincerely want to a bill to be passed. She stated that at this time, it is unclear how the process will work and what steps will be taken next.
Ms. Bottemiller Evich explained that in the past, the farm bill has failed for a variety of reasons. It is difficult to get bipartisan support for the entire bill, which puts strain on an urban-rural coalition.
She further described this farm bill as more of a status quo farm bill, as we are entering into four or five years of down prices and increased apprehension about trade. This raises questions as to if significant overhaul is needed, however she does not believe there will ever be a bigger baseline and spending will continue to be tightened.
Ms. Bottemiller Evich also discussed the politics of full government reorganization, for example moving SNAP to HHS, and decreasing USDA’s scope as a department. However, Ms. Bottemiller Evich felt this was an unlikely scenario as HHS is already an immense agency. She explained that if SNAP were removed from the Agriculture Committee’s jurisdiction, agriculture issues would become isolated with very narrow support from congressional members representing urban districts.
Finally, Ms. Bottemiller Evich discussed the role of the media in agriculture. She explained that she felt cable television to be “less substantive” covering little on issues such as the farm bill and opioid issues in rural communities. She stated that most D.C. reporters are disconnected, and it is important to specialize. With the farm bill being so large in scope, many news sources overlook it and believe it is not relevant. She concluded with advice to farmers—suggesting that they reach out and talk to their reporters. She explained it is important for reporters to build relationships with farmers, so they understand the issues better to report on and to slow the growth of the urban-rural divide.
• 2018 Election Analysis – Is it a wave or a ripple?; with guest speaker Mr. Stu Rothenberg, Senior Editor, Inside Elections, Political Analyst/Contributor, Roll Call
Mr. Rothenberg began by sharing multiple statistics with the Committee, such as the current employment rate at 3.8 percent and declining; GDP is growing and up to 3%; wages, business, and the Dow Jones are all up; and most people are generally satisfied or optimistic about the state of the economy. However, the President’s approval ratings are lower. He explained that these midterm elections will be very interesting, but believes that success in this election, as all do, will depend on turnout.
Mr. Rothenberg explained that business felt that Obama policies were hostile towards them, and President Trump was elected to be completely untraditional. Many voters viewed this as the only way to break away from continued political disappointments. Historically, midterm elections are very tough on the President’s party and many polls have the Democrats prevailing in the midterms. While the President still has a significant amount of support, a large group opposes him—either ideologically, or for problems with his personal behavior, or both. This election, Republicans will likely focus on the economic growth, while Democrats will target the President personally.
Mr. Rothenberg believes voters to be separated into silos, which will determine how they will vote. He stated that the President’s supporters have been Evangelicals, older, white males who live in a rural area, and do not have a college degree. This midterm election, the key group of swing voters will be white, suburban women who have a college education. He believes that gun and immigration issues will be top priorities for this demographic. However, the most important factor in any election is voter turnout. He stated that there is a 75 percent chance that the House will flip, however the Senate could be different because the class of Senators up for reelection are overwhelmingly Democrat.
• Priorities and Activities at USDA-MRP; with guest speaker Mr. Greg Ibach, Under Secretary, Marketing & Regulatory Programs, United States Department of Agriculture
Under Secretary Ibach first discussed his role with AMS, and specifically talked about the National Bioengineered Food Disclosure Standard. AMS has released a proposed rule which provides options to commenters in order to try to gain the best approach possible. Mr. Ibach encouraged all to submit comments before the July 3 deadline.
Mr. Ibach briefly mentioned the farm bill, and that USDA provided as much technical assistance for implementation to lawmakers as possible.
He also discussed issues associated with animal health, particularly problems related to vaccines and diseases. USDA is working with states to prevent, control, contain, and eradicate diseases. He explained the importance of having labs that can conduct local diagnostic tests yet are difficult to maintain because most labs are in land grant universities. He also mentioned that USDA is working to understand how a vaccine bank could be implemented.
Mr. Ibach explained Secretary Perdue’s top priority for USDA is regulation reform. Farmers and the agriculture community need relief from burdensome regulations, and USDA is working towards lessening that burden. Secretary Perdue has also brought to his staff’s attention his desire to achieve economic activity in rural America, improve overall rural life, and harness technological advancements and information.
In his APHIS role, Mr. Ibach works extensively on biotech issues, particularly gene editing. He explained that the technology of gene editing can be very beneficial for a variety of reasons, including being used for improvement of animal welfare. USDA wishes to push these technologies forward through positive marketing to a skeptical consumer population. Secretary Perdue has said that gene editing is an efficient form of natural breeding, and excessive regulations are unnecessary. Ideally, regulations of gene editing can be harmonized with international standards and more of the science can be shared with third world countries.
Mr. Ibach addressed several concerns on a number of issues. He first discussed the GMO wheat issue in Canada. He explained that it is well resolved that GMOs are not a danger to health, and at USDA they are more concerned with process and transparency, therefore an investigation is ongoing. Mr. Ibach also explained that USDA is perusing an aggressive timeline on the new biotech labeling rule and hope to begin the environmental impact statement soon. He also pointed out the USDA hopes to do a better job marketing gene editing than GMOs to avoid growing skepticism.
• Implementation of the National Bioengineered Food Disclosure Standard; moderated by Kelsey Billings, National Council of Farmer Cooperatives
Mrs. Billings discussed NCFC’s role as co-chair of the Coalition for Safe, Affordable Food and the market-oriented solution created to propose to USDA-AMS through public comment.
The Coalition includes several groups along the agriculture supply chain – from trade associations representing growers to manufacturers. The Coalition’s focus was to ensure continued access to the technology, provide consumers meaningful information about the food they eat, and establish a marketing standard – not a health or nutrition standard. The rule should be flexible, legally defensible, responsive to consumer demands, supportive of innovation, and consistent with our international trade obligations.
Several key issues the Coalition considered were preemption; the definition of “bioengineering”; incidental additives/enzyme processing aids; animals fed with bioengineered feed; organic consistency; and disclosure options. After the rule goes into effect, the compliance date should be two years later, and then producers should be granted an additional two years to exhaust inventory of labels.
The Coalition did not agree on a few other issues, however came together to establish a workable, market-oriented alternative approach to disclosure. Rather than two separate disclosure lists, the Coalition is proposing to have one single BE crop list, with a Factors & Conditions section of the rule that will contain exempted ingredients derived from those crops but do not contain bioengineered DNA. The Coalition is also recommending a dual disclosure threshold – 5% unintentional presence to allow flexibility for grain handlers, and 0.9% intentional presence to give manufacturers flexibility to label at a de minimis level. Finally, the Coalition proposes that the rule should have a rigorous voluntary option for manufacturers and producers to label above and beyond the rule’s requirements.
• Legislative Solution to Provide Accurate Product Labels; with guest speaker Ms. Karyn Schmidt, Senior Director, Regulatory & Technical Affairs, American Chemistry Council
Ms. Schmidt began by discussing Proposition 65 and issues associated with accurate product labeling. The Proposition has been shown to have gone too far, and even violated First Amendment rights in terms of compelled speech. This Proposition has labeled everyday items as carcinogenic, even coffee. Further, in California, courts have been filled with bounty-hunter type cases of aggressive plaintiffs going after any and all products, accusing them of being carcinogenic or otherwise dangerous and needing a label.
Ms. Schmidt explained that despite this enormous problem, a solution can be found through legislation. There is no risk basis for Proposition 65 labeling, which is entirely inappropriate. The new Accurate Labels Act will ideally reduce the impact of Proposition 65. The Bill suggests mandated speech must be clear, accurate, and not deceptive. Further, warnings may be set for naturally occurring exceptions, however they must be based upon science. The labels should be practical—for example through electronic disclosure. The Bill also syncs up well with the National Bioengineered Food Disclosure Standard, to make labeling cohesive.
• Train the Trainer – Keys to a Successful Fly-in; with guest speaker Mr. Paul Miller, PPC, LCP, Miller/Wenhold Capitol Strategies
Mr. Miller discussed strategies to be an effective advocate on the Hill, no matter what the issue. He pointed out a few of the most important components of lobbying, including advocacy, relationship building, and branding. He also emphasized that meetings with staff are sometimes the best option. Despite young ages, many staffers have a significant amount of influence in Congressional offices.
In terms of planning a fly-in, he suggested that groups be strategic with timing, send thank you notes, follow-up by phone or email, and have a plan for the meeting and message. It is also important to keep information easy to understand and avoid super-technical topics to keep everyone engaged. Finally, he suggested that attendees be flexible, stay on message, keep politics out of the conversation, and leave behind helpful information.
FUTURE MEETINGS AND OTHER BUSINESS
The next NCFC Government Affairs Meeting will take place on November 12-14 in Santa Fe, NM. The 2019 Annual Meeting will be held on February 13-15 in Phoenix, AZ.
ADJOURN Mr. Spencer adjourned the meeting.
Mid-Term Election Analysis Congressional Farmer Cooperative Caucus
NCFC Position: 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 (44 35): Senate (15 13): Rep. Rod Blum (R-IA) Rep. Roger Marshall (R-KS) Senator Thad Cochran (R-MS) Rep. Cheri Bustos (D-IL) Rep. Betty McCollum (D-MN) Senator Michael Crapo (R-ID) Rep. Mike Bost (R-IL) Rep. Kristi Noem (R-SD) Senator Tammy Duckworth (D-IL) Rep. Mike Conaway (R-TX) Rep. Devin Nunes (R-CA) Senator Dick Durbin (D-IL) Rep. Jim Costa (D-CA) Rep. Collin Peterson (D-MN) Senator Michael Enzi (R-WY) Rep. Joe Courtney (D-CT) Rep. Todd Rokita (R-IN) Senator Deb Fischer (R-NE) Rep. Kevin Cramer (R-At Large ND) Rep. Gregorio Sablan (D-MP) Senator Charles Grassley (R-IA) Rep. Rick Crawford (R-AR) Rep. Bill Shuster (R-PA) Senator Heidi Heitkamp (D-ND) Rep. Henry Cuellar (D-TX) Rep. Michael Simpson (R-ID) Senator Amy Klobuchar (D-MN) Rep. Rodney Davis (R-IL) Rep. Adrian Smith (R-NE) Senator Jerry Moran (R-KS) Rep. Jeff Denham (R-CA) Rep. Mike Thompson (D-CA) Senator Michael Rounds (R-SD) Rep. Bill Flores (R-TX) Rep. Fred Upton (R-MI) Senator Charles Schumer (D-NY) Rep. Jeff Fortenberry (R-NE) Rep. David Valadao (R-CA) Senator Debbie Stabenow (D-MI) Rep. Bob Gibbs (R-OH) Rep. Greg Walden (R-OR) Senator John Thune (R-SD) Rep. Sam Graves (R-MO) Rep. Tim Walz (D-MN) Senator Roger Wicker (R-MS) Rep. Vicky Hartzler (R-MO) Rep. Kevin Yoder (R-KS) Rep. Bill Huizenga (R-MI) Rep. David Young (R-IA) Rep. Lynn Jenkins (R-KS) Rep. Marcy Kaptur (D-OH) Rep. Ron Kind (D-WI) Rep. Steve King (R-IA) Rep. Adam Kinzinger (R-IL) Rep. Rick Larsen (D-WA) Rep. Dave Loebsack (D-IA) Rep. Billy Long (R-MO) Rep. Frank Lucas (R-OK) Rep. Blaine Luetkemeyer (R-MO)
NATIONAL COUNCIL OF FARMER COOPERATIVES 50 F Street NW, Suite 900 Washington, DC 20001 | (202) 626-8700 www.ncfc.org | facebook: www.facebook.com/FarmerCoop | twitter: @FarmerCoop Congressional Farmer Cooperative Caucus
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 Nick Christensen (Office of Representative Graves) (202) 225-7041 Ben Goldeen (Office of Representative Costa) (202) 225-3341
NATIONAL COUNCIL OF FARMER COOPERATIVES 50 F Street NW, Suite 900 Washington, DC 20001 | (202) 626-8700 www.ncfc.org | facebook: www.facebook.com/FarmerCoop | twitter: @FarmerCoop 2018 Midterm Elections: High-Level Trends Charts and maps on House, Senate and gubernatorial races and key ballot initiatives
November 8, 2018 Data compiled 9am; Election results may have changed slightly
National Journal Presentation Center Roadmap
Control of Congress Gubernatorial results • Historical data • Map of results • Recent control • Map of control of governorships • Changes between 115th & 116th Congress • Map of control of state legislatures • Governorships + state legislatures
Senate results Key ballot initiatives • Results map • Medicaid expansion • Makeup of 116th Senate map • Marijuana legalization • Map of seats won/lost • Automatic and same-day voter • Potential committee chairs registration • Voter ID • Felon voting rights House results • Redistricting independent commissions • House election results map • Makeup of 116th House map • Map of seats won/lost • Potential committee chairs
Slide updated on November 8, 2018 Control of Congress over time: House of Representatives
Partisan makeup of the US House over time 1981-2019; COMPOSITION AT BEGINNING OF TERM ■ Republicans ■ Democrats ■ Not yet called
243 269 254 258 260 267 258 204 207 211 213 205 201 233 257 193 201 188 194 223
192 166 181 177 175 167 176 230 226 223 220 229 233 202 178 242 234 247 241 197
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19
Slide updated on November 8, 2018 Control of Congress over time: Senate
Partisan makeup of the US Senate over time 1981-2019; COMPOSITION AT BEGINNING OF TERM *Independents Sanders and King, who caucus with the ■ Republicans ■ Democrats ■ Not yet called Democrats, have been included in the Democratic tally
47 45 47 55 55 56 57 48 45 45 50 49 45 51 59 53 55 46 49 46
53 55 53 45 45 44 43 52 55 55 50 51 55 49 41 47 45 54 51 51
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19
Slide updated on November 8, 2018 Republicans enlarged their Senate majority, but lost the House for the first time since the 2010 midterms
Control of Congress and the White House by party 2009-2019; COMPOSITION ON JANUARY 20 OF EACH YEAR *Independents Sanders and King, who caucus with the ■ Republican control ■ Democratic control Democrats, have been included in the Democratic tally *House and Senate margin as of 9am 11/8/18
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
House D+77 D+78 R+49 R+50 R+33 R+33 R+59 R+59 R+47 R+45 D+26*
Senate* D+16 D+20 D+6 D+6 D+10 D+10 R+8 R+8 R+4 R+2 R+5*
White Obama Obama Obama Obama Obama Obama Obama Obama Trump Trump Trump House
Slide updated on November 8, 2018 Composition of the 116th Congress: House
Partisan makeup of the House compared to the previous Congress 115th 116th Republican 235 197 Seats flipped R to D (Total: 31) Seats flipped D to R (Total: 3) Democrat 193 223 Not yet called (color outline is incumbent’s party) Not yet called 7 15 (vacant)
218 votes needed to pass
Slide updated on November 8, 2018 Composition of the 116th Congress: Senate
Partisan makeup of the Senate compared to the previous Congress 115th 116th Republican 51 51 Seats flipped R to D (Total: 1) Seats flipped D to R (Total: 3) Democrat 49 46 Not yet called (color outline is incumbent’s party) Not yet called 0 3 50 votes for majority *Independents Sanders and King, who caucus with the Democrats, have been included in the Democratic tally
60 votes for supermajority
Slide updated on November 8, 2018 Roadmap
Control of Congress Gubernatorial results • Historical data • Map of results • Recent control • Map of control of governorships • Changes between 115th & 116th Congress • Map of control of state legislatures • Governorships + state legislatures
Senate results Key ballot initiatives • Results map • Medicaid expansion • Makeup of 116th Senate map • Marijuana legalization • Map of seats won/lost • Automatic and same-day voter • Potential committee chairs registration • Voter ID • Felon voting rights House results • Redistricting independent commissions • House election results map • Makeup of 116th House map • Map of seats won/lost • Potential committee chairs
Slide updated on November 8, 2018 Republicans have expanded their Senate majority
2018 U.S. Senate election results map ■ Republican won (9) ■ Democrat won (23) ■ Election not yet called (3) *Sen. King (I-ME) and Sen. Sanders (I-VT) caucus with the Democrats In MN, both Democratic candidates won In MS, Wicker (R) won reelection and Hyde-Smith (R) is going to a runoff
Slide updated on November 8, 2018 Democrats lost at least three close elections, but flipped Nevada and forced a runoff in Mississippi
Change of seats in the US Senate after the 2018 midterms ■ Democratic gain (1) ■ Democratic hold (22) ■ Republican gain (3) ■ Republican hold (6) ■ Election not yet called (3) *Sen. King (I-ME) and Sen. Sanders (I-VT) caucus with the Democrats In MN, both Democratic candidates won In MS, Wicker (R) won reelection and Hyde-Smith (R) is going to a runoff
Slide updated on November 8, 2018 The Republican Party maintains its majority in the Senate
Composition of the 116th Senate map ■ 2 Democrats (19) ■ 2 Republicans (20) ■ 1 Democrat + 1 Republican (8) ■ Election not yet called (3)
*Sen. King (I-ME) and Sen. Sanders (I-VT) caucus with the Democrats In MN, both Democratic candidates won In MS, Wicker (R) won reelection and Hyde- Smith (R) is going to a runoff
Slide updated on November 8, 2018 Potential Senate committee chairs based on seniority (1/2)
Committee Ranking Member Chair
Aging Bob Casey, Jr. (D-PA) Susan Collins (R-ME)
Agriculture, Nutrition, & Forestry Debbie Stabenow (D-MI) Pat Roberts (R-KS)
Appropriations Patrick Leahy (D-VT) Richard Shelby (R-AL)
Armed Services Jack Reed (D-RI) Jim Inhofe (R-OK)
Banking, Housing, & Urban Mike Crapo (R-ID)/ Sherrod Brown (D-OH) Development Pat Toomey (R-PA)
Budget Bernie Sanders (I-VT) Mike Enzi (R-WY)
Commerce, Science, & Bill Nelson (D-FL – Not called) John Thune (R-SD) Transportation (Maria Cantwell (D-WA) if loss) Maria Cantwell (D-WA)/ Energy & Natural Resources Lisa Murkowski (R-AK) Ron Wyden (D-OR)
Environment & Public Works Tom Carper (D-DE) John Barrasso (R-WY)
Ethics Christopher Coons (D-DE) Johnny Isakson (R-GA)
Slide updated on November 8, 2018 Potential Senate committee chairs based on seniority (2/2)
Committee Ranking Member Chair
Chuck Grassley (R-IA)/ Finance Ron Wyden (D-OR) Mike Crapo (R-ID) Jim Risch (R-ID)/ Foreign Relations Bob Menendez (D-NJ) Marco Rubio (R-FL) Health, Education, Labor, & Patty Murray (D-WA) Lamar Alexander (R-TN) Pensions Homeland Security & Government Tom Carper (D-DE) Ron Johnson (R-WI) Affairs
Indian Affairs Tom Udall (D-NM) John Hoeven (R-ND)
Intelligence Mark Warner (D-VA) Richard Burr (R-NC)
Chuck Grassley (R-IA)/ Judiciary Dianne Feinstein (D-CA) Lindsay Graham (R-SC)
Rules & Administration Amy Klobuchar (D-MN) Roy Blunt (R-MO)
Jim Risch (R-ID)/ Small Business & Entrepreneurship Jeanne Shaheen (D-NH) Marco Rubio (R-FL)
Veterans’ Affairs Jon Tester (D-MT) Johnny Isakson (R-GA)
Slide updated on November 8, 2018 Roadmap
Control of Congress Gubernatorial results • Historical data • Map of results • Recent control • Map of control of governorships • Changes between 115th & 116th Congress • Map of control of state legislatures • Governorships + state legislatures
Senate results Key ballot initiatives • Results map • Medicaid expansion • Makeup of 116th Senate map • Marijuana legalization • Map of seats won/lost • Automatic and same-day voter • Potential committee chairs registration • Voter ID • Felon voting rights House results • Redistricting independent commissions • House election results map • Makeup of 116th House map • Map of seats won/lost • Potential committee chairs
Slide updated on November 8, 2018 Democrats win the House with about a 30 seat majority
2018 U.S. House election results map ■ Republican won ■ Democrat won ■ Election not yet called
Republican 197
Democrat 223
Independent 0
Not yet called 15
Slide updated on November 8, 2018 Democrats gained around 30 seats; Republicans flipped three seats
Change of seats in the US House after the 2018 midterms ■ Democratic gain (31) ■ Democratic hold (192) ■ Republican gain (3) ■ Republican hold (194) ■ Election not yet called (15)
Slide updated on November 8, 2018 Potential House committee chairs based on seniority (1/2)
Committee Chair Ranking Member
Administration Zoe Lofgren (D-NY) Rodney Davis (R-IL)
Agriculture Collin Peterson (D-MN) Mike Conaway (R-TX)
Appropriations Nita Lowey (D-NY) Robert Aderholt (R-AL)
Armed Services Adam Smith (D-WA) Mac Thornberry (R-TX)
Budget John Yarmuth (D-KY) Steve Womack (R-AR)
Education and the Workforce Bobby Scott (D-VA) Virginia Foxx (R-NC)
Energy and Commerce Frank Pallone (D-NJ) Greg Walden (R-OR)
Ethics Ted Deutch (D-FL) Susan Brooks (R-IN)
Financial Services Maxine Waters (D-CA) Peter King (R-NY)
Foreign Affairs Eliot Engel (D-NY) Chris Smith (R-NJ)
Slide updated on November 8, 2018 Potential House committee chairs based on seniority (2/2)
Committee Chair Ranking Member
Homeland Security Bennie Thompson (D-MS) Mike Rogers (R-AL)
Intelligence Adam Schiff (D-CA) Devin Nunes (R-CA)
Steve Chabot (R-OH)/ Judiciary Jerry Nadler (D-NY) Doug Collins (R-GA)
Natural Resources Raul Grijalva (D-AZ) Rob Bishop (R-UT)
Oversight & Government Reform Elijah Cumming (D-MD) Jim Jordan (R-OH)
Rules Jim McGovern (D-MA) Tom Cole (R-OK)
Dana Rohrabacher (R-CA ) Science, Space & Technology Eddie Bernice Johnson (D-TX) (If loss, Frank Lucas (OK-3) Steve Chabot (R-OH)/ Small Business Nydia Velázquez (D-NY) Steve King (R-IA)
Transportation & Infrastructure Peter DeFazio (D-OR) Sam Graves (R-MO)
Veterans’ Affairs Mark Takano (D-CA) Phil Roe (R-TN)
Ways & Means Richard Neal (D-MA) Kevin Brady (R-TX)
Slide updated on November 8, 2018 Roadmap
Control of Congress Gubernatorial results • Historical data • Map of results • Recent control • Map of control of governorships • Changes between 115th & 116th Congress • Map of control of state legislatures • Governorships + state legislatures
Senate results Key ballot initiatives • Results map • Medicaid expansion • Makeup of 116th Senate map • Marijuana legalization • Map of seats won/lost • Automatic and same-day voter • Potential committee chairs registration • Voter ID • Felon voting rights House results • Redistricting independent commissions • House election results map • Makeup of 116th House map • Map of seats won/lost • Potential committee chairs
Slide updated on November 8, 2018 Democrats win 16 governor seats, Republicans win 19; Georgia still too close to call
2018 gubernatorial elections results map ■ Republican won (19) ■ Democrat won (16) ■ Election not yet called (1)
Slide updated on November 8, 2018 Democrats flipped seven governor seats, which will be important for redistricting after the 2020 census
Change of governor seats after the 2018 midterms ■ Democratic gain (7) ■ Democratic hold (9) ■ Republican gain (0) ■ Republican hold (19) ■ Election not yet called (1)
Slide updated on November 8, 2018 Republicans now control only half of US governorships
Control of governorships after the 2018 elections ■ Democratic governor (23) ■ Republican governor (26) ■ Election not yet called (1)
Slide updated on November 8, 2018 Republicans control more state legislatures than Democrats
Control of state legislatures after the 2018 elections ■ Democratic-controlled ■ Republican-controlled ■ Split Legislature ■ Nonpartisan ■ Election not yet called
Slide updated on November 8, 2018 At least 13 states now have split party control over state government
Control of state government after the 2018 elections ■ Dem legislature, Dem governor ■ GOP legislature, GOP governor ■ Dem legislature, GOP governor ■ GOP legislature, Dem governor ■ Split legislature, Dem governor ■ Split legislature, GOP governor ■ Election not yet called
Slide updated on November 8, 2018 Roadmap
Control of Congress Gubernatorial results • Historical data • Map of results • Recent control • Map of control of governorships • Changes between 115th & 116th Congress • Map of control of state legislatures • Governorships + state legislatures
Senate results Key ballot initiatives • Results map • Medicaid expansion • Makeup of 116th Senate map • Marijuana legalization • Map of seats won/lost • Automatic and same-day voter • Potential committee chairs registration • Voter ID • Felon voting rights House results • Redistricting independent commissions • House election results map • Makeup of 116th House map • Map of seats won/lost • Potential committee chairs
Slide updated on November 8, 2018 Idaho, Nebraska and Utah voted to expand Medicaid under the ACA; Montana did not vote to expand
Healthcare initiatives by state ■ Has expanded Medicaid ■ Has not expanded Medicaid
WA Ballot State Result ME Measure MT ND OR MN ID SD NY WI Medicaid WY MI ID expansion Pass IA PA NE NV OH UT IL IN WV CO Medicaid CA VA MA NE Pass KS MO KY expansion NC RI TN AZ Permanent OK CT NM AR SC extension of MT Medicaid Fail NJ MS AL GA expansion AK TX DE LA Medicaid MD expansion UT with funding Pass HI FL DC provision
Slide updated on November 8, 2018 Missouri and Utah legalized medical marijuana; Michigan legalized recreational marijuana, but North Dakota voted it down
Marijuana ballot initiatives by state ■ Recreational and medical use ■ Medical use ■ No legality
WA Ballot State Result ME Measure MT ND OR MN
ID SD WI NY Recreational WY MI MI Pass IA PA NE NV OH UT IL IN WV CO CA VA MA ND Recreational Fail KS MO KY NC RI AZ TN OK CT NM AR SC MO Medical Pass MS AL GA NJ
AK TX LA DE
MD UT Medical Pass FL HI DC
Slide updated on November 8, 2018 Nevada, Michigan and Maryland voted to implement same-day or automatic voter registration
Election policy initiatives by state ■ Automatic voter registration ■ Same-day registration ■ Both same-day and automatic registration
WA Ballot State Result ME Measure MT ND OR MN ID SD NY WI Automatic WY MI NV registration Pass IA PA NE NV OH UT IL IN Automatic WV CO registration CA VA MA MI Pass KS MO KY & same-day registration NC RI AZ TN Legislature OK CT NM AR SC permitted to MD enact Pass MS AL GA NJ same-day registration AK TX LA DE
MD HI FL DC
Slide updated on November 8, 2018 North Carolina and Arkansas chose to require photo-IDs to vote
Election policy initiatives by state ■ Strict voter ID required ■ Some other ID required
WA Ballot State Result ME Measure MT ND OR MN ID SD NY WI Photo-ID to WY MI NC vote Pass IA PA NE NV OH UT IL IN WV CO Photo-ID to CA VA MA AR Pass KS MO KY vote NC RI AZ TN OK CT NM AR SC
MS AL GA NJ
AK TX LA DE
MD HI FL DC
Slide updated on November 8, 2018 Florida voted to automatically restore voting rights for felons
Election policy initiatives by state ■ Voting rights not automatically restored after all felony convictions ■ Never lose right to vote ■ Automatically regain rights upon finishing sentence/parole/probation
WA Ballot State Result ME Measure MT ND OR MN
ID SD WI NY Felon voting rights WY MI FL Pass restored IA PA NE NV OH UT IL IN WV CO CA VA MA KS MO KY NC RI AZ TN OK CT NM AR SC
MS AL GA NJ
AK TX LA DE
MD HI FL DC
Slide updated on November 8, 2018 Colorado, Michigan and Missouri voted to create independent redistricting commissions
Redistricting initiatives by state ■ Independent redistricting for federal and state legislative districts ■ Independent redistricting for state legislative districts only ■ Not yet called
WA Ballot State Result ME Measure MT ND OR MN Commissions ID SD NY WI for both Not UT WY MI federal and called state level IA PA NE NV OH UT IL IN Commissions WV CO for both CA VA MA CO Pass KS MO KY federal and state level NC RI TN AZ Commissions OK CT NM AR SC for both MI federal and Pass NJ MS AL GA state level
AK TX LA DE Commission for MD MO state level Pass HI FL only DC
Slide updated on November 8, 2018 Trade Outlook
Legal, Tax & Accounting Update
LEGAL, TAX AND ACCOUNTING COMMITTEE REPORT
TO: NCFC Government Affairs Committee FROM: Marlis Carson DATE: November 13, 2018
Tax Developments
Implementing New Code Section 199A. Congress instructed IRS and Treasury to rely on “old” Section 199 when implementing new Section 199A. However, Treasury has stated that they plan to issue guidance on cooperative issues “later this year.” In anticipation of the guidance, NCFC representatives met with Treasury and IRS officials on October 11.
Discussion topics at the meeting included: how to define agricultural and horticultural cooperatives and products; the calculation of the cooperative-level deduction; how federated cooperatives work and how they implement the deduction; transition rules for moving from Section 199 to 199A; and the deduction adjustment taken at the farmer level.
NCFC provided legislative background on Section 199A and its application to cooperatives and asserted that new regulations are not necessary because Congress was clear that “old” 199 concepts should apply. The officials stated that they will issue regulations and have mentioned that guidance is coming in subsequent publications.
We will continue to communicate with Treasury and IRS and will provide comments once proposed regulations are published. The release of proposed regulations may be delayed until 2019 due to the volume of regulations Treasury is tasked with generating.
New Tax Deduction May Benefit Cooperatives. New Code Section 250 provides a tax deduction for foreign-derived intangible income (FDII). NCFC members licensing a brand name overseas may be eligible for the FDII deduction, which applies to income derived from selling, licensing, or leasing property for use outside the United States.
For tax years beginning after December 31, 2017, and before January 1, 2026, the deduction will reduce the effective tax rate on FDII to 13 percent. For tax years beginning after December 31, 2025, the effective tax rate on FDII will be 16.4 percent. The new
LTA Committee Report November 13, 2018 Page 2 of 3
provision in some ways resembles Section 199, but taxpayers do not need to manufacture the property in the U.S. in order to qualify.
There are complex rules for determining an entity’s FDII deduction, and proposed regulations have not yet been issued. A new LTA Committee Working Group is meeting and discussing whether and how NCFC members can utilize the new deduction. LTA members from AGP, CHS, Darigold, GROWMARK, Land O’ Lakes, Ocean Spray, Sunsweet, and Welch’s are participating in the working group.
Supreme Court Overturns Quill, Paving the Way for Internet Taxation by State and Local Authorities. The U.S. Supreme Court recently overturned a prior ruling and concluded that state and local taxing authorities may tax retailers that do not have a physical presence in their jurisdiction. At issue in South Dakota v. Wayfair, Inc., was whether South Dakota could require out-of-state retailers that lack a physical presence in the state to collect sales taxes on sales to customers in South Dakota. In a 5-4 decision, the Supreme Court overruled its prior precedent in Quill Corp. v. North Dakota, holding that the physical presence rule of Quill is unsound and incorrect.
The House Judiciary Committee held a hearing this fall to examine the potential impact of the Supreme Court’s decision. Chairman Bob Goodlatte (R-VA) expressed concern, saying the “Court’s close and incomplete decision in Wayfair has the potential to unleash chaos for consumers and remote sellers, particularly small business sellers. There are over 10,000 sales tax jurisdictions, each with different rates, rules, exemptions, product definitions, thresholds for liability and the power to audit,” Chairman Goodlatte said. Witness testimony and other information is available here.
IRS Urges Taxpayers to Complete a “Checkup” to Avoid Tax Bill, Penalties. The IRS is urging taxpayers to use their withholding calculator to complete a “checkup” and determine whether their withholdings are correct. Because the state and local tax deduction has been capped at $10,000, some taxpayers may have under withheld for the 2018 tax year.
The IRS encourages everyone to check the withholding. However, checking withholding is more important for employees who: • Are a two-income family. • Have two or more jobs at the same time. • Work a seasonal job or only work part of the year. • Claim credits like the child tax credit. • Have dependents age 17 or older. • Itemized deductions on their 2017 returns. • Have high income or a complex tax return. • Had a large tax refund or tax bill for 2017.
LTA Committee Report November 13, 2018 Page 3 of 3
USDA Analyzes Impacts of Tax Reform. Using IRS data and farm-level data from USDA’s Agricultural Resource Management Survey, USDA’s Economic Research Service has analyzed the impact the Tax Cuts and Jobs Act could have on family farms. The report notes the changes to Section 199A, but does not discuss impacts to farmers who conduct business with a co-op. The full report is available here.
Antitrust Developments
Dairy Summit Explores Solutions for Low Prices. On August 13, more than three hundred dairy producers, dairy cooperative staff, legislative staff, and others gathered in Albany to discuss solutions for low dairy prices and the hardships faced by producers. Bob Wellington, Agri-Mark, Inc. Senior Vice President of Economics, Communications and Legislative Affairs moderated the meeting, which was an opportunity for dairy producers from the Northeast and other areas of the country to gather and discuss the issue and present proposals. Staff from several Congressional offices and members of the New York State Assembly attended.
The organizers asked NCFC to give a presentation on legal challenges to supply management programs used by commodities other than dairy. We also fielded questions on the antitrust protections available to cooperatives and their members under the Capper-Volstead Act.
Producers were encouraged to submit proposed solutions to the low-price situation. Proposals can be viewed here.
Wage Inflation & Worker Scarcity HELP WANTED:
Wage Inflation and Worker Scarcity U.S. Agribusinesses Experience Hiring Headaches
AUGUST 2018
With insights from AMERICAN AGCREDIT • CACTUS FEEDERS • CASE FARMS • FRIONA INDUSTRIES PERI & SONS FARMS • STATEWIDE HARVESTING AND HAULING • SCHWARTZ FARMS • WOODCREST DAIRY
Help Wanted: U.S. Agribusinesses Experience Hiring Headaches • August 2018 i ii © CoBank ACB, 2018 AUGUST 2018
HELP WANTED: A two-part report exploring some of the factors influencing today’s agricultural labor climate
Part of the rural labor shortage story is best told through statistics and trends. But to gain a more full picture of how labor challenges are affecting businesses, it is best to hear directly from those meeting the challenges head on.
Therefore, this report provides both. The first section highlights the current economic situation and how concerning trends will shape the reality of of tomorrow. The second section offers perspectives from interviews with several CoBank customers, revealing their greatest labor challenges and how they are adapting to remain successful.
Prepared by CoBank’s Knowledge Exchange Division
Part I: Wage Inflation and Worker Scarcity...... 1 Wages are higher and jobs are now more widely available than ever in several industries that compete for the same workers as the agricultural sector, forcing agribusinesses to find new ways to adapt.
By Ben Laine, Senior Economist, CoBank
Part II: U.S. Agribusinesses Experience Hiring Headaches...... 7 From North Carolina’s poultry processing plants to California’s strawberry farms, the Help Wanted sign is out. U.S. agribusinesses need workers – thousands of them.
By Donna Abernathy, for CoBank
About CoBank...... 22 PHOTO: COBANK
© CoBank ACB, 2018 i HELP WANTED: Wage Inflation and Worker Scarcity BY BEN LAINE
WAGES ARE HIGHER AND JOBS are now Key Points: more widely available than ever in several industries n In a tight U.S. labor market, agriculture is struggling that compete for the same workers as the agricultural disproportionately compared with other industries to sector. To keep up with sectors like construction, food compete for scarce labor. service, and manufacturing, agricultural wages are increasing at a faster rate than most other industries. n With the U.S. economy growing and manual laborers chasing higher wages that are offered in more Labor accounts for a significant share of overall wage-competitive industries like transportation, operational costs for many types of farms, particularly construction, hospitality and mining, employers in specialty crop and dairy operations. In 2016, labor agricultural industries are being forced to increase costs on all farms made up about 10 percent of gross wages at a faster rate to compete. income, while that share represented closer to 27 percent for specialty crops.1 (See Exhibit 1.) n The quickening pace of wage inflation in agriculture puts significant stress on profitability at a time of Hired workers on U.S. farms are primarily from depressed commodity prices. Mexico.2 A number of factors including demographic shifts, competing opportunities for agricultural labor n As the pool of migrant agricultural laborers from within Mexico, and increased border control are now Mexico continues to shrink due to ongoing economic, combining to tighten that labor supply and drive up demographic and policy shifts, agricultural employers costs. Higher costs associated with producing many in the U.S. face a future of further tightening in the of these labor-intensive commodities are forcing labor market. producers to find new ways to adapt, including n To adapt to a worsening labor climate, agricultural technology and automation. employers in the years ahead will increasingly be pressured to raise wages and worker benefits, seek out workers via the H-2A visa program, turn to other areas like Central America’s Northern Triangle or East Asia for workers, adopt new technologies in robotics and automation, or ultimately move operations abroad to regions where labor is more accessible. PHOTO: COBANK
Help Wanted: Wage Inflation and Worker Scarcity • August 2018 1 EXHIBIT 1: Labor Costs as a Percent of Gross Income Labor Costs as a Percent of Gross Income Percent 35 Demographics Farm labor makes up only about 1.5 percent of 30 the U.S. workforce. (See Exhibit 2.) The share is 25 much higher in Mexico (13 percent) and other Latin American countries which can reach above 30 percent. 20 Dairy Specialty Crops All Farms However, the share of farm labor in those countries is 15 dropping quickly as they modernize and populations 10 shift from scattered small rural family farms into urban centers with a stronger focus on education and 5 jobs in the service sector.3 0
U.S. agriculture is consolidating into larger-scale 2000 2001 2002 2003 2004 2005 2006 2007 2008 200 2010 2011 2012 2013 2014 2015 2016 Source: USDAM - ERS, NASS efficient farms. This consolidation has been driven Source: USDA - ERS, NASS by two primary forces. First, rising production costs in the U.S. open opportunities for Mexico to produce commodities for export to the U.S. Second, modernization of Mexico’s own food supply chain into EXHIBIT 2: Share of Workforce in Agriculture larger grocers and retailers like Wal-Mart requires (Select Regions/Countries)
4 Share of Workforce in Agriculture (Select Regions/Countries) food to be sourced from larger farms. Percent 35 This consolidation in Mexico, similar to that which 30 was experienced in the U.S. in previous generations, has pushed the population out of rural areas and 25 into cities. Meanwhile, the rate of population growth 20 is beginning to slow. (See Exhibit 3.) With lower birthrates meaning fewer family members to support, 15 opportunities to work closer to home become more 10 appealing and searching for higher-paying farm work to support large families becomes less necessary. 5
As in the U.S., a decreasing share of the population 0 Guatemala Honduras East Asia MENA El Salvador Mexico EU US Canada in Mexico now comes from an agricultural Source: World Bank Source: World Bank background, and those who do are finding new opportunities for farm work in Mexico. Mexicans looking abroad for work in the U.S., meanwhile, are increasingly from urban areas and are more attracted to the higher paying job opportunities off the farm in urban areas.
2 © CoBank ACB, 2018 EXHIBIT 3: Fertility Rates in the U.S. and Mexico Fertility Rates in the U.S. and Mexico Births per Woman 8 Competition and Rising Wages 7 The unemployment rate in the U.S. has fallen 6 dramatically since the most recent recession. United States Mexico 5 Tightness in the labor market has broadly driven up wages, and increased job openings in industries 4 that compete with agriculture for labor are forcing 3 agricultural wages up even faster. (See Exhibit 4.)
2 Some of the industries that are competing 1 with agriculture for workers are construction, 0 transportation and warehousing, and hospitality. 1 60 1 62 1 64 1 66 1 68 1 70 1 72 1 74 1 76 1 78 1 80 1 82 1 84 1 86 1 88 1 0 1 2 1 4 1 6 1 8 2000 2002 2004 2006 2008 2010 2012 2014 2016 Transportation has been a particular challenge lately Source: The World Bank Source: The World Bank as an extreme need for truck drivers in the energy industry has been enticing drivers which could otherwise be hauling milk or grains. (See Exhibit 5.)
Wages have long been higher in these other industries EXHIBIT 4: Compound Annual Growth Rate in Wages, 2007-2017 when compared to most farm labor. The difference Compound Annual Growth Rate in Wages, 2007-2017 now is that these jobs are much more widely available, 1.00 1.50 2.00 2.50 3.00 3.50 4.00 and are more in line with the background of workers Fruit Tree Nuts
Vegetables Melons coming from Mexico. As a result, in order to compete
All Crops for and retain workers, employers in agricultural
All Agriculture industries are being forced to increase wages at a
Dairy faster rate. But, with labor being such a large share
Meat Processing of the cost for these industries, increasing wages put
Construction significant stress on profitability.
Leisure Hospitality
Manufacturing Immigration Controls Mining Approximately half of agricultural workers in the Transportation Warehousing U.S. are not legally authorized to work in the U.S.5 Source: Bureau of Labor Statistics - Quarterly Census of Employment and Wages In an environment of tightening border controls and Source: Bureau of Labor Statistics - Quarterly Census of Employment and Wages increased immigration enforcement, employing farm workers and finding qualified, authorized employees is challenging and stressful.
The primary type of visa for agricultural labor is the H-2A visa, which is for temporary work in agriculture. H-2B visas are for temporary non-agricultural work, but often involve labor for work in processing
Help Wanted: Wage Inflation and Worker Scarcity • August 2018 3 EXHIBIT 5: Weekly Wages in Select Industries, 2017 Weekly Wages in Various Industries, 2017 1,400 agricultural goods. Employers seeking to bring 1,200 workers in to the U.S. must, among other things, demonstrate that the need for this labor is only 1,000 temporary, that it could not be filled by a U.S. citizen, 800 and that it will not negatively impact the working conditions or wages of U.S. citizens employed in 600 similar industries. Temporary workers holding these 400 visas are not able to apply for permanent resident 200 status or citizenship.