In recent years, FSA has increased its scrutiny of loans to poultry and hog producers who raise their animals in vertically integrated systems under production contracts with poultry processors or meatpackers.  FSA realized that the integrators in these systems could control and manipulate the conditions under which these producers operate and put them at risk of defaulting on FSA loans.

In 2009, FSA issued a Notice to its state and country offices requiring that staff look more closely at the business plans submitted by poultry contract growers to assess whether the performance assumptions in a plan are realistic in light of the ability of poultry integrators to manipulate a grower’s operation.  The Notice stated that when a producer’s business plan depends on income from other sources in addition to income from land owned by the producer, the producer’s income must be dependable and likely to continue.

FSA found that, especially for new loan applicants, a contract with a poultry integrator that guaranteed only a single flock – a flock-to-flock arrangement – was not dependable.  The agency determined that for a poultry production contract with a new applicant to be considered dependable, the contract must:

• be for a minimum period of 3 years;
• provide for termination based on an objective “for cause” criteria only;
• require that the grower be notified of specific reasons for cancellation; and
• specify a minimum number of flock placements per year.

In 2010, USDA expanded the guidance with to cover loans to hog contract producers.  In a November 2010 Notice, the FSA also provided an additional requirement for loans to poultry and hog producers – that the production contract “provide assurance of the producer’s opportunity to generate enough income to develop a cash flow budget and repay the loan.” The assurance is required to be stated in the contract, which must incorporate requirements, such as minimum number of poultry flocks or hog “turns” per year, minimum number of bird or hog placements per year, or similar quantifiable requirements.”

In April 2012, FSA issued an Amendment to the Handbook for the Farm Loan Program that reaffirmed the guidance on loans to contract poultry and hog producers.  The Amendment also extended the guidance to loan applicants requesting funding to expand their poultry or hog operation by adding more houses or barns or buying more land to increase the size of the operations.  The production contract must at least cover the facilities financed with guaranteed funds.

USDA’s concerns about the dependability and continuation of the income of contract producers are valid.  In the 2011 Packers and Stockyards Annual Report released in March 2012, the Packers and Stockyards Administration concluded that poultry growers are particularly susceptible to extraction of income by integrators after the contract is executed.  Poultry growers and hog growers can be trapped in a contract by high rates of investment in their facilities and low rates of compensation in the production contract.  This gives integrators the opportunity to extract even more wealth by requiring upgrades to houses and barns after the contract is signed.

The PSA Report estimated that poultry growers are losing equity at a rate exceeding the loss of equity due to inflation.  Based on a per farm asset value for 2009 of $624,047, the gap on earnings to inflation represents an annual loss on equity of $16,903 per farm.  The median return on equity from USDA Economic Research Service data for growers that were earning 90 percent of more their gross income from production contracts is negative (-0.509) when averaged over the 7 years from 2003 to 2009.

USDA is to be commended for continuing its policy of requiring that poultry and hog contracts must demonstrate dependability and likely continuation before providing farm program loans to producers.  But much more must be done to ensure that all poultry and livestock farmers, both those with production contracts and independent producers, receive a fair return on their investments.

The Grain Inspection Packers & Stockyards Administration (GIPSA) regulation issued in November 2011 made some improvements.  Congress, however, blocked additional improvements via a legislative rider on the agricultural appropriations bill last year.  The Senate appropriations bill past last week removes that rider, but action now turns to the House, where action on agricultural appropriations for FY 2013 is expected in the next month.  NSAC urges Congress to cease blocking implementation of the comprehensive GIPSA regulation required under the 2008 Farm Bill.  Continuation of the rider, among other things, will put taxpayers on the line to bail out loans benefiting the integrators.

We are thrilled to report the bill approved by the Appropriations Committee endorsed the Administration’s proposal to fund for the first time the Sustainable Agriculture Federal-State Matching Grant Program as a new component of the Sustainable Agriculture Research and Education (SARE) program.  Combined, the Committee bill provides for $22.7 million for SARE, including $3.5 million for the matching grant initiative.  The latter was authorized by Congress, along with the rest of SARE, back in 1990, but to date it has never received an appropriation.  The Committee’s proposed funding level represents a long overdue 18 percent increase in funding.

We are also glad the Committee endorsed the Administration’s proposal to increase spending for the Value-Added Producer Grants program by $1 million to $15 million.  This is still $5 million less than the long-term funding level for the program and $25 million less than the 2002 Farm Bill provided for the program, but at least a modest step back in the right direction.

In the conservation part of the bill, we are delighted the Committee chose to reject the Administration’s proposal to cut a portion of farm bill mandatory funding for the Conservation Stewardship Program (CSP).  We strongly oppose backdoor efforts in the appropriations bill to reduce mandatory farm bill funding for conservation and applaud the Committee for keeping CSP funding intact.

The Committee bill also steered clear of cuts to the Farmland Protection Program, the Wetlands Reserve Program, and several other conservation programs.  However, they did propose to cut $350 million out of the farm bill mandatory funding level of $1.75 billion for the Environmental Quality Incentives Program, the same amount as in FY 11 and FY 12.  Also cut was farm bill funding for the Wildlife Habitat Incentives Program, down $12 million from the farm bill level of $85 million, a smaller cut than made in the FY 12 appropriations act.

We are also pleased to report the Senate Committee did not include the legislative rider from the FY 12 appropriations act that acts to prevent USDA from doing its job to ensure fair competition in the livestock and poultry marketplace.

The Committee also:

• includes a big bump up for the Agriculture and Food Research Initiative, a quasi-competitive research, education and extension grants program, from $264 million currently to $298 million, a 13 percent increase;
• keeps direct and guaranteed farm ownership and operating loan funds constant at FY 12 levels; NSAC has requested an increase for direct farm ownership loans targeted to beginning farmers and ranchers;
• allows $3 million in remaining 2008 Farm Bill funding for the Rural Microentrepreneur Assistance Program to be spent in 2013; we had advocated for additional discretionary funding but none was granted; and
• maintains level funding or very modest increases for a variety of other programs we follow closely including ATTRA, Organic Transitions Research, IPM Regional Centers, Office of Advocacy and Outreach, Local and Regional Food Enterprise Loan Guarantees, State Mediation Grants, Conservation Operations including Technical Assistance, and others.

For more details, see the NSAC Appropriations Chart on our website, which is now up-to-date with Senate Committee action.

For general details on the bill refer to the Committee’s summary.

To read about the big conflict between House and Senate spending levels for 2013, read our earlier post.

The letter calls for the protection of provisions in the 2008 Farm Bill Livestock Title to clarify and strengthen Packer and Stockyards Act regulations so that the there is a more level playing field for farmer and ranchers who raise livestock and poultry under contract and independent farmers and ranchers facing highly concentrated markets for their livestock.  It also calls for continuation of mandatory country-of-origin labeling for selected agricultural products and improvements in livestock mandatory price reporting.

The letter urges the enactment of two measures already introduced into Congress.  The first is the Livestock Marketing Fairness Act (S. 1026/H.R. 2631) that would prohibit secret contracts between producers and packers, bringing those contracts into an open market to which all buyers and sellers have access.  The second is a bill (S.2141) that would amend the Packers & Stockyards Act to ban packer ownership of livestock in order to deny packers the opportunity to use packer-owned livestock to manipulate the market price for livestock.

In addition, the letter requests new Farm Bill provisions for increased fairness in production contracts between farmers and processors, which is particularly relevant for poultry growers and some hog producers.  Other requests include measures to ensure that farmers have access to affordable seed and to ensure that patents on seed cannot be used to undermine competition and stifle scientific innovation in the seed industry by limiting access to germplasm and generic seeds.

Additional measures requested include the establishment of a Special Agricultural Competition Counsel to coordinate the activities of federal agencies responsible for preventing anti-competitive, deceptive and manipulative practices in the farm and food sectors and an annual report from USDA and other relevant federal agencies on concentration in the nation’s agricultural and food markets.

The four hearings covered the President’s budget requests for four USDA mission areas: Rural Development, Marketing and Regulatory Affairs, Natural Resources and Environment, and Food Safety.  Hearings for the Farm and Foreign Agricultural Services mission area and Research, Education, and Economics mission area have been scheduled for later this month.

The first hearing, which occurred on March 1, focused on rural development.  Judith Canales, Administrator of the Rural Business-Cooperative Service spoke about the importance of the rural development programs, including the Value-Added Producer Grants (VAPG) program, Rural Business Enterprise Grants (RBEG) program, Rural Microentrepreneur Assistance Program (RMAP), and Rural Energy for America Program (REAP).  In her written remarks, Canales states “USDA is revitalizing rural communities by expanding economic opportunities and creating jobs for rural residents to promote investment[…] and build a link between local production and local consumption.”

In response to a question from Rep. Sanford Bishop (D-GA) regarding improving and expanding upon the Rural Microentrepreneur Assistance Program in FY 2013, Administrator Canales explained that the Administration’s FY 2013 request of $3.4 million in discretionary funding for the program would support $22.5 million in loans and create or save more than 3,000 jobs.  Rep. Bishop noted that RMAP is able to leverage a small amount of money to create a major impact in rural America.  During the same exchange, Administrator Canales also spoke to the importance and effectiveness of VAPG, noting that the program is targeted at small business development and consistently contributes to farmer-led job creation in rural areas.

VAPG provides competitive grants to producers, groups of producers, or producer-owned businesses or cooperatives to develop value-added producer-owned enterprises. VAPG grants can be used for business planning and feasibility studies as well as for working capital.  Since 2001, the program has provided 1,541 grants totaling more than $210 million to all 50 states.  Despite being a key part of a proven job-creation strategy, VAPG has been cut by more than 30 percent in the last two years.  We hope that Congress does not continue this trend in FY 2013.

Following the rural development hearing, the Subcommittee held a hearing on March 6 to consider the President’s FY 2013 budget request for USDA’s Marketing and Regulatory Affairs mission area.  One of the issues that arose at the March 6 hearing was USDA’s implementation of the Grain Inspection, Packers & Stockyards Act (GIPSA) rule.  USDA implemented pieces of this rule last year, but was cut of at the knees on the rest of it by last year’s agriculture appropriations bill.  Unfortunately, two members of the Agriculture Appropriations Subcommittee spoke out against the rule on behalf of the anti-competitive meatpacking industry.  USDA will have an opportunity to implement the remaining portions of this fair competition rule in FY 2013 so long as it is not once again limited by the agriculture appropriations bill.

Subcommittee Ranking Member Sam Farr (D-CA) spoke up in support of a number of NSAC appropriations priorities related to organic production.  In particular, Rep. Farr noted the importance of maintaining funding for the National Organic Certification Cost-Share Program and for organic price data collection and reporting by the Agricultural Marketing Service, National Agricultural Statistics Service, and Economic Research Service.

The Subcommittee held two more hearings last week, one on March 7 and another on March 8.  Both Under Secretary Harris Sherman and Natural Resources Conservation Service (NRCS) Chief Dave White testified at the March 7 hearing on the President’s budget requests for the Natural Resources and Environment mission area.  Chief White began by discussing the agency’s Streamlining Initiative.  He noted that while the Initiative will result in increased efficiencies, NRCS must ensure that those efficiencies do not limit the agency’s ability to provide technical assistance to producers.

Within the agriculture appropriations bill, the Conservation Operations account is the primary discretionary funding mechanism used to support technical assistance for farmers and ranchers.  This is discretionary funding is paired with technical assistance support from mandatory conservation program spending, which does not come from the Appropriations Committees, but rather from the Farm Bill itself.  While appropriators do not provide mandatory funding, they do have the ability to limit it and have done so repeatedly in recent years.

In order to provide adequate technical assistance to producers across the country, NRCS needs more boots on the ground; and while the Streamlining Initiative will work toward this goal, it will do little so long as the Conservation Operations account is underfunded and mandatory conservation spending is undercut.

The Administration’s FY 2013 budget request includes a $347 million (roughly 20 percent) permanent cut to the Environmental Quality Incentives Program (EQIP).  Subcommittee Chairman Jack Kingston (R-GA) asked Undersecretary Sherman to explain how this Change in Mandatory Program Spending (CHIMPS) would play out on the ground.  Undersecretary Sherman noted that the CHIMPS would lower the level of activity in the program and “would delay the work that needs to be done.”

Representative Farr then asked Chief White to touch on the issue of reattaching highly erodible land and wetland conservation requirements to subsidized crop insurance.  This has become an increasingly important issue in recent years, with support from a broad array of groups, including NSAC, the National Farmers’ Union, American Farmland Trust, National Wildlife Federation, and many others.

Basic conservation requirements to protect against soil erosion and wetland drainage have been a condition of receiving farm subsidies since 1985.  This conservation requirement has dramatically reduced soil erosion on farmland and protected wetlands, keeping land productive and important natural resources intact.  Today, the biggest farm subsidy paid by U.S. taxpayers is for crop insurance.  With this shift in the prominence of crop insurance and with proposed changes to the farm safety net that will accelerate this shift, many groups and farmers around the country believe that compliance should be reattached to crop insurance subsidies, as it was up until 1996.  Chief White noted that he recognizes the importance and understands the rationale, but noted that in the end it is up to the House and Senate Agriculture Committees to decide.

Following this exchange, Rep. Farr asked Chief White to discuss the FY 2012 Conservation Stewardship Program (CSP) sign up, which ended in January, and to comment on the improvements that NRCS made to the program for FY 2012.  Chief White noted that demand for the program this year was incredible high and that the agency significantly increased the transparency and functionality of the Conservation Measurement Tool, which NRCS uses to enroll, score, and rank producers who apply for the program.  See this earlier post about the recent Senate Agriculture Committee hearing on conservation for more detailed remarks by Chief White.

The House Agriculture Appropriations Subcommittee will hold two more hearings next week.  A hearing on the Administration’s requests for the Farm and Foreign Agricultural Services mission area and Research, Education, and Economics mission area will be held on March 20 and March 21, respectively.  We will report on the results of those hearings shortly thereafter.

The case, James v. Tyson Foods, Inc, was filed in 2008.  This was before USDA issued regulations in 2011, under the authority of the federal Packers and Stockyards Act and the 2008 Farm Bill, that provide some modest protections for farmers raising poultry and livestock under contracts with processing companies.  The farmers claimed that Tyson had violated the Oklahoma Consumer Protection Act by providing the farmers with substandard birds and feed.  After the jury award, Tyson’s request for a new trial was refused by a lower court judge and the company then went to the Oklahoma Supreme Court.  That court ruled that the Oklahoma Consumer Protection Act does not cover the poultry growers because they are not strictly consumers who are buying products from Tyson.

The new GIPSA regulations do provide some limited protection for farmers who find themselves under the thumb of processing companies.  Under one provision of the 2011 regulations, if a company requires a poultry farmer to make additional capital investments not included in a production contract the company must also provide a reasonable opportunity for the farmer to recoup the investment over the life of the production contract.   But USDA failed to eliminate a judge-made doctrine that in addition to showing unfair and deceptive practices by a company, farmers also must show that the harms to them as individuals also harm competition for the agricultural products they produce.  In addition, the GIPSA rules do not address the issue of retaliation by companies or the unfair practice of providing substandard birds, feed and other inputs to farmers who complain about how they are treated in the vertically integrated contract system.

In the FY2012 Agricultural Appropriations bill, some provisions of the GIPSA proposed rule were blocked for a year by Congress.  Even the modest GIPSA regulation issued by USDA is currently under attack by some members of Congress, who are content to see large corporations manipulating agricultural markets and trapping farmers in one-sided contracts.  The current GIPSA regulations must be protected from these attacks.  And USDA should stand up to Congress and call for new stronger regulations to ensure that farmers and ranchers have fair terms in their dealings with meatpackers and poultry processors.

The Senate passed versions of this legislation in 2002 and 2008, but each time the measure was removed in the farm bill House-Senate conference.

The bill excludes single pack entities and packers that are too small to participate in USDA’s Mandatory Price Reporting program.  The bill also exempts farmer cooperatives where the members own, feed, or control the livestock themselves.

In his remarks introducing the bill, Senator Grassley gave a straight forward reason for the need for this legislation.  As explained by a meatpacking executive, meatpackers own livestock so that when prices are high, they slaughter their own livestock.  When prices are low, they buy from farmers.

Moreover, the ability of meatpackers to manipulate livestock markets is further increased by the concentration of meat processing in the hands of a few large corporations.  In the cattle sector, meatpackers are buying up feedlots in order to vertically integrate the sector and gain even more control over producers and profits.  Over the past 15 years, the number of beef feedlots has decreased by 35,000.  Currently, four mega-companies – Tyson, Cargill, National Beef, and Brazil-based JBS – control more than 80 percent of the U.S. beef market.

A good overview of the history of the U.S. cattle sector and the current struggles of cattle producers in this increasingly concentrated market was provided in an article by Stephanie Page Ogburn published in High Country News in 2011.

The large companies control much of the cattle in feedlots, through direct ownership or advance contracts with the feedlots.  An open cash market for cattle, with price discovery through offers made by numerous buyers, is disappearing.  This gives the large companies the power to set lower prices for cattle, lower prices that are passed from the feedlots through to cattle producers.  The price ranchers get for beef, controlled for inflation, decreased from $1.97 to 93 cents per pound between 1980 and 2009.  In addition, the mega-companies can benefit from market concentration and control on the consumer side, keeping consumer prices high even when producers are getting lower prices.

Other measures are also needed to ensure fair and open livestock markets.  The Obama administration did issue a proposed rule, under the authority of the Packers and Stockyards Act and the 2008 Farm Bill, that included some of these measures — a ban on packer-to-packer sales and the use of a single buyer for multiple companies at livestock auctions, as well as requirements for packers to retain records about the basis for pricing.

But after a lengthy comment period and administrative delays, the Administration announced in November 2011 that it was dropping rather than revising and perfecting these provisions.  The meatpacking mega-companies then followed with a lobbying campaign to block all of the provisions of the proposed rule, even those called for by the 2008 Farm Bill, by getting a legislative rider added to the appropriations bill for 2012 that effectively negates the law as enacted in the farm bill for the rest of this fiscal year.

Senators Grassley, Conrad, Johnson and Harkin are to be commended for introducing the packer ban bill as the congressional Agriculture Committees take up the hearings for the next Farm Bill.  Without an expanded and effective Livestock Title in the Farm Bill, the number of farmers and ranchers will continue to shrink and the wealth generated from rural land and our food and farming system will continue to be concentrated in a few corporate hands.

The summer’s bounty may feel far away, but even in January, farmers and ranchers are busy – unloading hay for cattle on the snowy range, selecting next summer’s most-delicious tomato seeds, or harvesting fresh grapefruit for your breakfast table.  Here in Washington, DC, we’re busy too:  members of Congress will return in just a few days, and they’ll debate the farm bill this year.

This opportunity to transform federal food and farm policy comes only once every five years.

We’ll need every voice – including yours – to achieve what we want: farm policy that helps family farmers produce healthy food, builds vibrant communities, and sustains the environment.

Our 2012 Farm Bill campaign calls for reforms that will:

• Ensure a sustainable future for American agriculture
• Create jobs and spur economic opportunities
• Equip rural communities for the 21st century
• Level the playing field for producers
• Support innovation for tomorrow’s farmers
• Protect our natural resources

We’ve made great progress already – both our Beginning Farmer and Rancher Opportunity Act and our Local Farms, Food, and Jobs Act are gaining momentum in Congress, and we want the contents of both of these crucial bills included in the 2012 Farm Bill.

What’s next?

Join us! Over the next year, we’ll ask you to speak up and help us fight for family farmers and ensure the future of sustainable agriculture.  You can help us keep the momentum into 2012 – share this alert with your friends and family and ask them to join our campaign for a Farm Bill that supports health, prosperity, and equity for family farmers and for our nation!

Thank you for all that you do,

The National Sustainable Agriculture Coalition Grassroots Team

• Measures to ensure that a poultry grower has received adequate notice that a poultry processor plans to suspend delivery of birds;
• Criteria for determining whether a requirement of additional capital investment over the life of a poultry or hog production contract growing arrangement or swine production constitutes a violation of the Packers and Stockyards Act;
• Requirement that a packer, swine contractor, or live poultry dealer has provided a reasonable period of time for a grower to remedy a breach of contract that could lead to termination of a production contract; and
• Arbitration provisions in production contracts that allow a producer or grower to decline arbitration and that detail criteria for USDA to use in determining if an arbitration process provides a meaningful opportunity for participation in the arbitration by a grower or producer.

On the positive side, the arbitration provision of the final rule is an improvement over the proposed rule.  Farmers who do not choose whether to be bound by an arbitration clause in a production contract are deemed by the rule to have declined to be bound by arbitration.

But the final rule also weakens important provisions of the proposed rule.  The proposed rule provided that a processor that requires a farmer to make initial and additional capital investments must also provide a reasonable opportunity for the farmer to recoup the investment over the life of the production contract.  The final rule limits the recoupment requirement to additional capital investments required after a production contract is entered into and omits the recoupment requirement for the initial capital investment.

The final rule also weakens a requirement that packers and processors provide poultry and livestock contract farmers with notice and a reasonable opportunity to remedy an alleged breach of a production contract.   The final rule includes a new broad exemption from the requirements if the packer or processor contends that food safety or animal welfare was concerned in the breach.  There are no safeguards or procedures in the final rule to ensure that packers and processors document these contentions.

The protections provided in this limited GIPSA final rule, which took more than one and one-half year to issue, are an important but very modest first step to ensuring farmers and ranchers a fair shake in dealing with meatpackers and poultry processors.  In 2010, USDA and the Department of Justice heard from farmers and ranchers across the U.S. about the failures of these agencies to enforce the law and improve regulations to actively and effectively address their concerns.

Since that time, the Obama Administration has dragged its feet on issuing final rules.  In November, the Administration announced that it was completely dropping, rather than refining, several provisions from  the GIPSA proposed rule that would provide fair markets for livestock farmers and ranchers, including a ban on packer-to-packer sales and the use of a single buyer at livestock auctions, as well as requirements for packers to retain records about the basis for pricing.

USDA also announced it was still considering and, therefore, delaying finalization of other measures in the proposed regulations including long-awaited elaboration on what constitutes illegal undue price preferences and the pivotal clarification that farmers and ranchers need not prove injury to competition in markets for their products but rather only need show that they had been injured by a deceptive or unfair practice.  These core sections of the rule would have to be revised and issued as new proposed rules, starting the long rulemaking process all over again.

This Administration announcement was followed closely by Congressional approval of a rider to the FY2012 Agricultural Appropriations measure that bars USDA from implementing in FY2012 any rules that would:

• eliminate the activist court-fashioned requirement that farmers and ranchers prove an injury to market competition from unfair or deceptive practices used against them as individuals by packers and processors;
• give definitions to unfair, unjustly discriminatory and deceptive practices or abuses;
• give definition to the prohibition on undue or unreasonable preferences;
• require packers and processors to make available sample production contracts;
• limit or modify the existing “tournament system” for that processors use to determine payments for poultry growers; and
• prohibit the implementation of any of the GIPSA proposed rules if the annual cost to the economy of such rules exceeds $100,000,000, while potential benefits will not be considered.

USDA was allowed to publish any rule not exceeding $100,000,000 in costs to the economy if the rule were published by December 9, 2011.  USDA did meet that deadline for the poultry and hog contract final rule.

In addition the agriculture appropriations bill, the minibus includes the Commerce-Justice-Science and the Transportation-Housing and Urban Development funding bills as well as a new continuing resolution, which extends FY 2011 funding levels through December 16, 2011 for programs that have not received an FY 2012 appropriation.  The current continuing resolution keeping the government funded expires on November 18.

The final FY 2012 agriculture appropriations bill provides for $19.8 billion in discretionary spending, which is $350 million below last year’s level and $2.5 billion below the President’s request.

For a comparison of the negotiated bill, known as a Conference Report, with the original House and Senate bills, you can download the latest version of our annual appropriations chart.

Raid on Conservation Programs

The final FY 2012 bill cuts more than $927 million from farm bill mandatory conservation, on top of the half billion dollar cut contained in the FY 2011 agriculture appropriations bill.  If we include the renewable energy programs, this number jumps to approximately $1.2 billion.  Conservation and renewable energy were the primary farm bill mandatory programs cut.  Commodity, crop insurance, and export subsidies were left unscathed, as was the SNAP (food stamps).

The final FY 2012 agriculture appropriations bill cuts the Conservation Stewardship Program (CSP) by $75.5 million, roughly 9 percent, relative to its FY 2012 farm bill-mandated level.  This cut will reduce the size of the 2012 CSP sign-up by more than 30 percent.

The final bill also cuts the Environmental Quality Incentives Program (EQIP) by $350 million, or 20 percent.  The Wetlands Reserve Program (WRP) and Grasslands Reserve Program (GRP) are cut by roughly $200 million (32 percent) and $30 million (25 percent), respectively, while the Farm and Ranch Lands Protection Program (FRPP) and the Wildlife Habitat Incentives Program (WHIP) are cut by $50 million (25 percent) and $35 million (41 percent), respectively.  As in both the House and Senate bills, the Voluntary Public Access and Habitat Incentive Program (VPA-HIP) was zeroed out.

Taken together with what is rumored to be at least a $6 billion 10-year cut to conservation programs, the cuts to farm bill conservation programs would total $9 billion, or nearly 15 percent, considerably more than the proposed 10 percent cut to commodity and crop insurance subsidies in the pending farm bill deal.  NSAC has consistently said it will oppose a farm bill with a disproportional cut.

If one assumes that continued pressure on the agricultural appropriations bill from the $1 trillion reduction in appropriations over the next ten years approved by Congress in August will tend to keep forcing cuts to mandatory conservation, and if one further assumes that  the lackluster performance of the Agriculture Committees in defending their own mandatory spending during consideration of the FY 2012 appropriations bill will continue, it would then appear safe to say, based on the evidence at hand, the actual cut to conservation programs being contemplated now by the combined forces of the Appropriations and Agriculture Committees would be vastly higher, closer to $15 to $20 billion of ten years, or approaching a 30 percent cut.

In addition to the cuts to mandatory conservation funding, the bill cuts the Natural Resources Conservation Service’s (NRCS) conservation operations budget that pays for technical assistance by $44 million to $828 million.  NRCS uses conservation operations money to provide technical assistance to farmers and ranchers in the development of conservation plans and enrollment in conservation programs.  Lack of adequate technical assistance funding has become a chronic problem at USDA.

Energy Programs Slashed Too

A number of mandatory renewable energy programs were also cut in the conference bill.  Spending on the Biomass Crop Assistance Program (BCAP) is capped at $17 million, which is a 62 percent cut below the $45 million in remaining (unobligated) FY 2012 funds.  The Renewable Energy for America Program (REAP) received only 31 percent ($22 million) of its farm bill-mandated funding.

Rural Development and Farm Loans

The final bill makes significant cuts to a number of critical programs that create jobs and help rural communities thrive.  The bill cuts the Value-Added Producer Grants (VAPG) program to $14 million, roughly 35 percent of its authorized level and 26 percent less than what went out the door in 2011.  Surprisingly, the conferees chose to adopt the House proposal to zero out the Rural Micro-entrepreneur Assistance Program (RMAP) completely in FY 2012, despite existing grantees being due technical assistance funding based on their micro lending to date.  The Rural Business Enterprise Grants program was cut by 37 percent to roughly $24 million, while the Rural Business and Industry (B&I) loans program was cut by 17 percent relative to FY 2011.  With the B&I cut, approximately $41 million will be available in FY 2012 for loan guarantees for local and regional food enterprises.

The final bill funds direct operating loans at close to $1.05 billion, as requested in the President’s budget.  Unfortunately, it also matches both bills’ funding for direct farm ownership (DFO) loans at $475 million, which is 27 percent lower than 2010 levels.  The FY 2011 agriculture appropriations bill first reduced the DFO loan program level from $650 million to $475 million.  Not surprisingly, this has resulted in a $129 million backlog of approved applications for DFO loans, nearly half of which are beginning farmers.  The chances of real estate deals remaining in play after long delays in receiving approved loans are slim, resulting in the loss of new farming opportunities.

Research, Education, and Extension

Fortunately, the conference report maintains level funding for the Sustainable Agriculture Research and Education (SARE) program at $19.2 million.  As has been the case for many years, this does not include the $10 million requested by USDA to launch the SARE federal-state matching program.

Funding for the Organic Transitions Research Program and the Agriculture and Food Research Initiative (AFRI) was also maintained at FY 2011 levels.  Farm bill mandatory funding for the Organic Research and Education Initiative (OREI), Specialty Crop Research Initiative (SCRI), and Beginning Farmer and Rancher Development Program (BFRDP) were left intact.

Finally, the bill funds the National Sustainable Agriculture Information Service program (popularly known as ATTRA) at $2.25 million in FY 2012.  While not the $2.8 million funding level the program has maintained for many years, it is $2.25 million more than the zero dollars the program received in FY 2011 and thus an important step forward.  We are glad to see that this incredibly important program has been revitalized.

GIPSA Rule Travesty

One of the biggest travesties of all in the conference report is the Conference Committee’s handling of the livestock and poultry fair competition and contract reform rule, widely known as the “GIPSA rule” after the name of the agency (Grain Inspection, Packers and Stockyards Administration) that issued the proposal.  The rule was mandated by the 2008 Farm Bill.

The final appropriations bill bars any rule to eliminate the activist court-fashioned requirement that farmers and ranchers prove an injury to market competition from unfair or deceptive practices used against them as individuals by packers and processors; proposed rules that give definitions to unfair, unjustly discriminatory and deceptive practices or abuses; proposed rules to give definition to the prohibition on undue or unreasonable preferences; and proposed rules requiring packers and processors to make available sample production contracts.   The bill also prevents any final rule or interim rule from being published or otherwise implemented if the rule concerns the poultry tournament system.

The conference bill also prohibits the implementation of any of the proposed rules if the annual cost to the economy of such rules exceeds $100,000,000, while potential benefits will not be considered.  If its costs do not exceed $100,000,000, the bill allows the remaining poultry rules to be implemented, if the rules are published in the Federal Register no later than December 9, 2011.  This means if OMB can get its act together in time, anything left by the Report of the Final Rule sent to OMB for consideration by USDA might squeak under the wire.  The Report requires a 60-day delay after publication before this rule could be become effective.

Background Maneuvering by USDA on GIPSA Rule

To understand the complex nature of the stipulations in the appropriations bill it helps to know what USDA proposed last week.  Just as the appropriations conference was about to start, USDA announced that it had sent some of the GIPSA rules proposed by the agency in June 2010 to the Office of Management & Budget (OMB) as a Final Rule.  These rules focus on the poultry sector and include provisions in the 2008 Farm Bill concerning suspension of delivery of birds by poultry processors, measures addressing additional capital requirements, such as improvements to poultry houses, required after growers enter producer contracts with poultry processors, measures concerning notice for breach of contract, and requirements for processors to provide sample swine and poultry contracts.

USDA also sent to OMB, as an Interim Rule open to additional comment, the provision from the proposed rule on poultry tournament systems, which are used by the processors to compare poultry growers against each other in determining payment for their birds.

USDA decide to completely drop several provisions from the fair markets for livestock portion of the proposed rule, including a ban on packer-to-packer sales and the use of a single buyer at livestock auctions, as well as requirements for packers to retain records about the basis for pricing.

Finally, USDA announced it was still considering and, therefore, delaying finalization of other measures in the proposed regulations including eliminating the need for farmers and ranchers to prove injury to competition in markets for their products in addition to showing that they had been injured by a deceptive or unfair practice.  These core sections of the rule would be revised and issued as new proposed rules, starting the long rulemaking process all over again.

The conference agreement follows the USDA announcement closely, with the major change being upending the reform of the tournament system.  Otherwise, the agreement allows for the contract reform provisions that are in the process of becoming final to proceed, and then effectively kills everything else.  Many observers feel this is not a coincidence but rather something orchestrated ahead of time by the Administration and the industry giants, though we are unaware of any specific evidence of such collusion.

Local and Regional Food Systems

As we previously reported, the House bill contained an amendment offered by Virginia Foxx (R-NC) to strip all FY 2012 funding for USDA’s Know Your Farmer, Know Your Food Initiative (KYF2).  This was a misguided attack on an initiative that does not even have its own budget, but rather coordinates various programs and activities across multiple USDA agencies that work with farmers and ranchers producing for local and regional markets.  We are happy to report that the Conference Report does not include the Foxx amendment.

At the same time, however, it does retain some anti-KYF2 language that first showed up in the House agriculture appropriations report.  The Conference Report directs USDA to post on its website prior to any travel primarily related to KYF2, information including the agenda and the cost of such travel.  It also directs USDA to submit to Congress, within 90 days of enactment of the bill, a report on the impacts of KYF2 over the previous two years, as well as justification for spending on the initiative in the fiscal year 2013 budget explanatory notes.

As we reported when the House language was first released earlier this year, we are increasingly concerned about this ideologically driven and misguided attack on a growing and increasingly popular segment of American agriculture.

We hope that USDA goes one step beyond the new Conference Report requirement and also documents agendas and travel costs for all USDA travel primarily related to conventional national and multinational commodity markets as well.  Such a dual track reporting system would actually be quite educational!

Earlier Appropriations Actions

The House passed its agriculture appropriations bill in June of this year.  That bill included a $3 billion, or 14 percent, cut to discretionary spending for U.S. Department of Agriculture (USDA) and the Food and Drug Administration (FDA).  The House bill also included a $1 billion cut to mandatory conservation programs.

The Senate passed its agriculture appropriations bill in early September, proposing to cut $192 million from discretionary programs and taking roughly $742 million, or 12 percent, from farm bill mandatory conservation programs, on top of the half billion dollar cut contained in the FY 2011 agriculture appropriations bill.

Our previous reporting included full descriptions of the funding levels for conservation, rural development, credit, and research programs contained in the House bill and in the Senate bill.

After the Senate completed its bill, the House and Senate conferees were selected and the two sides went to work on a negotiated bill.  The Conference Report must now be sent back to both the House and Senate for a final vote before FY 2012 funding levels are set.

The Agricultural Appropriations bill for fiscal year 2012 is currently working its way through Senate floor action, with final passage expected to occur on or about November 1.  We issued a full rundown on the measure and the voting to date earlier.

No action will be taken in the Senate bill with respect to the GIPSA rule.  Earlier this year, the House approved its version of the Agricultural Appropriations measure and included in it a rider that would prohibit USDA from issuing the final rule.

NSAC strongly supports the rule and has joined with our members and with other groups in encouraging its immediate finalization.  We also strongly oppose the House rider and oppose its inclusion in the final appropriations bill.  We applaud Senators Harkin and Johnson for standing up for fair competition!

Senator Johnson stated on the floor:  “Independent farmers and ranchers must have an opportunity to leverage a decent price for their products.  Market consolidation has done a severe disservice to our producers, and it is critically important that we maintain market access and price discovery options for independent farmers and ranchers.  I am also fully supportive of GIPSA’s authority to continue the rulemaking process as directed in the 2008 Farm Bill.  The proposed rule takes an important first step toward finally enabling livestock producers to get a fair shake in the marketplace.”

He also brought up how a letter written by 190 organizations from across the country was recently sent to Congress outlining the important protections provided for in the proposed rule and urging Congress to allow the rulemaking process to continue.

Senator Harkin pointedly noted that “contrary to some of the arguments that are being made, the topics and subject matter covered in the proposed rule, and which therefore likely would be encompassed in the final rule, are entirely consistent with the rulemaking process that the 2008 farm bill directed the Secretary of Agriculture to conduct and with the authority provided by the Packers and Stockyards Act.”

He went on to explain how “the proposed rule would clarify what many believe to be a misinterpretation of the act by some courts that have held that an individual grower or producer cannot succeed on a claim for harm suffered from a violation of the act without an additional showing of harm to competition in the broader market.”  This is simply next to impossible for a grower to do.  He refuted the argument that  the proposed rule exceeds the authority of the USDA by stating the claims are “plainly unfounded.”

Harkin closed his remarks by responding to the studies claiming that the rule would be very costly and eliminate jobs, saying that they’re founded on misreading of the intent of the proposed rule and are extreme predictions of the effects of a rule that is designed to simply ensure fair and nondiscriminatory treatment of livestock and poultry producers and growers in the market.

The two floor statements can be found here.