Washington Insider - Wednesday

By DTN's Washington Insider

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Ohio May Tighten Regulations Governing Fertilizer Applications

The giant algae blooms on Lake Erie that caused the city of Toledo, Ohio, to temporarily ban residents from drinking tap water last month have resulted in the local state senator introducing a proposal to add manure to the list of fertilizers requiring state certification.

The new legislation, introduced by state Sen. Edna Brown, would alter fertilizer rules established in legislation signed into law by the governor in May. The rules require farmers using synthetic and chemical fertilizers to take a state-run certification course to learn how much fertilizer to use per acre and when it should be applied. Use of animal manure originally was included in that bill, but was removed prior to passage.

Toledo draws its drinking water supplies from Lake Erie and the algae blooms there have been traced to fertilizer runoff from farms carried into the lake by the Maumee River, which drains a large portion of northwestern Ohio and northeastern Indiana.

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USDA Spending Bill Likely to be Postponed Until Lame Duck Session

Congress returns from its five-week summer recess on Sept. 8 with many issues to be addressed but with only a few days to accomplish any work before leaving Washington again for five weeks of mid-term election campaigning. One of the chief issues that members need to take up is to appropriate money to fund the government during the coming fiscal year which begins Oct. 1.

The House approved its version of the agriculture appropriations measure back in June, but the Senate has not yet moved its version to the floor for a vote. The two versions will be significantly different, so a conference committee will be required to find a compromise with which both chambers can live. There is virtually no chance this will happen before the end of September, and little chance it will happen by the end of calendar 2014.

That means Congress will be required again this year to approve a continuing resolution (CR), a measure that will keep not only USDA but also the rest of government funded at current levels until after the November elections. Just how far into the future a CR would have effect remains to be seen.

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Washington Insider: Watchdog Group Criticizes Sugar Litigation

Sugar is among the most protected U.S. commodities, and has been for decades. Still, it has strong political support and typically escapes heavy political scrutiny, even from other commodity groups whose markets face far greater competition. It came through the recent farm bill debate unscathed.

In addition, it is now engaged in litigation attempting to constrain sugar imports from Mexico — and, is running into at least some opposition including that from Citizens Against Government Waste. Recently, Thomas Schatz, president of that group, circulated an article highly critical of the industry's efforts and called its recent litigation "The latest example of Big Sugar running to Uncle Sugar to protect the industry's sweet deal at the expense of taxpayers and consumers."

Schatz notes that domestic sugar producers filed complaints earlier this year about Mexican sugar imports with the U.S. International Trade Commission and the Department of Commerce claiming that, "Mexican sugar is being dumped in the U.S. market and receives unfair subsidies from the Mexican government, thereby injuring U.S. sugar producers."

Schatz argues that as a signatory to the North American Free Trade Agreement, or NAFTA, Mexico now has open access to the U.S. market. NAFTA, he says, has led to an integrated sweetener market under which Mexico exports sugar to and imports high fructose corn syrup from the United States. He adds that this system is precisely what was anticipated by both countries when the agreement was ratified in 1994.

Furthermore, Schatz thinks the sugar industry's filings with the ITC and DOC threaten to disrupt this balanced market, since Mexico is likely to retaliate if the agencies rule in favor of U.S. producers.

He adds detail to this charge, noting that while federal sugar beet and sugar cane growers and processors have been supported heavily for more than 75 years, he thinks the programs have been particularly pernicious since the 2008 farm bill which increased loan rates for raw and refined sugar; continued a domestic allotment system; placed new restrictions on the ability of the secretary of Agriculture to allow imports (even if they are needed to fill shortfalls in the U.S. market); and requires USDA to sell surplus sugar for subsidized ethanol production at a loss to the government.

Perhaps his most contentious point is that the sugar program has "caused the price of sugar to be about 40% higher than the world price, resulting in increased costs to consumers of $3.5 billion annually in years 2009 through 2012. Thousands of jobs in sugar-using industries such as candy manufacturers have been lost, he says.

And, finally, sugar producers forfeited $152 million worth of sugar to the USDA in September and October 2013, Schatz notes. He cites estimates by the Congressional Budget Office that the program costs will be about $629 million between fiscal years 2014 and 2024, paid mainly by taxpayers.

Now, Schatz says, the industry is attempting to use trade laws as a weapon to intimidate America's partner in a free trade agreement in an attempt to manipulate not only domestic policy but also the trading rules between the United States and Mexico.

Most of these points have been made by others in other settings and have received occasional support from the administration and other commodity and farm organizations with stakes in this fight and who are sensitive to Schatz' charges. Still, observers have been somewhat surprised that beyond the rather weak protests by the administration, there has been little protest as the sugar industry's push against the NAFTA agreement has proceeded.

So, observers await decisions by the ITC and Department of Commerce that are likely to come in the fall. Those determinations, if the case proceeds, may lead to more substantial reactions and greater controversy, since this is a case with high stakes for producers of numerous commodities, and should be watched carefully as it unfolds, Washington Insider believes.

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