2018 Farm Bill: With the passage of both the House and Senate versions of the farm bill, the next challenge will be to reconcile the two bills into a single conference report that will be voted on by both Houses and sent to the President for his signature. Sugar policy was unchanged in both bills, so the focus will be on other controversial provisions, such as the work requirements in the Supplemental Nutrition Assistance Program (SNAP). On July 18th, the House voted to proceed with the conference. We will continue to monitor the conference negotiations closely until they are completed. Hopefully the bill can be in place by the end of September when the old Farm Bill expires. Only time will tell.
The first quarter of 2018 has been action packed for our industry. We had a very successful annual meeting in Washington, D.C. bringing in the top agricultural leaders from the House and Senate who will write the next farm bill and key leaders from the Trump Administration who have a direct impact on implementing the bill and overseeing the suspension agreements with Mexico. It is essential for them to see and speak to a ballroom full of beet farmer leaders and for our leaders to see and hear from those who shepherd the farm bill through the Congress.
Farm Bill: As with any major piece of legislation, there are a multitude of issues and dynamics that create the political environment when Congress considers the reauthorization of the farm bill this year. There are policy structures, spending constraints, low commodity prices, vocal opponents, pending mid-term elections, floor time to consider the bill and competing legislative issues, just to name a few. Let’s look at a few of these to put the months ahead into their proper context.
With 2018 now underway, the first notable hiccup of the year was the government shut down on the one year anniversary of the Trump Administration. This is yet another sign of political dysfunction in our nation’s capital. Frustration and emotions are at a boiling point. Government shut downs, even short ones, are costly, inefficient, disruptive and avoidable. It does, however, provide lots of finger-pointing opportunities in an election year. Most people “outside the Beltway” are tired of the blame game and just want their government to work in a responsible and timely fashion.
2018 is going to be a good year for sugarbeet growers. With the amended Mexican antidumping and countervailing duty suspension agreements going into effect last October, the beet crop going into the ground this spring will fully benefit from the price recovery provided by the amended agreements. Yes, there is and always will be work to defend and maintain the suspension agreements and make sure that Mexico complies with the provisions, but it is in the interest of both governments and industries that these agreements work as they were intended. These agreements will manage sugar imports from Mexico so there is no need for any discussions with Mexico regarding sugar in the NAFTA negotiations. What everyone must also realize is that USDA needs the best production and consumption data available to determine how much additional sugar is needed from Mexico or other quota-holding countries. Working with USDA to get that critical information is very important so they do not make decisions that oversupply the U.S. sugar market with imports. This is a very high priority for our industry.
Tax Reform: Much of the focus this fall has been on the tax reform bill as it makes dramatic reforms to lower corporate taxes and remove a number of personal deductions. Section 199, or the Domestic Production Activities Deduction (DPAD), was eliminated in both the House and Senate tax bills. The DPAD is calculated as 9% of qualified production activities income of the taxpayer (in our case, the cooperative), capped at 50% of cumulative W-2 wages of cooperative employees. Cooperatives can retain it at the cooperative and use it for capital improvements or pass the deduction through to their members. Section 199 is especially valuable to the grower-owners of cooperatives because their share of the cooperative’s DPAD is based off their share of the total beet payment (or patronage) paid to growers, not corporate profits. It is likely that without this deduction, grower taxes could go up--not down. Senator Hoeven (R-ND) led the charge to amend the Senate tax bill to retain Section 199 and had the support of 194 organizations, and eight senators cosponsored the amendment. But the amendment faced a budget point of order which would have required a 60-vote margin instead of a simple majority to gain Senate approval, so the amendment was not offered.
There is a flurry of activities in Washington this summer that will impact the beet sugar industry in the months and years ahead. Here are a few of them.
2018 Farm Bill: Hearings have begun in both the House and Senate Agriculture Committees on the new Farm Bill. The House Subcommittee on General Farm Commodities and Risk Management held a hearing on April 4th that included views by the domestic sugar industry. Jack Roney, Director of Economics and Policy Analysis for the American Sugar Alliance presented testimony entitled “U.S. Sugar Policy: Why We Have It and How It’s Working”. The message to Congress had six key points.
Much of the focus in the testimony was on the continued subsidization and dumping of Mexican sugar into the U.S. market. The one year that sugar policy cost taxpayers money, was when Mexico subsidized and dumped sugar into our market in violation of our trade laws. The biggest threat to a successful sugar policy is our trade problems with Mexico. Our producers are suffering great economic stress as a result of the suspension agreements with Mexico. The Hawaiian sugar industry closed its doors last December, as victims of the Mexican dumping. The Trump Administration is attempting to address this problem in the month of April with expectations to have it resolved no later than May 1. Your industry leaders are very engaged in this very difficult negotiation. If it cannot be resolved to our satisfaction, then duties should be put in place to stop all the sugar imports from Mexico. That is not our desire but we need a solution that works.
Hearings in the Senate began in Agriculture Committee Chairman Pat Robert’s state of Kansas. The next hearing that will include sugar will be held in Michigan in early May at the Saginaw Valley Research and Extension Center. Ranking Member Stabenow and the committee will provide the opportunity for commodity leaders to show the importance of their commodities to the state, the need for a strong safety net for farmers and the importance of research for American agriculture.
Sugar will likely testify in various regions around the country during the course of this year. We will tell our story at any and every appropriate venue. We may see more “listening sessions” outside of DC rather than formal committee hearings. These sessions can be held in more places at much lower costs than a formal hearing.
Florida Congressman Ted Yoho reintroduced his resolution called “Zero-for-Zero” in which U.S. sugar producers would give up our domestic policy if other countries would stop subsidizing and dumping their surplus sugar in the global market. The U.S. sugar industry wholeheartedly supports this resolution. When half of the sugar produced in the world is produced at a higher cost than in the U.S. and the less efficient foreign producers were forced to exit the business, we would see world sugar prices reflect the cost of production and rise substantially. Unilateral elimination or crippling of sugar policy would be foolish to push domestic producers out of business and become dependent on foreign suppliers for a strategic commodity in your food supply.
The long delay in getting a Secretary of Agriculture confirmed, along with several other political appointees in the subcabinet positions has caused harmful delays in moving the agriculture agenda forward in the new Administration. A strong Secretary has been needed to promote agriculture and defend its budgets and resources as the Administration sorts out the specifics of their priorities. Of particular note, we continue to wait on how we move forward with regulations on biotechnology disclosure under the new law passed last July.
Planting intentions for 2017 were released on March 31. Beet plantings will be down two percent or 28,600 acres from 2016. With market surpluses and greater confidence in higher yielding varieties, fewer acres are needed to produce adequate supplies for processing. There are no increases in any state in the country.
Crop Insurance: There has been some confusion this spring over the new 2017 definition of “practical to replant.” However, it does not apply to sugarbeets. The change was made to the FCIC “basic provisions” covering all crops, but the sugarbeet policy has its own “special provisions” that contain a separate definition of “practical to replant” that remains untouched. The following is an explanation of the issue by our crop insurance legal counsel Ken Ackerman.
It would be unthinkable to send an NFL coach to a Super Bowl with only a handful of players and let him draft players after the game starts. To some extent, that is what happens in the world of politics whenever a new President takes the oath of office. On January 20th at noon, when the reins of power are handed over to the new President, he is now the head coach in a global and political Super Bowl, and it will be some time before his entire team is selected, vetted, confirmed and fully in place. Whoever the President picks for his team is a good indication of how his Administration views the world and what their priorities will be.
Luther Markwart, author of Dateline Washington, is executive vice president of the American Sugarbeet Growers Association.