TO:  SouthWestern Association Equipment Members

FROM:   Tom Sell - Combest, Sell & Associates, LLC

DATE: February 14, 2007

RE:     Report on Southwest Council of Agribusiness’ 2/07-2/09 Washington, D.C. “Fly-In”
 
A delegation from the Southwest Council of Agribusiness ("SWCA") traveled to the Nation's Capitol on Wednesday, February 7, 2007 to Friday, February 9, 2007, to introduce the organization, and meet with key decision-makers regarding the 2007 Farm Bill.  It was an outstanding group, and the meetings were very useful - a great first run for the SWCA which laid some important groundwork and provided valuable insight for the Farm Bill debate ahead.  

Members of the envoy were:

            - Mark Williams - SWCA President; Producer from Farwell, TX.
            - Dee Vaughan - SWCA Vice President; Producer from Dumas, TX.
            - Mitchell Harris - Lender; Ag Texas Farm Credit Services, Lubbock, TX.
            - Bud Holmes - Lender; Plains Capital Bank, Lubbock, TX.
            - Matt Huie - Producer from Beeville, TX.
            - Steve Verett - SWCA Secretary/Treasurer; Plains Cotton Growers, Lubbock, TX.
            - Tag Webb - Agribusiness; SouthWestern Association (Implement Dealers), Tulsa, OK.

Larry Combest, Jeff Harrison and Tom Sell hosted the group.

Discussions were far ranging in many of the offices (and there was plenty to talk about with the Administration's Farm Bill Proposal still hot off the press), but in each meeting, your representatives sought to convey 3 important messages listed below.  In addition, written material with the SWCA logo and contact information was left behind in each office, the text of which is attached at the end of this memo.
 
First:  We wanted to introduce the Southwest Council; explain why it is that lending and other business interests have teamed up with producers to support a strong farm bill; and present the organization as a resource for offices (for information, feedback, support, etc.) as Congress gets into the meat of the farm bill debate.
 
Second:  We wanted to convey in no uncertain terms that the farm bill is critical to the economy of the Southwest; that we support nothing less than maintenance of the current policy, and that current policy should be viewed as a foundation upon which to build.
 
Third:  Relative to the budget debate (which officially began on Monday the 5th with the release of the President's FY'08 budget blueprint - Congress will work on its version through February, March, and into April), we wanted to make the case that the farm bill has performed so well (providing a safety net that has spurred a vigorous rural economy, while coming in $25 billion under budget (a 24% savings) over the '02-'08 period) that a further investment over the budget baseline would be warranted to address additional needs that have been identified.

In a total of 28.5 working hours (Wednesday afternoon, Thursday and Friday morning), the group had twenty meetings.  Offices visited include:

From the Southwest:
          - Senator John Cornyn (R-TX) and Agriculture LA Keith Franks.  
          - Senator Kay Hutchison (R-TX) and Agriculture LA Jamie.
          - Congressman Mike Conaway (R-TX) and Agriculture LA Scott Graves.
          - Congressman John R. "Judge" Carter (R-TX) and Agriculture LA Jason Fenton.
          - Congressman Randy Neugebauer (R-TX) and Agriculture LA Kathy Bergren.
          - Congressman Henry Cuellar (D-TX) and Agriculture LA Keith Jones.
          - Congressman Mac Thornberry (R-TX) and Agriculture LA Kate Williamson. 
          - Stoney Burke, Agriculture LA with Congressman Chet Edwards (D-TX).
          - Meghan Riley, Agriculture LA with Congressman Ciro Rodriguez (D-TX). 

          - Connie Humphrey, Chief of Staff for Congressman Ruben Hinojosa (D-TX).
          - Congressman Frank Lucas (R-OK) and Chief of Staff Nicole Scott. 
          - Congressman Jerry Moran (R-KS) and Agriculture LA Aaron Popelka.

From Leadership Positions:
         

 - House Agriculture Committee Chairman Collin Peterson (D-MN); Rob Larew, Staff Director; Anne Simmons, Professional     

              Staff; and Clark Ogilvie, Subcommittee Staff Director.
 - Bill O'Conner, Minority Staff Director, House Agriculture Committee; Kevin Kramp, Deputy Staff Director; and Bryan

              Dierlam, Professional Staff.
 - Subcommittee Chairman Bob Etheridge (D-NC) and Subcommittee Staff Clark Ogilvie. 
 - Senate Agriculture Committee Ranking Member Saxby Chambliss (R-GA), Counsel Vernie Hubert, and Professional Staff

              Christy Seyfert.
 - Susan Keith, Professional Staff, Senate Agriculture Committee (Dee met individually with Susan)

 - Senate Budget Committee Chairman Kent Conrad (D-ND) and Budget Committee Professional Staff Jim Miller.  

From the Administration:
          - Hunter Moorhead, Special Assistant to the President for Agriculture (White House Staff).
          - Dr. Mark Keenum, Undersecretary for Farm and Foreign Agriculture Service (USDA).

In addition to these meetings, the group also met with Vernie Hubert, Counsel, Senate Agriculture Committee, Ranking Member Senator Chambliss; Tony Eberhard, Legislative Director, Senator Norm Coleman; Robert Holifield, Legislative Assistant, Majority Leader Harry Reid; Jim Miller, Professional Staff, Budget Committee Chairman Kent Conrad; Brandon Willis, Legislative Assistant, Finance Committee Chairman Max Baucus; Jimmy Johnson, U.S. Sugar Beet Association; and Reece Langley, USA Rice Federation.

Below are the "leave behinds" that were shared with Members and staff.  Please feel free to share with your Senators, Congressmen, staff members, and others interested in U.S. farm policy. 

The 2007 Farm Bill:
     A Strong Safety Net for U.S. Farmers and Ranchers
     A Global Competitiveness Bill for an Important American Industry

U.S. Farmers Are at the Mercy of Weather, Markets, and the Actions of Governments.  U.S. farmers and ranchers each year face a tough battle on three fronts:  weather, markets, and the actions of governments. 

Weather.  Weather impacts everyone, but it often hits farmers and ranchers hardest.  A producer's entire crop can be lost overnight.  Or a crop may be spared but only after enormous cost that can ultimately offset much, if not all, of the value of the crop.  Last season's drought and wildfires serve as painful reminders.

                           
Markets.  President Kennedy once said, "The farmer is the only man in our economy who buys everything he buys at retail, sells everything he sells at wholesale, and pays the freight both ways."  This captures the unique predicament facing farmers and ranchers:  they have little control over the prices they pay for inputs to produce their crops or livestock or the price they will ultimately receive on the market, which is reduced by transportation costs.  Add to this the highly volatile nature of commodity prices and it is easy to picture the financial squeeze farmers and ranchers are caught in.
      
Actions of Governments.  Former U.S. Trade Representative and now Director of Office of Management and Budget Rob Portman has noted many times that there is no economic sector in the world that is more distorted than global agriculture markets.  Director Portman has also noted that our foreign competitors have huge subsidies and high tariffs that far outstrip any help offered to U.S. farmers.  Even on the rare occasion when foreign competitors do not resort to tariffs and subsidies, they find other means of locking out American food and fiber, including through the use of bogus sanitary and phytosanitary regulations and State Trading Enterprises which make those countries' governments a monopoly.  Yet despite the bold U.S. offer tabled in the Doha Round of the World Trade Organization (WTO), our foreign competitors have repeatedly failed to reciprocate with offers to do the same.  And many countries, including China, have sought a free pass that would mean little or no concessions on their part.  Government actions take a very heavy toll on U.S. farmers and ranchers.   

Unilateral Disarmament Would Harm an Important U.S. Industry and Cost America Jobs.  Despite weather, markets, and the actions of government, some say the U.S. government should unilaterally disarm its farmers and ranchers in the Farm Bill in order to pave the way for a WTO agreement providing a one way street in favor of foreign competitors.  American agriculture today creates 25 million good paying jobs, contributes $3.5 trillion in economic activity, accounts for 17 percent of the nation's Gross Domestic Product, and is too important to give away.  Earlier this decade, after 3 million manufacturing jobs were offshored from the United States, Congress passed the American Jobs Creation Act to help U.S. manufacturers compete on a lopsided global playing field.  A strong Farm Bill is the competitiveness bill for America's farmers and ranchers who face the toughest world market terrain of any economic sector.                                   

The 2002 Farm Bill is the Benchmark.  While input costs have sharply risen in recent years dealing a hard blow to a very energy-intensive farming and ranching industry, America's farmers and ranchers believe that the 2002 Farm Bill is a good foundation for the 2007 Farm Bill given both the budget and trade constraints Congress faces.  The 2002 Farm Bill is fiscally responsible, coming in more than $21 billion under budget, and the most trade compliant of any options that provide a meaningful safety net.  Any further reduction to the safety net would seriously injure U.S. farmers and ranchers and the economic activity and jobs agriculture provides across the country.  It would also eliminate any leverage the U.S. has to achieve a balanced and fair agreement in a WTO Doha Round.  

Direct Payments.  Created under the 1996 Farm Bill, this component of the farm safety net was designed to be the most trade-friendly since it is not directly connected to price or production.  Direct payments have been particularly critical to U.S. producers facing closed markets due to government actions and record high input costs.  Direct payments, if properly balanced with the other two components of the farm safety net, help provide a meaningful safety net to U.S. producers.  2002 direct payment levels should serve as the floor in the 2007 Farm Bill.                   

Countercyclical Payments.  Created under the 2002 Farm Bill, this component of the farm safety net was designed to fill the void left by the previous law that had required Congress to pass costly, unbudgeted ad hoc economic assistance between 1998 and 2001.  Countercyclical payments help offset the effects of volatile prices caused by distorted world markets brought on by foreign tariffs, subsidies, and closed-off markets.  2002 countercyclical safety net levels should serve as the floor in the 2007 Farm Bill.    

Marketing Assistance Loans/Loan Deficiency Payments.  Preceding both the 1996 and 2002 laws, this component of the farm safety net serves as a critical foundation since it provides farmers with a market-oriented safety net that most directly relates to a farmer's risks, again brought on by volatile prices much of which is created by high foreign subsidies and tariffs and closed-off markets.  2002 loan rate levels should serve as the floor in the 2007 Farm Bill.         

Payment Limitations.  Lower payment limitations than those contained in the 2002 Farm Bill would injure U.S. global competitiveness and farm families of all sizes.  The Farm Bill is a competitiveness bill and U.S. farm families simply must be able to produce at production levels that allow them to remain viable in an increasingly competitive world market, just as any other sector of our economy must do.  Regardless of size or production, all American farm and ranch families face the reality of a lopsided global playing field.  It is for this reason that a law with similar goals, the American Jobs Creation Act, does not limit benefits that help U.S. manufacturers compete to only those of a certain size.  Both bills are about maintaining important U.S. industries and millions of American jobs.  In short, lowering pay limits would seriously undermine U.S. global competitiveness.  Ironically, lower limits would also lead to fewer and larger farms as farm families are forced to offset critical loss of Farm Bill support with greater production just to stay afloat.  Changing pay limit rules would also punish many small farmers by denying them any Farm Bill benefits they may now receive when crop-sharing.  Mid-sized farmers, too, would be hurt by a change in rules, with many landlords pressed to move to cash rents, forcing mid-sized farmers to go the risks of farming alone.  Besides hurting farmers of all sizes, lower pay limits would also hurt fruit and vegetable farmers and set back important conservation efforts to promote air and water quality, reduce soil erosion, and protect wetlands, wildlife and wildlife habitat.  Again, ironically, farm families are often criticized for receiving Farm Bill benefits, much of which are used to implement the very conservation practices advocated by those making the criticism.

 "Our farmers deserve praise, not condemnation; and their efficiency should be cause for gratitude, not something for which they are penalized." - President John F. Kennedy

FY2008 Budget Resolution

A Fair Farm Bill Budget

The Farm Bill Covers a Lot of Ground.  Today's Farm Bill provides a safety net to America's farmers and ranchers struggling with volatile weather, markets, and government actions.  It also promotes economic development for our rural communities; conservation to protect and enhance water and air quality, soil, wetlands, wildlife, and wildlife habitat; critical nutrition assistance for children and low income families; vital research; and, increasingly, clean-burning, domestically-produced renewable fuels.

The 2007 Farm Bill Budget Baseline Is Already Sharply Reduced Compared to the 2002 Farm Bill Budget Baseline.  Despite all that is riding on the Farm Bill, the budget baseline for the 2007 Farm Bill is expected to be far lower than what was provided to write the 2002 Farm Bill.  The 2005 Budget Reconciliation package reduced overall government spending but disproportionately cut the Farm Bill budget.  Similarly, discretionary funding for appropriations bills in recent years has also been lean, but agriculture again has borne much of the brunt of these tighter budgets and this has required borrowing from the Farm Bill in order to meet appropriations needs.  These factors, coupled with substantially lower than expected farm policy costs over the past five years, mean that the budget baseline for the Farm Bill is expected to be drastically lower in 2007 than it was for 2002.

Farm Bill Needs Have Not Diminished Since 2002, While New Needs Must Now Be Met.  While funding available to write a new Farm Bill has drastically declined since 2002, the needs being met have not - in fact, many new needs have been identified, including but not limited to the areas of conservation, nutrition, renewable fuels, and fruits and vegetables.  Without at least some additional budget resources, it is difficult to conceive how a Farm Bill can be successfully written and passed in Congress given such a bill would have to either abandon important current needs, ignore new ones, or both.

Unless the Farm Bill Receives Credit for Realized and Expected Budget Reductions, Deeper Cuts Will Result.  Funding for current farm policy will have been reduced by $21 billion from 2002 to 2007 and further declines are expected, resulting in a grim choice this year for policymakers of abandoning current needs, ignoring new needs, or both.  Given that farm policy funding has already sustained sharp reductions over the past five years, the Southwest Council strongly believe that the necessary budget resources should be restored to the Farm Bill budget in order to adequately fund the writing of the 2007 Farm Bill.  At the currently reduced level of funding, severe budget cuts to current policies would be unavoidable in a Farm Bill rewrite.  Without speaking to the specific level proposed, it is significant that the Administration acknowledges that a budget increase for the Farm Bill is absolutely necessary and proposed such an increase in its Farm Bill proposal.  The Southwest Council encourages Congress to provide additional resources required to meet current as well as any new needs to be addressed in the 2007 Farm Bill.     

Please Contact the House or Senate Budget Committee With Your Support for Adequate Funding.  The Southwest Council strongly encourage Senators and Congressmen to contact their respective Budget Committees and urge that adequate additional resources be provided to the Agriculture Committees in order to write a new Farm Bill that does not result in harmful cuts to important needs now being met while providing ample funding to address any new needs that must be funded.