November 2011

Early in the morning of September 10th, the legislature gaveled down the end of the first year of the legislative session. Many expectations were established for this legislature dominated by Democrats with Jerry Brown at the helm for his third try at Governor. The legislature has sent him approximately 700 bills this year.  

For the first time in years, the California budget was enacted before the July 1 constitutional deadline. Other budget firsts include: The first budget passed by a majority vote due to the enactment of Proposition 25 last November, first budget ever vetoed by the Governor and the first budget in numerous years passed before the deadline. Because the Governor was unable to persuade Republicans to support revenue increases the budget is littered with gimmicks and fee increases and if state revenues do not outpace expectations the budget triggers an additional $4 billion in cuts, including a $1.75 billion cut to K-12 education.   This Budget is relying on favorable revenue models that were immediately suspect due to the 2010-11 budget ending almost $400 million short of expected revenues and they were based on much more modest revenue assumptions.  

Impacts on agricultural interests are significant including $19 million in general fund cuts to the Department of Food and Agriculture for a cross section of programs including pest inspection and prevention, increased fees for phytosanitary certificates, elimination of the $32 million for the state's fair system and fee increases in many agencies that impact business and agriculture, most notably a $24 million increase in fees at the Water Resources Control Board.  

President Obama wasted no time signing the Colombia, Panama and South Korea free trade agreements into law October 21, and following that action signed the Trade Assistance Authority (TAA) reauthorization legislation. Secretary of Agriculture Tom Vilsack declared the trade agreements "a major piece of President Obama's jobs agenda," the political spin the White House has put on the free trade pacts since the President embraced their ratification as part of his jobs bill. The TAA law will reauthorize and expand federal assistance to U.S. workers whose hours or wages are negatively impacted by trade agreements, including retraining and health care cost assistance. "Farm exports help support 1 million American jobs," Vilsack said. "This year and next, U.S. agricultural exports are on track to reach new highs, leading to a trade surplus of over $42 billion - eight times greater than five years ago. When implemented, these three agreements will increase farm exports by an additional $2.3 billion - supporting nearly 20,000 American jobs - by eliminating tariffs, removing barriers to trade and leveling the playing field for U.S. producers." The three agreements were negotiated by the Bush Administration and have been stuck in the Senate for the last several years.

With the chairs of the House and Senate Agriculture Committees submitting a consensus letter estimating agriculture can withstand about $23 billion in cuts over the next 10 years to the Joint Special Committee on Deficit Reduction, the ag committees must now make good by November 1 on a pledge to provide the super committee details of how those cuts should be achieved. Generally it's agreed that of the $23 billion, at least $15 billion would come out of farm program payments, $4 billion could be shaved off conservation programs, and another $4 billion could come out of nutrition programs, including food stamps, according to Sen. Charles Grassley (R, IA). But further reconstruction of direct program payments into some form of revenue protection insurance is still underway, and it's expected the money needed to create these new programs will come in part from a shift in spending from direct payments to risk management which would impact the overall savings. New to the mix and getting a lot of talk is the Aggregate Risk and Revenue Management (ARRM) program proposal put forward last week by Sens. Sherrod Brown (D, OH), John Thune (R, SD), Dick Durbin (D, IL) and Dick Lugar (R, IN). This plan is predicated on creating crop-specific revenue insurance-type protection based on a producer's planted acres. ARRM, says the Congressional Budget Office (CBO), would save $19.8 billion over 10 years and would go a long way to freeing up cuts in other programs.  

The four committee principals must sign off on the detailed plan, and then they must convince their respective committee members. Secretary of Agriculture Tom Vilsack publicly urged this week the super committee to go easy on ag research cuts because such programs are necessary to increasing crop and livestock production to meet global food needs over the next several decades. He also said federal disaster programs must be preserved, particularly in the wake of natural disasters experienced this past year. Lastly, the super committee must approve the approach. Rep. Frank Lucas (R, OK), chair of the House Agriculture Committee, said this week he's concerned about the "regional competitions" in the various proposals that have emerged over the last month. It's Lucas' contention corn and soybean farmers in the Midwest seem to be favored over producers in other parts of country, part of the regional disputes always seen in Farm Bill debates. But Lucas told an Oklahoma radio station he wants equitable treatment of all producers, not just those in regions "where soil is measured in feet and where it rains when it's supposed to." Lucas went as far as to say the abbreviated budget cutting process driving the Farm Bill debate may wind up with a Farm Bill written - with the new numbers in hand - next summer so as to allow input from both committees, amendments and other input based on drafts, etc.

The beginning of the public duels between members of the up-to-now very quiet Joint Special Committee on Deficit Reduction began this week as the Democrat members unveiled a plan to double the level of cuts over the next decade from $1.5 trillion called for by law to nearly $3 trillion. The plan is heavy on cuts in discretionary spending, including cuts to defense, but also takes $500 billion out of Medicare and Medicaid and includes tax increases. Complicating the formula, however, is that the debt limit law creating the super committee and its goals also caps appropriations - increases in non-emergency discretionary spending must stay below the rate of inflation over the next decade - and critics claim the caps plus additional cuts are too heavy a burden for some segments of the government, particularly defense spending.  

The GOP super committee members came back with a plan that's heavy on cuts and could require tax code overhaul as part of its formula for hitting the $1.5 trillion target. One report indicated 75% of the Republican plan relies on spending cuts, the rest coming from increases in non-tax revenue, including at least consideration of user fees for government services. However, while some GOP House members have pushed for tax reform, at least at the corporate level, it's unclear how far they're willing to go. Unrelated to the super committee's deliberations but sure to influence how the final bill being crafted cuts the budget, House Ways & Means Committee Chair Dave Camp (R, MI), a member of the super committee, floated a highly detailed and complex discussion draft on federal tax code changes this week that seeks to reduce the federal tax on foreign business earnings by 1.25% to 35%, but only when those earnings are brought back to the U.S. as dividends. As part of what are being called "anti-abuse changes", Camp wants to clamp down on preventing corporations from hiding taxable revenues overseas. Overall, Camp's plan would cut the corporate tax rate from 35% -- the second highest in the world - to 25%, with simplification of the individual tax rates and elimination of tax loopholes.

In a move to clarify ag transportation regulations, including the hours of service exemption for agriculture, Reps. Sam Graves (D, MO) and Blaine Leutkemeyer (R, MO) introduced a bill this week "intended to resolve questions regarding the applicability of the agriculture hours of service exemption." The bill was praised by the Agricultural Retailers Assn. (ARA), the National Council of Farmer Cooperatives (NCFC), The Fertilizer Institute (TFI) and the Agricultural & Food Transporters Conference of the American Trucking Assn. (ATA). The bill amends parts of the Motor Carrier Safety Improvement Act to clarify the ag exemption and facilitate interpretation and enforcement by the Federal Motor Carrier Safety Administration (FMCSA), said the two House members. Since the exemption was authorized in 2009, the ag groups supporting the exemption said FMCSA interpretations have restricted the movement of some agricultural supplies. The bill says the ag exemption - which covers feeds and feed ingredients - specifically applies to drivers transporting ag commodities within a 100-air-mile radius; drivers transporting farm supplies for ag purposes from a wholesale or retail business to a farm or other location where the farm supplies are to be used within a 100-air-mile radius, and drivers transporting farm supplies from a wholesale location to a retail location so long as the transport is within a 100-air-mile radius.

A program that would provide up to a 30% federal tax credit to "biobased" manufacturers was unveiled this week by Senate Agriculture Committee Chair Debbie Stabenow (D, MI). Her "Grow it Here, Make it Here" legislation is designed to provide the tax credit for a variety of new, expanded or re-equipped bio-manufacturing facilities and projects. Stabenow said biobased products represent 4% of the market for plastic and chemical industries, and that USDA estimates the potential market share for biobased plastic and chemical products to be in excess of 20% by 2025. The American Soybean Assn. (ASA) praised the legislation and offering support for bio-based manufacturing, adding it holds USDA's Biobased Markets Program as a top priority and wants to see it expanded. Stabenow previously held a hearing on bio-based manufacturing in her home state.

As the battle over the future of federal support of biofuels continues to grow, the Renewable Fuels Assn. (RFA) this week joined with others in the alternatives fuels industry to urge Congress to establish an "open fuels standard" as envisioned in HR 1687, a bill by Rep. Elliot Engel (D, NY) and Rep. John Shimkus (R, IL). An open fuel standard would allow patrons to pick from a variety of fuels, including multiple ethanol fuel blends, at the pump, according to RFA. It also means a need for greater investment in infrastructure, say critics of the move. RFA says "hundreds of billions of dollars now being drained from our economy to pay for foreign oil could go instead to American businesses and workers to produce our fuel right here at home."

When President Obama proposed a federal mandatory "clean energy standard" earlier this year, the goal was to improve the environment, jump start alternative energy industries and reduce costs by weaning the U.S. off foreign oil. However, Rep. Ralph Hall (R, TX), chair of the House Science, Space & Technology Committee, this week said such a standard would increase national electricity costs by 30% and cost the average U.S. household an additional $211 a year. Hall cited an EPA Energy Information Administration (EIA) report which he requested that looked at a federal mandate under which 80% of the power generated by utilities come from wind, solar, nuclear, clean coal or natural gas by 2035, similar to the Obama plan. Hall said the report demonstrates the clean energy standard is "an expensive new electricity tax on the American people." House critics said Hall's study request was designed to look at only a "worst-case cost scenario." EIA said that under the best-case scenario it was asked to examine clean coal that would be ultimately be displaced by cleaner-burning natural gas, leading to higher gas prices, but that the policy would reduce carbon dioxide emissions by 50% between 2009-2035.

A proposed rule that would provide new methods by which EPA will get information from confined animal feed operations (CAFOs) as part of its Clean Water Act (CWA) enforcement was published this week in the Federal Register. EPA wants facility-specific information to make sure CAFOs comply with CWA reporting and reduction regulations, and under one of the options proposed CAFOs within certain areas with water quality challenges "likely associated with CAFOs" would be required to enhance their reporting. The second option actually lays out three alternatives for information collection. EPA said it would "make every reasonable effort to assess...existing publicly available data...before determining whether an additional information request is necessary." Comments on the new proposal are due December 20. Details can be found at www.epa.gov.

EPA wants public comment from ag sectors demonstrating they have no viable or economical alternative to methyl bromide on the paperwork and "regulatory burden" associated with its program allowing pesticide registrants to apply for continued use permits for the chemical. The information request is routine and required by the Office of Management & Budget (OMB). The notice can be found in the October 24 Federal Register, or by going to

 http://www.gpo.gov/fdsys/pkg/FR-2011-10-24/html/2011-27438.htm.

After a dioxin contamination episode last winter during which meat and eggs from nearly 5,000 German farms were destroyed and the farms shut down after it was determined feed contained dioxin-contaminated industrial vegetable oil, the European Union (EU) is moving quickly to clamp down on feed ingredient companies. EU member states approved a draft program created by the Standing Committee on the Food Chain & Animal Health, now on its way to the European Parliament and the European Council for final approval. Under the program - expected to be implemented by mid-2012 - feed ingredient companies processing crude vegetable oils, manufacturing products from those oils and blending fats will be required to be registered and approved by the respective national government; fats intended for feed and food must be strictly segregated from industrial-use fats during production and transport, and labeling must explicitly state the intended use of the product; member states will enter into a harmonized EU plan for mandatory minimum testing for dioxin depending on "the risk inherent to the products," with testing focusing on risky products from the time they enter the food/feed chain, and all laboratories testing ingredients, fats and oils will be required to directly notify the governments if "excessive" dioxin is found.

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Position Available:  

PACIFIC ELEMENTS, LLC

5001 Prairie Flower Road

Ceres, CA 95307

JOB DESCRIPTION: Controller

LOCATION: Ceres, CA

REPORTS TO: General Manager and business owners (members)

DATE:            November 1, 2011

DESCRIPTION:

Pacific Elements, Heartland Grains & Milling, and Prairie Flower Trucking are now under common ownership. This business consolidation has created the need for a controller to manager the administration, accounting and finances of each business unit and to optimize synergies as a consolidated business group. The controller will assist management and members in the day to day operation of the business with oversight over accounting and internal controls of the company. The controller will work in conjunction with Tim Byers, CPA of Byers Accountancy Corporation to provide accurate and timely financial reporting and to influence optimal profitability as a result of the controller's sound business decisions and management.

• CLICK HERE FOR FULL DESCRIPTION OF RESPONSIBILITIES AND DUTIES 

Send resumes to:   Tim Byers, CPA

                                    Byers Accountancy Corporation

                                    1300 W. Shaw Avenue, Ste 2A

                                    Fresno, CA 93711