October 19, 2012

The U.S. Food and Drug Administration (FDA) today issued further information and guidance regarding registration requirements for domestic and foreign manufacturers, processors, packers or holders of food for human or animal consumption based on changes made by the FDA Food Safety Modernization Act (FSMA) to the Federal Food, Drug, and Cosmetic Act (FD&C Act).   The updated food facility registration system will become available at 12:01 a.m. Monday morning, October 22, 2012.  

Food producers and manufactures have long been required to register with the Food and Drug Administration. There is no fee to register or renew the registration of a food facility. Facilities can register online, via mail or fax. FDA encourages online registration as a quick and efficient means for food facility registration.

The Food Safety Modernization Act improves the registration process by ensuring, among other things, that the FDA has accurate contact information for each facility. The new registration form also includes new categories of foods. These new categories will help FDA rapidly communicate with the right facilities in the event of an emergency.    

Biennial registration renewal will become available at 12:01 a.m. Monday morning, October 22, 2012. To submit a registration renewal to FDA, a food facility is required to submit required registration information to FDA, including the additional registration information described above. To facilitate this process, the agency is offering technical assistance online and through the help desk. Please check  FDA's food facility registration website for more information and to register online.

• FDA Guidance on Use of Food Product Categories During Food Facility Registration

While congressional leadership has still not released the exact dates of the November lame duck session, the failure of the House to pass a five-year Farm Bill continues as an issue in farm state congressional races, particularly those hard fought in the Senate. From Iowa where two incumbents are battling it out to Montana where a veteran House Republican is challenging a Democrat Senate incumbent, who's to blame for the failure to enact an omnibus farm bill is the incentive for much political finger pointing. Sen. Debbie Stabenow (D, MI), chair of the Senate Agriculture Committee, told a reelection audience this week she's proud of her committee and the full Senate for approving a five-year Farm Bill.  

However, that achievement means nothing, she said, if the House doesn't act during lame duck to either approve a new Farm Bill or at the very least formally extend existing farm programs. Perhaps the most vocal and seemingly desperate producers calling for a new Farm Bill are dairy farmers. Nearly all of dairy's support programs disappear by the end of the year -- most have disappeared already -- and so dire is the situation that Maine dairy farmers came to Washington, DC, this week to make sure that state's 306 dairy farms -- ranging from 10 to 1,700 cows -- are not left in the dust of disappearing dairy support programs. House Speaker John Boehner (R, OH) and Majority Leader Eric Cantor (R, VA) have confirmed that with some "tweaking" the House's committee-approved bill will be brought to the floor during the lame duck session. The biggest hurdles: Getting commodity groups to agree on a collective approach to replacing direct payments with risk-based programs, and finding a middle ground -- or a way to explain committee action -- on nearly $16 billion in cuts to federal food stamps over 10 years.

Eight Senators and a handful of House colleagues continue to meet in hopes of hammering out a bipartisan proposal to avoid the looming January 1, 2013, "fiscal cliff" -- the expiration of current tax cuts along with a 3% or $109 billion annually in across-the-board cut in federal spending -- in order to avoid reversing the economy's sluggish recovery. Progress on coming up with a bipartisan agreement has not been as quick as negotiators hoped, and some members have already started examining ways to mitigate the impact of higher taxes and lower spending that will kill programs and idle federal workers.  

The so-called Senate "Gang of Eight" -- eight Senators from both sides of the aisle who've accelerated their discussions and meeting schedule in the last couple of weeks -- remains collectively confident a package can be hammered together that will get 60 votes in the Senate and pass the House. Sen. Chris Coons (D, DE) has proposed the group set aside the $109 billion in automatic cuts, accepting instead a $75-billion "down payment" on deficit reduction with an agreement to set aside further cuts for six months. Sen. Tom Coburn (R, OK), a member of the gang, says he's confident a solution will be reached, even though this week he released his annual "Wastebook," a chronicle of 100 federal programs he's identified as wasteful. The number one program is Congress, Coburn said. This week the group met with former Sen. Alan Simpson (R, WY) and former Clinton chief of staff Erskine Bowles -- chairs of the National Commission on Fiscal Responsibility & Reform. Simpson called the eight senators "warriors" and said he's hopeful the group will find consensus.    

Analysts say it's difficult to gauge how much progress has actually been made given the amount of pre-election sniping that's gone on among rank-and-file House and Senate members. One insider said both parties' leadership is on board with finding a bipartisan compromise -- even though House Speaker John Boehner (R, OH) said this week he's skeptical of the economic benefits and impact of such a package -- but it's the rest of both chambers who are the problem. Pre-election sniping includes a number of members -- mostly Republican -- who say they're willing to let the economy "go over the cliff" rather than give up too much in spending cuts and budget controls.   Meanwhile, Rep. Norm Dicks (D, WA) sent a 15-page letter to his colleagues outlining the disruptions and cuts to public safety, transportation, health care and defense.

Milk Producers Council's General Manager Rob Vandenheuvel put out the following comments in response to a "Statement on Milk Pricing" published by the California Department of Food and Agriculture (http://www.cdfa.ca.gov/dairy/MilkPricingStatement.html):

"As many California dairy families stood on the State Capitol steps this morning demanding a fair price for the milk they produce, the California Department of Food and Agriculture (CDFA), led by Secretary Karen Ross, put out an extremely disappointing 'Statement on Milk Pricing.'  Over the past several years, California dairy farmers have expressed growing frustration over how CDFA establishes monthly prices for milk sold in the State.  However, what was once just a frustration has now culminated into financial devastation, with scores of California dairies reportedly already in bankruptcy, and the rest in dire financial straits.

"The economic challenges that face dairy families in California and throughout the U.S. are well-documented.  Dairy farms are being squeezed between record high feed costs and milk prices that have failed to cover those costs month-after-month, leaving the dairies swimming in losses.  However, adding insult to injury in California, our Department of Food and Agriculture, which is tasked with establishing on-the-farm milk prices that are in a 'reasonable and sound economic relationship' with what comparable milk is being sold for around the country, has overseen more than two years of a steep discount in what a large portion of our milk is sold for in California.  In other words, while the U.S. dairy industry has certainly been having a difficult time, Secretary Ross has seen fit to sit idly by as her State's dairy farmers go through utter devastation, with CDFA's own policies much to blame.

"Specifically, dairy farmers point to CDFA's pricing policies with regard to milk sold to California cheese manufacturers, which is where about 40-45 percent of the State's milk production is currently being sold.  CDFA announces a monthly 'Class 4b' price, which applies to the California cheese manufacturers buying California milk.  A similar system operates around the country, which is known as the Federal Milk Marketing Orders.  That system includes a monthly 'Class III' price, which also applies to cheese manufacturers operating under that system and buying milk. 

"The chart on the next page shows the difference between the California Class 4b price and the Federal Order Class III price for the past ten years.  While California's cheese manufacturers have long-enjoyed a state-sponsored discount on the milk the buy, the past three years have seen that discount blow up.  The difference outlined below represents about $375,000 in forgone revenue since January 2010 for an average dairy in California.  Cumulatively, that's a state-sponsored discount awarded to California cheese manufacturers of more than $633,000,000, on the backs of the roughly 1,600 California dairies since January 2010.

"Instead of sending out a statement explaining her inaction, dairy families need Secretary Ross to announce a hearing immediately and change California's 4b monthly price to more closely follow the prices paid for comparable milk around the country.  While CDFA's statement points out that Class 4b prices have risen from $13.56 to $17.50 per hundredweight between May and September 2012, it ignores the fact that the Federal Order Class III price during that same period rose from $15.23 to $19.00 per hundredweight.

"CDFA's statement also tries to justify this state-sponsored discount by speaking of the distance from California to the Northeast cheese markets.  However, CDFA ignores the fact that cheese processors in Arizona, Oregon and Washington are regulated under the Federal Milk Marketing Order system and are paying these higher prices.

"Perhaps one of the most misleading parts of CDFA's statement is the reference to high Class 1 prices.  First off, the Class 1 price is applicable to those who buy milk to sell it as a fluid product (whole, lowfat, skim, etc.).  The November 2012 price of $23.17 per hundredweight cited by CDFA represents $2.00 per gallon paid to the farmer.  Is CDFA arguing that paying the dairymen $2.00 per gallon is too high while it sells on the store shelves for $3.50-$4.00 per gallon?  Further, California dairy farmers have not asked to raise the Class 1 price; we have continually focused on the Class 4b price, which only applies to California cheese manufacturers, not fluid milk bottlers.  It's difficult to understand why CDFA would attempt to confuse the public by turning their attention to a pricing formula (Class 1) that isn't even being challenged - by either the dairy farmers or the bottlers buying Class 1 milk.

"Finally, it is interesting to read CDFA's comments on 'some milk buyers' announcing that they will be paying an additional premium for the milk they buy.  Apparently even the buyers of our milk are starting to be embarrassed by how much of a discount CDFA is lavishing upon them.  While dairy farmers appreciate additional premiums for the milk they produce, that unofficial 'announcement' by 'some milk buyers' in no way relieves CDFA from their legal responsibility to maintain prices in California that are in a 'reasonable and sound economic relationship' with what comparable milk is sold for around the country.

"What is needed is action, not a statement.  California's dairy families need results, not excuses."

The Commodity Futures Trading Commission's (CFTC) new rule on derivatives and position limits continues to generate controversy, with Sen. Pat Roberts (R, KS) this week calling for a post-election hearing on the new rules and the limits set by the commission on how much collateral and capital major traders need to meet the new criteria. Roberts contends the CFTC has exceeded its authority and has misread the Dodd-Frank law that requires new regulations of financial markets. The House members want to see an accounting by the end of the month of the costs involved in producing the rule that limits positions in 28 commodities. Roberts pointed to a federal judge's invalidation of the rule, which is supposed to go into effect next week, in saying the commission has gone too far. Roberts reminded reporters this week that at one point, Gentler said only about 20 derivatives dealers would be affected by the new rule; today, he says the number of traders captured by the rule is closer to 300 swaps dealers.

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While eight U.S. governors and most of the nation's livestock and poultry industry await EPA's decision on whether to waive all or part of the ethanol Renewable Fuel Standard (RFS) -- a decision expected shortly after the November election -- the European Union (EU) this week said it wants to limit the amount of food crops used in biofuels refining -- primarily ethanol and biodiesel -- so as to avoid competition with the food industry and to spur development of fuels refined from non-food crops and grasses. The European Commission (EC) said that first-generation biofuels made from sugar, starches and vegetable oils provide 5% of the continent's transportation fuel, but said the goal of reaching 10% poses potential problems, similar to those in the U.S. Legislation will be introduced to set the limits on food crops in biofuels manufacture, but that legislation must be approved by the European Parliament as well as the EU member nation governments.

California has the most to lose if Congress fails to act following the election and allows scheduled tax changes to go into effect at the start of the new year. Known as the "fiscal cliff," this combination of tax increases and spending cuts, many mandated by the 2011 Budget Control Act, will lead to a recession, according to a Congressional Budget Office (CBO) study.

As part of the 2011 Budget Control Act, $1.2 trillion in federal spending cuts must begin starting in January and continuing over 10 years, if federal lawmakers do not reach an agreement on how to adjust spending appropriations and a Congress-set spending limit. Also in January, a series of tax provisions are set to expire, and taxes are slated to increase by 20%, estimated the nonpartisan Tax Policy Center in a study released earlier this month.

Impact on Jobs

The CBO study projects unemployment will jump above 9%. The American Action Forum (AAF), an independent policy institute based in Washington, D.C., however, estimates the unemployment number to be likely above 10%.

The AAF prediction takes into consideration the jobs the nation will lose from the negative impact the fiscal cliff will have on gross domestic product.

Sequestration-the cuts that automatically take effect to bring spending Congress authorized in line with the spending limit it set-will affect defense discretionary spending, non-defense discretionary spending (includes agencies such as Agriculture, Commerce, Education, Energy, and Transportation, among others), and Medicare spending.

These cuts in turn are expected to have an impact on jobs that are both directly and indirectly tied to these agencies.

A study published by Stephen S. Fuller at George Mason University forecasts that 1,090,359 jobs will be lost due to U.S. Department of Defense budget cuts in 2013. In addition, 1,047,349 jobs will be lost in the non-defense sector, with almost half of them being federal jobs, and 31% coming from the professional and business services sector.

California

California will be affected more deeply than any other state, in terms of job losses, loss of gross state product (GSP), and loss of labor income, according to the George Mason study. Virginia will be the second most affected and Texas will be third.

In fiscal years 2012 and 2013, the George Mason study concludes, the state will lose:

• 225,464 jobs (135,209 jobs lost from defense cuts; 90,255 jobs lost from non-defense cuts);

• $22.676 billion in GSP (Virginia will lose $20.876 billion; and Texas will lose $16.039 billion); and

• $11.543 billion in income.

The looming California impact led the Los Angeles County Economic Development Corporation (LAEDC) to urge Congress to find a budget compromise. The cuts mandated to take place "would be an absolute disaster for the already-struggling California and Los Angeles County economies," the LAEDC said.  The LAEDC noted that sequestration cuts would hit particularly hard in Los Angeles County, as it is home to about 18,000 Northrop Grumman and 11,000 Boeing jobs, with some estimates placing the county's potential for lost defense-related contract revenue at $2 billion.  (Source: California Chamber of Commerce Alert)

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