Agriculture Law: 02-99

8/14/2019 Agriculture Law: 02-99

1/7

NSI DE

F UTURE N SSUES I

I

VOLUME 16, NUMBER 3, WHOLE NUMBER 184 FEBRUARY 1999

Critical questionsabout the farm crisis:causes and remedies

Pesticide drift lawcompilation available

Expanded qualificationunder recreational usestatutes

Agriculturalenvironmentalmanagement inNew York state

Solicitation of articles: All AALAmembers are invited to submitarticles to the Update. Please in-clude copies of decisions and leg-islation with the article. To avoid duplication of effort, please no-tify the Editor of your proposed article.

Continued on page 6

I

Continued on page 2

T T T T T he ag he ag he ag he ag he ag r r r r r icultur icultur icultur icultur icultur e pr e pr e pr e pr e pr ooooo visions of thevisions of thevisions of thevisions of thevisions of the1999 Omnibus1999 Omnibus1999 Omnibus1999 Omnibus1999 Omnibus Appr Appr Appr Appr Appr opr opr opr opr opr iations Billiations Billiations Billiations Billiations BillOn October 19, 1998, Congress passed H.R. 4328, Making Omnibus Consolidatedand Emergency Supplemental Appropriations for Fiscal Year 1999. PresidentClinton signed this bill into law on October 21, 1998. 1 Regulations implementing thechanges have not yet been adopted by USDA, but the Secretary of Agriculture isdirected to issue the necessary regulations as soon as practicable. 2 In this article,the bill will be referred to as the 1999 Omnibus Bill. [This is a continuation of thecoverage of the 1999 Omnibus Appropriations Bill that began in the January 1999issue of the Agricultural Law Update .]

Chapter 12 bankruptcy extensionChapter 12 bankruptcy extensionChapter 12 bankruptcy extensionChapter 12 bankruptcy extensionChapter 12 bankruptcy extensionChapter 12 of the Bankruptcy Code, which allows for bankruptcy reorganization

of family farms, was enacted in 1986 as a temporary law that was due to expire orsunset on October 1, 1998. Although Congress failed to re-authorize Chapter 12prior to October 1, the 1999 Omnibus Bill included a provision that extended Chapter12 for six months. 3 The extension is retroactive, meaning that it applies back toOctober 1, 1998. Chapter 12 will continue to be available to farmers through April

CleanCleanCleanCleanClean W W W W W ater and concentr ater and concentr ater and concentr ater and concentr ater and concentr ated animalated animalated animalated animalated animalf f f f f eeding oper eeding oper eeding oper eeding oper eeding oper ations (C ations (C ations (C ations (C ations (C AFOs)AFOs)AFOs)AFOs)AFOs)For years, the leading agricultural environmental issue was wetlands. Farmers,ranchers, and their agricultural organizations worried greatly about the scope, theapplication, and the enforcement of section 404 of the Clean Water Act and thewetlands provisions of federal farm legislation to their fields and pastures. Theyworried greatly that environmental organizations would use wetlands laws andregulations to gain land use control over their agricultural lands. 1

By contrast, Clean Water Act section 402 NPDES and delegated-state equivalentshad very little impact on farmers and ranchers. Exemptions from the definition ofpoint source for return flows from irrigation 2 and stormwater runoff from agricul-tural lands 3 buffered agriculture from the NPDES system. Only concentrated

animal feeding operations (CAFOs) met the definition of a point source. Even withrespect to CAFOs, the EPA and states defined CAFOs in such a way that mostfarmers and ranchers did not worry that they had to apply for an NPDES permit fortheir livestock operations. 4

Beginning in the early 1990s, farmers and ranchers complacency about section402 began to change. Federal appellate courts decided two cases that applied section402 to a feedlot and a dairy, respectively. 5 Moreover, a rural donnybrook betweensmall dairies and large dairies in Erath County, Texas resulted in the EPA for thefirst time ever issuing a general permit applicable to CAFOs. 6

Then along came hogs. Hogs became the focal point for environmental disputesunder the Clean Water Act, land use disputes about rural zoning and nuisances, andsocial disputes about corporate agriculture. Indeed, several state regulators havepublicly stated that if there were no social disputes about corporate agriculture, hogswould just be another farm animal. 7 Instead, the passions generated by hogs, similarto the passions in the Erath County donnybrook, have created a battle royale in stateafter state. While large-scale livestock production continues to be the major focus oflegal activity, growing concern over the chronic impacts to water quality of diffusesources of livestock pollution, including small-scale livestock production, is alsogenerating significant interest in new CWA policies and programs.

From its beginning several years ago, the Special Committee on AgriculturalManagement recognized the significance of livestock production. On behalf of the


2/72 AGRICULTURAL LAW UPDATE FEBRUARY 1999

VOL. 16, NO. 3, WHOLE NO. 184 February 1999

AALA Editor..........................Linda Grim McCormickRt. 2, Box 292A, 2816 C.R. 163

Alvin, TX 77511Phone: (281) 388-0155

FAX: (281) 388-0155E-mail: [email protected]

Contributing Editors: Drew L. Kershen, University ofOklahoma, College of Law; Otto Doering, Purdue,University; Phil Paarlberg, Purdue, University; KarenR. Krub, FLAG, Inc., St. Paul, MN.

For AALA membership information, contactWilliam P. Babione, Office of the Executive Director,Robert A. Leflar Law Center, University of Arkansas,Fayetteville, AR 72701.

Agricultural Law Update is published by theAmerican Agricultural Law Association, Publicationoffice: Maynard Printing, Inc., 219 New York Ave., DesMoines, IA 50313. All rights reserved. First classpostage paid at Des Moines, IA 50313.

This publication is designed to provide accurate andauthoritative information in regard to the subjectmatter covered. It is sold with the understanding thatthe publisher is not engaged in rendering legal,accounting, or other professional service. If legal adviceor other expert assistance is required, the services ofa competent professional should be sought.

Views expressed herein are those of the individualauthors and should not be interpreted as statements ofpolicy by the American Agricultural Law Association.

Letters and editorial contributions are welcome andshould be directed to Linda Grim McCormick, Editor,Rt. 2, Box 292A, 2816 C.R. 163, Alvin, TX 77511.

Copyright 1999 by American Agricultural LawAssociation. No part of this newsletter may bereproduced or transmitted in any form or by any means,electronic or mechanical, including photocopying,recording, or by any information storage or retrievalsystem, without permission in writing from thepublisher.

OMNIBUS/ CONTINUED FROM PAGE 1

Cont. on p.3

1, 1999. Any cases that are filed on orbefore April 1, 1999, will be allowed toproceed under the existing Chapter 12provisions. 4

Conservation programsConservation programsConservation programsConservation programsConservation programsThe 1999 Omnibus Bill and the accom-

panying Conference Report include anumber of provisions affecting USDAconservation programs. These provisionsare briefly described here.

Funding for the Environmental Qual-ity Incentives Program is limited to $174million. 5

Enrollment in the Wetlands ReserveProgram is limited to 120,000 acres. 6

Thirty-year easements are now exemptfrom payment limitations for the Wet-lands Reserve Program. 7 Acceptance ofbids for the Wetlands Reserve Programmay now be in proportion to landownerinterest expressed in program options. 8

The 1999 Omnibus Bill did not adopt apilot program for haying and grazing onConservation Reserve Program (CRP)

land.9

This program was included the

Senate version of the bill.The Conference Report expresses the

expectation that the Secretary will pro-vide a two-year extension for CRP par-ticipants to complete pruning, thinning,and stand improvement of trees on landssubject to a CRP contract. 10 The improve-ments would otherwise have to be com-pleted in 1998 or 1999.

Livestock pricing and tradeLivestock pricing and tradeLivestock pricing and tradeLivestock pricing and tradeLivestock pricing and tradeprovisionsprovisionsprovisionsprovisionsprovisionsLivestock Price Reporting PilotProgram

The 1999 Omnibus Bill requires theSecretary to conduct a 12-month pilotprogram for mandatory reporting of pro-curement prices in the beef and lambindustries. 11 This limited pilot programis a compromise coming out of strongerlivestock price reporting provisionspassed by the Senate. Only those in-volved in trading a significant share ofthe national market are covered by theprogram. The covered trades include do-

mestic or imported cattle for immediateslaughter, fresh muscle cuts of beef, do-mestic or imported sheep, and fresh orfrozen muscle cuts of lamb. Feeder cattleprice information is specifically excludedby the Conference Report language. 12

The Secretary is required to report thefindings from the pilot program no morethan six months after the program con-clusion. 13 No information collectedthrough the program may be discloseduntil the report is submitted. In additionto the pilot program for mandatory pricereporting, the Secretary is directed bythe Conference Report to take steps to

increase voluntary price and volume re-porting of beef and lamb sales. 14

The Secretary is also to conduct a 12-month pilot investigation of streamlinedelectronic system for collecting exportdata for fresh or frozen muscle cuts ofmeat food products. 15

Report on interstate distribution of state-inspected meat

The Conference Report directs the Sec-retary to make a report by March 1, 1999,to the House and Senate AppropriationsCommittees with recommendations onlifting the statutory ban on interstatedistribution of state-inspected meat. 16

Dairy pricingDairy pricingDairy pricingDairy pricingDairy pricingThe 1996 FAIR Act required the Secre-

tary to undertake consolidation and re-form of the federal milk marketing or-ders. 17 The 1999 Omnibus Bill requiresthe Secretary to submit to Congress be-tween February 1, 1999, and April 4,1999, a final rule implementing that con-solidation. 18 The 1999 Omnibus Bill re-quires that the actual changes not takeeffect until October 1, 1999.

The 1999 Omnibus Bill includes a pro-vision requiring that whenever the Sec-

retary announces a basic formula price(BFP) for milk, he must include an esti-mate of per hundredweight costs of pro-duction, including transportation andmarketing costs, in different regions ofthe United States. 19

Discrimination at USDADiscrimination at USDADiscrimination at USDADiscrimination at USDADiscrimination at USDAThe 1999 Omnibus Bill includes a

waiver of the statute of limitations formany discrimination complaints relatedto USDA credit, commodity, or disasterprograms. 20

Two-year extension for filing civilactions based on eligible complaints of discrimination

No civil action filed within two years ofthe enactment of the 1999 Omnibus Billwill be barred by the statutory limita-tions period if the action seeks reliefrelated to discrimination alleged in aneligible complaint. 21 Eligible complaintsare any complaints not related to em-ployment that were filed with USDA

before July 1, 1997, and that allege thatdiscrimination in USDA farm loan pro-grams, housing programs, commodityprograms, and/or disaster assistance pro-grams occurred between January 1, 1981,and December 31, 1996. 22 The word filedis not defined in the statute for thispurpose. We are hoping that the Depart-ment will interpret this broadly to in-clude any form of communication thatcan be documented, either in officialUSDA documents or by affidavit.

Option to seek agency review of discrimination complaint

Instead of filing a civil action, farmersmay choose to file an administrative ac-tion. The statute gives farmers up to twoyears from the enactment of the 1999Omnibus Bill to request a hearing on therecord regarding their eligible com-plaint. 23 (The wording in this section ofthe law is unclearit is possible that thissection also allows new complaints to befiled for a period of up to two years afterenactmentbut the language is too con-fusing to be sure. 24 ) Following the hear-ing on the record, the agency is requiredto provide the complainant with suchrelief as would be afforded under theapplicable statute... notwithstanding anystatute of limitations. 25 The 1999 Omni-bus Bill lists some of the substantivestatutes which may govern the disposi-tion of complaints, including the EqualCredit Opportunity Act. 26 The agency isrequired to the maximum extent practi-cable to conduct an investigation, issuea written determination, and propose aresolution within 180 days of a requestfor a hearing. 27

The 1999 Omnibus Bill makes it clearthat complainants who opt for the on-the-record hearing discussed above and


3/7FEBRUARY 1999 AGRICULTURAL LAW UPDATE 3

Cont. on p.7

are denied the requested relief will have180 days after the denial to seek judicialreview of the agency decision. 28

Compensatory damages for discrimination based on disability

The 1999 Omnibus Bill provides forcompensatory damages to be paid to farm-ers who filed a disability discriminationcomplaint after January 1994 related toUSDA farm loan programs or activities. 29The complaint must have resulted in afinding that the farmer was subjected todiscrimination and the farmer must havesought compensatory damages while thecase was pending. Unlike the other dis-crimination provision of the 1999 Omni-bus Bill, this section does not waive thestatute of limitations.

USDA required to make report onIndian agriculture

The Conference Committee directedUSDA to report to Congress by February1, 1999, on the progress made within

Indian agriculture, Federal inter-agencycoordination, and the level of Indian us-age of Federal programs and initiativesoutlined to benefit Indian agriculture. 30

Crop insurance provisionsCrop insurance provisionsCrop insurance provisionsCrop insurance provisionsCrop insurance provisionsThe 1999 Omnibus Bill changes the

law for setting fees for catastrophic (CAT)crop insurance protection. 31 Beginningwith the 1999 reinsurance year, produc-ers cannot be required to pay more than$50 per crop as an administrative fee forCAT coverage. Earlier in 1998 Congresshad passed a law allowing CAT fees to bethe greater of $50 per crop or 10 percentof the coverage received. 32 This is nolonger effective for the 1999 reinsuranceyears and thereafter.

The Conference Committee specificallynoted that risk management tools arelimited for livestock producers. 33 USDAsRisk Management Agency is directed bythe Committee to report to Congress onfeasibility of a crop insurance programfor livestock producers forages and na-tive pastures.

Miscellaneous ag provisionsMiscellaneous ag provisionsMiscellaneous ag provisionsMiscellaneous ag provisionsMiscellaneous ag provisionsThe 1999 Omnibus Bill did not adopt

provisions included in the Senate billwhich would have provided statutoryrelief for producers who inadvertentlyplanted ineligible bean crops in violationof Production Flexibility Contract (PFC)eligibility requirements. (Many produc-ers had planted garbanzo beans and simi-lar bean crops not realizing that thosecrops are classified as vegetables and aretherefore ineligible for PFC acreage cal-culations). Rather than provide statu-tory relief, the Conference Report urgesthe Secretary to exercise reasonabletreatment of producers in order to avoidharmful consequences. 34

The 1999 Omnibus Bill did not adopt

provisions included in the Senate billwhich would have required country-of-origin labeling for fresh produce and meat.Instead, the Conference Report directsthe General Accounting Office (GAO) toconduct a comprehensive study on theeffects of mandatory country-of-originlabeling on fresh produce importers, pro-ducers, consumers, and retailers. 35 TheConference Report similarly directs theSecretary to conduct a comprehensivestudy on the effects of mandatory coun-try-of-origin labeling on meat importers,exporters , livestock producers, consum-ers, packers, processors, distributors, andgrocers. 36 The reports on the studies mustbe submitted to Congress within sixmonths after enactment of the 1999Omnibus Bill.

The 1999 Omnibus Bill did not adoptprovisions included in the Senate billwhich would have established a new Of-fice of the Small Farms Advocate withinUSDA. Instead, the Secretary is directedto better manage existing programs to

encourage policy considerations withinexisting programs . . . that promote theneeds of small farm operators and thatmay help reverse the unwarranted de-cline in small farm operations. 37

The 1999 Omnibus Bill did not adopt achange in the definition of family farmwhich was included in the Senate bill. 38

The 1999 Omnibus Bill eliminatedfunding for both the Fund for RuralAmerica and the Conservation FarmOption program established by the 1996FAIR Act. 39

Tax provisionsTax provisionsTax provisionsTax provisionsTax provisionsThe 1999 Omnibus Bill includes tax

provisions which are known together asthe Tax and Trade Relief Extension Actof 1998. You should be aware that anumber of changes made by this Act willaffect tax liabilities for farmers and ranch-ers. These changes are discussed onlybriefly here. Farmers and ranchers shouldconsult tax professionals for assistancein understanding how the changes willaffect their individual tax obligations.

Self-employed may deduct 100 percentof health insurance costs starting in2003

The Tax and Trade Relief ExtensionAct of 1998 increases the percentage ofhealth insurance expenses that may bededucted by self-employed individuals.The allowable deduction is increased to60 percent in 1999 through 2001, 70percent in 2002, and 100 percent in 2003and later years. 40

Three-year farm income averaging made permanent

Federal tax law allows a farmer tochoose to compute his or her current yeartax liability by averaging, over the previ-

ous three-years, all or a portion of thetaxable income attributable to the farmbusiness. 41 Prior to the enactment of the1999 Omnibus Bill, this provision wasonly authorized for years 1998-2000. 42

The Tax and Trade Relief Extension Actof 1998 permanently extends authorityfor this farm income averaging provi-sion. 43

Production flexibility contract paymentstaxed in year received

The 1996 FAIR Act allows producers tochoose whether to receive half of theirannual Production Flexibility Contract(PFC) payment on December 15 or Janu-ary 15 of the fiscal year that the paymentis due. 44 The option to receive an advancepayment in December can have tax re-sults for producers, even if they choose toreceive the advance payment in January.The Emergency Farm Financial ReliefAct of 1998 allows producers to receivetheir entire 1999 PFC payment at anytime after October 1, 1998. 45 This statu-

tory option, could have had tax implica-tions for producers even if they did notchoose to take early payment on thecontract.

The Tax and Trade Relief ExtensionAct of 1998 provides that a producerslegal option to take early payments mustbe disregarded in determining the tax-able year for PFC payments. 46 PFC pay-ments are to be included in gross incomefor the taxable year in which they areactually received.

Five-year carryback available for farmnet operating losses

Federal tax law generally allows busi-nesses to carry a net operating loss backtwo years and forward 20 years to offsettaxable income in those years. Farmersare able to carry the net operating lossback three years if the loss is due to aPresidentially-declared disaster.

The Tax and Trade Relief ExtensionAct of 1998 provides a special five-yearcarryback period for farm net operatinglosses, regardless of whether the losswas incurred in a Presidentially declareddisaster area. 47

1 The legislation is known as Public Law 105-277.Statute-at-Large designations have not yet been made.The text of the bill can be found in the CongressionalRecord for October 19, 1998.

2 1999 Omnibus Bill, Div. A, Agriculture, Title XI,1133.

3 1999 Omnibus Bill, Div. C, Other Matters, Title I,149.

4 The bill language refers to the period beginning onOctober 1, 1998, and ending on April 1, 1999. 1999Omnibus Bill, Div. C, Other Matters, Title I, 149. We areinterpreting this language to keep Chapter 12 alive throughApril 1, 1999, rather than ending on March 31, 1999, butthere is some ambiguity. Farmers seeking to file as theend of March 1999 approaches should confirm the enddate for the Chapter 12 extension.



By Otto Doering and Phil Paarlberg

Just over a year ago everything seemedsettled. The new Freedom to Farm legis-lation ended farm programs as we knewthem, eliminating acreage restriction oncrops that could be planted, eliminatingsupply control with land set asides, andproviding transition payments to farm-ers that were fixed amounts in contrastto the counter cyclical target paymentsthat increased when prices were low.Freedom to Farm passed because priceswere high, exports were supposed to in-crease over the next decades, andagribusiness consultants claimed thatincreased land in production (no set-asides and a smaller CRP) would notreduce prices, just create more jobs. Timeswere good. For 1996 wheat land owners

and producers got almost $2 billion inpayments under Freedom to Farm com-pared to less than 40 million they wouldhave received under the old program.Corn land owners and producers receiveda little over $5 billion in payments in1996 and 1997 instead of just a little over$1 billion under the old program.

What a change today. The Asian finan-cial crisis, declining exports, big crops inthe bins, and a good 98 harvest havelowered prices. Gloom replaces optimism.Exports of agricultural products by theUnited States for fiscal 1998/99 are fore-cast at 52 billion dollars, 4 billion dollarslower than in 1997/98. Freedom to Farmpayments looked good with high prices,but with low prices producers feel thedecline in government support under thenew program.

Did Asia do it?Did Asia do it?Did Asia do it?Did Asia do it?Did Asia do it?Many believe the economic problems

in Asia caused most of our commodityprice problem. During the 1990s, Asiaemerged as a major market for U.S. agri-cultural products. However, many of thefactors causing the current financial cri-sis, like overextended credit, had ini-tially boosted economic growth and fu-eled agricultural imports. In the summerof 1997, this house of cards collapsed ( seeCoyle, McKibbin, Wang, and Lopez,Choices, 4th Qtr. 1998).

While serious for most U.S. exportcommodities, the price impacts to thispoint have not been as large as the mediaportrays. The Asian problems have notbeen the major cause of the decline in

U.S. agricultural prices. Using the elas-ticities the Eonomic Research Serviceused to analyze effects of the UruguayRound trade agreement, the devalua-tions and falling aggregate demand inAsia resulted in a short-run 4.1 percentdrop in the wheat price, a 3.7 percentdrop in the coarse grains price, and a 10.2percent fall in the soybean price. Weestimate that the devaluations and fall-ing national income reduced the price ofbeef 1.5 percent, pork by 9 percent, andpoultry by 5 percent. Rice, in contrast,shows a much larger price effect, falling29.9 percent. Except for rice, these Asia-specific impacts are much smaller thanthe overall price declines observed, andrice has other mitigating factors that

have reduced even its large overall pricedecline. A recent analysis using a globalmacroeconomic model with an agricul-tural sector supports these small priceimpacts (Stoeckel, Fisher, McKibbin, andBorrell).

Why might price declines be smallerthan expected? First, the Asian countriesmost severely affected were neither ma-jor agricultural importers nor exporters.Of the Asian Tigers (Korea, Malaysia,Indonesia, Philippines, Thailand, HongKong, and Taiwan), only Korea was alarge importer of U.S. agricultural prod-ucts, with a market share of 5 percent,and Korea received over 1 billion dollarsin General Sales Manager (GSM) creditguarantees. The remaining 6 nations com-bined acounted for 13 percent of U.S.agricultural exports. Of these, the mostseverely affected, Indonesia, Thailand,and Malaysia, buy only small amounts ofagricultural goods. Rice is again a differ-ent story, with Indonesia and Thailandbeing important importers or exporters.Data for Japan and China through May1998 do not show a large fall in trade.Japan shows a small, but persistent,drop in purchases from the United Statesduring the past two years. Except forDecember 1997 and May 1998, Chinesepurchases are at or above year earlierlevels. The data for the Asian Tigersshow monthly purchases of U.S. agricul-tural commodities fell sharply, startingin the fall of 1997, but as small customersthe impact is modest.

Adverse impacts of the Asian crisismay worsen. For the 1998/99 year, theproblems experienced by the Asian Ti-gers could spread. Japan alone accountsfor roughly 18 percent of U.S. agricul-tural exportsour largest single exportmarket. Japans current recession fol-lows years of low growth. Nearly half of

its exports go to the weakened marketsin Asia. The Japanese banking systemholds extensive bad debts, and past at-tempts to stimulate domestic demandfailed. In China, which accounts for 3percent of U.S. agricultural exports,slowed economic growth and unmet re-forms may force a currency devaluationto boost exports. Competitive devalua-tions by other Asian nations may follow.Latin America and Brazil in particular,which are large buyers of U.S. agricul-tural goods and rival exporters of some,are experiencing currency and financialproblems related to the Asian Crisis.

If the Asian problems have not beenthe major cause, how do we account forthe sharp fall in commodity prices?

Weather and the production response tothe high prices of 1996 both weigh in.Despite the strong El Nino in 1997/98,expectations of short global food suppliesfailed to materialize. Production of allgrains worldwide rose from 1,872 milliontons in 196/97 to 1,889 million tons in1997/98. With excellent crops in SouthAmerica and the United States, worldoilseed production rose from 261 milliontons in 1996/97 to 287 million tons in1997/98. Production forecasts for 1998/99 continue to be positive. Current fore-casts for the United States show recordor near record production. USDA projectsworld grain production to fall only slightlyin 1998/99 to 1,879 million tons and esti-mates world oilseed production to re-main at a high level as the U.S. soybeancrop offsets a return to normal crops inSouth America.

It is the combination of these negativeforces that has so sharply reduced agri-cultural prices and called into questionthe decision to adopt the Freedom toFarm legislation. Since the middle 1990s,the world has added around 150 milliontons to the average level of annual worldgrain output. The concern now is that theeconomic problems in Asia will spread toother major markets for U.S. agricul-tural goodsin Japan and in LatinAmericawhile global food supplies re-main at record levels. If this happens,recovery will be a 3-5 year process.

Is such an outcome likely? There islittle to support the idea that recovery inAsian economies will boost demand be-fore early in the next century (only a yearor two away). What about adjusting out-put? Arguments for and against a quicksupply response can be mustered. Eventhe authors disagree.

Paarlberg sees a drop in global supplyoccurring within the next few years.

Cr Cr Cr Cr Cr itical questions about the f itical questions about the f itical questions about the f itical questions about the f itical questions about the f arm cr arm cr arm cr arm cr arm cr isis:isis:isis:isis:isis: causes and r causes and r causes and r causes and r causes and r emedies*emedies*emedies*emedies*emedies*

Otto Doering, Professor, Purdue Univer-sity; Phil Paarlberg, Associate Professor,Purdue University.



Continued on page 6

With Freedom to Farm, U.S. farmerswill react to market signals and willabandon marginal lands. The Euro-pean Union has the ability and will useset-asides to cut area. Other exporters,like Argentina and Australia, are moreopen to world prices than in the 1980sand will adjust. Also weather can playa role. Already Russia appears to havea crop disaster, and the United Statesis extending concessional sales to thatnation. We could move substantial foodaid to the former Soviet Union thiswinter (but Congress appears unwill-ing). Looking at our past experience,La Nina could cut U.S. crop yeilds by10 percent or more. A 10 percent de-crease in U.S. coarse grains yieldstranslates into an output loss of around25 million tons, well above the 10 mil-lion tons of coarse grains exports somehave estimated lost due to the eco-nomic problems in Asia.

Doering has a different review. Heargues that farmers have few alterna-tives and so production is very priceinelastic.

It will take several years of low pricesto cut production. Actual policy re-forms resulting from the UruguayRound were limited, and most coun-tries continue to protect farmers whilesevering the link between domesticprices and world prices. Those nationswill not adjust production. In nationswhere reforms did occur, governmentswill intervene to support farm prices orfarm incomes. Relying on weather tocut output is a risky stragety given therecent experience with El Nino , whichwas also supposed to tighten worldfood supplies. At least one La Ninaevent was associated with a 20 percentyield increase in the United States.

Is Freedom to Farm a failure?Is Freedom to Farm a failure?Is Freedom to Farm a failure?Is Freedom to Farm a failure?Is Freedom to Farm a failure?Freedom to Farm has done what it was

supposed to do, and it has done it verywell. It removed planting and acreagerestrictions, gave farmers production sig-nals from commodity markets rather thanfrom price supports, and stabilized gov-ernment program expenditures at fixedamounts that can be counted on for bud-getary purposes. The problem is that the1996 optimism about demand for com-modities has not panned out, prices havegone down, and with low prices, Freedomto Farm does not pump as much extracash to landowners and producers as theold programs would have.

What are the issues andWhat are the issues andWhat are the issues andWhat are the issues andWhat are the issues andalternatives now?alternatives now?alternatives now?alternatives now?alternatives now?

On September 2, 1998, Senator TomHarkin, in the political rhetoric of anoutspoken critic of the FAIR Act, said

There are two things we can do to savethe 96 Farm Bill. He wanted to uncaploan rates and for this year only insti-tute a farmer-held reserve. Farmers hadfreedom to farm, according to Harkin,but they needed freedom to marketinthis context a farmer-held reserve to holdgrain off the market until prices arehigher. He concluded that we are facinga farm crisis in America unlike anythingwe have seen before in a long time.

Congress was already laying out alter-natives to deal with the farm financialproblem when Harkin spoke. With theOctober 1998 omnibus spending bill,Congress made available large disasterpayments ($2.58 billion) to producerswho suffered extreme weather and othercrop and livestock losses. In addition,Congress made Fair Act payments thatwould normally be made in 1999 avail-able to farmers in 1998. This belies theclaim of keeping expenditures predict-

able. Will Congress let landowners andproducers go through 1999 without addi-tional payment? Not likely.

Under the FAIR Act, the Loan Defi-ciency Payment (LDP) still does providea safety net under prices. If markets fallbelow a very low fixed loan rate, thegovernment will pay the farmer the dif-ference between the loan rate and themarket price. Unlike the old program,the government does not take title tograin and accumulate stocks. The FAIRAct set the loan very low to preventoutlays except in extremely low pricesituations like we had late this summer.However, it does provide a low level ofcounter cyclical support and can triggersubstantial government payments.

In the pre-election budget compromise,Congress also voted an additional one-time payment to FAIR Act program farm-ers of over $3 billion. If farmers took justthe first half of their 1999 transitionpayments the end of 1998 and locked inLDP payments at the early fall commod-ity prices, the Federal commodity andconservation expenditures might look likethis?

1998 Freedom to FarmTransition Payments @$5.7 billion

First half 1999 transitionpayments payable inNov.-Dec. 98 @$2.7 billionCRP and otherconservation payments @$2.0 billionSpecial disaster andmarket loss assistance @$5.9 billionEstimated potentialLDP payments @$2.5 billion

___________$18.8 billion

This is a big increase over the $5.7billion FAIR Act transition payments andthe $2.0 billion conservation paymentsthat would have been paid in a normalyear. The political issue is that manywant even more government paymentsin low price yearsthe extreme examplebeing the $26 billion expenditure in 1986during the Farm Financial crisis.

The issues joinedThe issues joinedThe issues joinedThe issues joinedThe issues joinedThe cusp of the debate that resulted in

the Clinton veto of the Ag AppropriationsBill on October 7, 1998, revolved around:

1. The distribution as well as theamount of the payments

2. The extent to which agriculturalprograms return to being counter cyclicalentitlements subject to large outlays dur-ing bad times.

Clinton, with Daschle looking over hisshoulder, vetoed the Ag. Appropriations

Bill, H.R. 4101, because it fails to ad-dress adequately the crisis now grippingour Nations farm community. The mes-sage also stressed the inadequate safetynet of Freedom to Farm and supportedDaschle and Harkins proposal to lift thecap on the marketing loan. Clinton said,I firmly believe and have stated oftenthat the Federal Government must playan important role in strengthening thefarm safety net.

The Daschle and Harkin debate alsoquestioned the beneficiaries of the tran-sition payment. Freedom to Farm putsthe landowner in the best position to

capture the transition payments and capi-talize them into the value of the land(Schertz & Johnston). The equity con-cern, while it has been raised, will notlikely be addressed directly. Congresshas been unwilling to have agriculturalprograms means tested like other in-come transfer programs, or to really tacklethe large farm versus small farm issue.Congress traditional solution pumpssome money to most parties and veryliberal amounts to a few.

Lifting the cap on the marketing loanis exactly what the Republican leader-ship (especially Dick Armey, who dis-likes farm programs more than almostanything else) wanted to avoid at allcosts. That is one reason the GOP leader-ship rushed to move the 1999 Freedom toFarm payments ahead to 1998 and ap-proved the disaster and market loss as-sistance payment to farmersto keepthe structure of Freedom to Farm. Lift-ing the cap would destroy the disciplineof fixed payments and take us back to thecounter cyclical payments of old withoutsupply control.



CRITICAL QUESTIONS /Cont. from page 5 CAFOs /Cont. from page 1

The decision for nowdoes itThe decision for nowdoes itThe decision for nowdoes itThe decision for nowdoes itThe decision for nowdoes itsettle the issues?settle the issues?settle the issues?settle the issues?settle the issues?

In the pre-election rush, Congress hasspoken. The market-based character ofthe FAIR Act itself has been preserved,but Congress has gone beyond the pro-gram and increased income transfers toagriculture. Congress also proved againit is unable to enforce discipline on cropinsuranceallowing those who did nottake the required crop insurance underFreedom to Farm to receive the disasterpayments if they promise to take subsi-dized crop insurance for the coming twoyears. Where does this leave us?

1. The income transfers beyond theFreedom to Farm program will dampenthe market-based supply response thatmight otherwise have occurred in theUnited States (proving Doering right forthe wrong reasons).

2. However, Freedom to Farm pay-ments and added government transfers

fall below the payments that probablywould have been made under the oldprogram.

3. Congress demonstrated again that itcan hardly resist sending aid to disas-tersmaking subsidized crop insurancethat much more difficult to sell.

4. This year proves that the FAIR Actwill be challenged when prices are low,and foretells a real debate in 2002 whenthe FAIR Act expiresunless, of course,prices are very high in 2001 and 2002. Ifit so chooses, the Commission on 21 st

Century Production Agriculture may havean opportunity to suggest another course.Income insurance anyone (Harringtonand Doering)?

ReferencesReferencesReferencesReferencesReferencesCoyle, W., W. McKibbin, Wang, and M.

Lopez, Choices, 4th Qtr. 1998.Harrington, David and Otto Doering,

Agricultural Policy Reform: A Proposal.Choices, 1st Qtr. 1993.

Schertz, Lyle and Warren Johnson,Land Owners: They Get the 1996 FarmAct Benefits . Choices, 1st Qtr. 1998.

Stoeckel, A., S. Fisher, W. McKibbin,and B. Borrell, Asia's Meltdown and Agriculture , Center for InternationalEconomics, Canberra, 1998.

*Reprinted with permission of The Ameri-can Agricultural Economics Association,Iowa State University, 415 S. Duff St.,Suite 3, Ames, IA 50010. Critical Ques-tions about the Farm Crisis, Otto Doering& Phil Paarlberg, Choices, 4 th Qtr. 1998.Reproduced with permission of the pub-lisher via Copyright Clearance Center,Inc.

Special Committee, this author preparedthis summary of recent significant legalevents relating to CAFOs.

Federal actionsFederal actionsFederal actionsFederal actionsFederal actionsIn October 1997, Vice-President Gore

announced the Clean Water Initiative toimprove and strengthen water pollutioncontrol under the Clean Water Act(CWA). 8 In response to the Clean WaterInitiative, USDA and EPA have proposeda Unified National Strategy for AnimalFeeding Operations. 9 The major thrustsof the Strategy are voluntary planningthrough Comprehensive Nutrient Man-agement Plans (CNMPs), increased regu-latory permitting (with the intention ofincreasing from the approximately 2,000CAFOs with CWA permits to an addi-tional 15,000 to 20,000 CAFOs with CWApermits by the year 2005), and increasedfinancial and technical assistance to thelivestock sector to meet the goals of the

Strategy.10

In addition, EPA has an-nounced that a long-term action on itsunified agenda is to revise the existingeffluent guidelines for beef, dairy, poul-try, and swine operations. 11

In line with the Clean Water Initiative,EPA and the National Pork ProducersCouncil (NPPC) agreed to a voluntaryCompliance Audit Program (CAP) forswine producers. The program has twoprongs. Prong one is an on-farm environ-mental assessment. The NPPC has de-veloped and copyrighted a comprehen-sive assessment framework for pork pro-ducers through which trained, certifiedpersonnel will conduct environmental as-sessments. 12 Prong two is the Final Re-port by the pork producer to the EPA (orparticipating state agency) whereby theproducer reveals the results of the as-sessment and commits to correcting anyviolations or deficiencies that the assess-ment revealed. In return for the self-revelations, the EPA and participatingstates agree to lessen the sanctions thatcould have been imposed upon the pro-ducer under the CWA. 13

During 1998, EPA also proposed toreissue the EPA Region 6 NPDES gen-eral permit for CAFOs. The commentperiod on the proposed reissuance ex-pired October 12, 1998 but as of earlyDecember the EPA had not published afinal decision. 14 Furthermore, EPA del-egated to Texas, through the Texas Natu-ral Resources Conservation Commission(TNRCC), NPDES authority, includingNPDES authority over CAFOs. 15

Due to litigation pressure, 16 the EPAhas more heavily emphasized water qual-ity standards, particularly on a water-shed basis, under section 303(d) of theClean Water Act. To achieve these waterquality standards, the EPA is workingclosely with the states to develop lists of

impaired waters required under section303 of the Act, and to complete the totalmaximum daily loads (TMDLs) of pollut-ants that stream segments can handlewhile, at the same time, meeting as-signed water quality standards. 17 TheEPA has also begun the process for devel-oping numeric water quality standardsfor nutrients that are often associatedwith livestock production. 18 The TMDLprogram must take into account CAFOsand nonpoint sources in the agriculturalsector if EPAs goals are to be achieved. 19

State activitiesState activitiesState activitiesState activitiesState activitiesOklahoma amended its CAFOs law in

1998 to focus its odor and clean waterefforts specifically on poultry and swine.In one bill, Oklahoma enacted three lawsregulating poultry: the Registered Poul-try Feeding Operations Act (a permitsystem); the Poultry Waste Transfer Act(transfer of poultry waste out of desig-nated watersheds); and the Poultry WasteApplicators Certification Act (controls

on land application of poultry litter).20

Asfor swine, Oklahoma toughened its statu-tory requirements for permits and opera-tion of licensed managed feeding opera-tions (LMFOs), which by definition arelarge swine operations. With the enact-ment of these toughened requirements,the Oklahoma legislature lifted a mora-torium that it had imposed on the issu-ance of permits for new swine opera-tions. 21

Colorado voters on November 3, 1998adopted a ballot initiative, Amendment14, that created a statutory regulatoryscheme for large swine operations. 22

Amendment 14 created a regulatoryscheme for swine operations similar tothat adopted in Oklahoma. On Novem-ber 3, 1998, South Dakota voters adopteda state constitutional amendment,Amendment E, that prohibits corpora-tions, limited partnerships, businesstrusts, or limited liability companies fromacquiring any legal, beneficial, or otherinterest in real estate and from engagingin crop or livestock production. Amend-ment E creates an exemption for familyfarm corporations or family farm syndi-cates. 23

The Mississippi legislature imposed amoratorium beginning February 28, 1998on the issuance of permits for swineoperations (new or expanded) until Janu-ary 1, 2000. 24 In addition, the legislatureexpanded the rural zoning authority ofcounty Boards of Supervisors relating toswine CAFOs, if counties enacted theirzoning ordinance prior to June 1, 1998. 25

At least 35 of Mississippis 82 countiestook advantage of this new zoning au-thority. 26 However, a federal court hasnow enjoined the enforcement of theseordinances in three counties. 27 Finallyfor Mississippi, the Department of Envi-ronmental Quality has proposed that new



OMNIBUS /Cont. from page 6

5 1999 Omnibus Bill, Div. A, Agriculture, Title VII,726.


7 1999 Omnibus Bill, Div. A, Agriculture, Title VII, 751(amending 16 U.S.C. 3837d(c)(1)).

8 1999 Omnibus Bill, Div. A, Agriculture, Title VII, 752(adding 16 U.S.C. 3837(b)(2)(C)).

9

Conference Report at H11300.10 Conference Report at H11302.11 1999 Omnibus Bill, Div. A, Agriculture, Title XI,

1127(a).12 Conference Report at H11303.13 1999 Omnibus Bill, Div. A, Agriculture, Title XI,

1127(a).14 Conference Report at H11301.15 1999 Omnibus Bill, Div. A, Agriculture, Title XI,

1127(b).16 Conference Report at H11295, H11301.17 1996 FAIR Act, 143.18 1999 Omnibus Bill, Div. A, Agriculture, Title VII,

738.19 1999 Omnibus Bill, Div. A, Agriculture, Title VII,

739.20

1999 Omnibus Bill, Div. A, Agriculture, Title VII,741.21 1999 Omnibus Bill, Div. A, Agriculture, Title VII,

741(a).

22 1999 Omnibus Bill, Div. A, Agriculture, Title VII,741(e).

23 1999 Omnibus Bill, Div. A, Agriculture, Title VII,741(b).

24 The language provides: The complainant may, inlieu of filing a civil action, seek a determination on themerits of the eligible complaint by the Department ofAgriculture if such complaint was filed not later than 2years after the date of enactment of this Act. 1999Omnibus Bill, Div. A, Agriculture, Title VII, 741(b). The

confusion is generated by the fact that eligible complaintis defined as: a nonemployment related complaint thatwas filed with the Department of Agriculture before July1, 1997, and alleges discrimination at any time during theperiod beginning on January 1, 1981 and ending Decem-ber 31, 1996... 1999 Omnibus Bill, Div. A, Agriculture,Title VII, 741(e).

25 1999 Omnibus Bill, Div. A, Agriculture, TitleVII, 741(b)(1), (2).

26 1999 Omnibus Bill, Div. A, Agriculture, Title VII,741(d). The Equal Credit Opportunity Act is found at 15U.S.C. 1691 et seq.

27 1999 Omnibus Bill, Div. A, Agriculture, Title VII,741(b)(3).

28 1999 Omnibus Bill, Div. A, Agriculture, Title VII,741(c).


30 Conference Report at H11291.31 1999 Omnibus Bill, Div. A, Agriculture, Title VII,

748.32 Act of June 23, 1998, Pub. L. No. 105-185, Title V,

Subtitle C, 532, 112 Stat. 581.33 Conference Report at H11295-96.34 Conference Report at H11301.35 Conference Report at H11301.36 Conference Report at H11302.37 Conference Report at H11301.38 Conference Report at H11301.39 1999 Omnibus Bill, Div. A, Agriculture, Title VII,

740.40 1999 Omnibus Bill, Div. J, Tax and Trade ReliefExtension Act of 1998, Title II, 2002.

41 26 U.S.C. 1301.42 Taxpayer Relief Act of 1997, Pub. L. No. 105-34,

933(c).43 1999 Omnibus Bill, Div. J, Tax and Trade Relief

Extension Act of 1998, Title II, 2011.44 1996 FAIR Act, 112(d)(2) (codified at 7 U.S.C.

7212(d)(2)).45 The Emergency Farm Financial Relief Act of 1998,

Pub. L. No. 105-228 , 2 (codified at 7 U.S.C.7212(d)(3)).

46 1999 Omnibus Bill, Div. J, Tax and Trade ReliefExtension Act of 1998, Title II, 2012.

47 1999 Omnibus Bill, Div. J, Tax and Trade ReliefExtension Act of 1998, Title II, 2013.

Karen R. Krub, Farmers LegalAction Group, Inc., St. Paul, MN

PPPPP esticide dr esticide dr esticide dr esticide dr esticide dr ift laift laift laift laift la w w w w w compilationcompilationcompilationcompilationcompilationA compilation of state statutes and regu-lations related to pesticide drift has beenprepared by Theodore A. Feitshans, J.D.,Department of Agricultural and ResourceEconomics, North Carolina State Uni-versity. The compilation includes stat-utes and regulations covering drift di-rectly as well as others, such as financialresponsibility, that implicate drift onlyindirectly. The compilation is containedin two volumes. Order and billing infor-mation is available from Copytron, tele-phone (919) 233-6862; fax (919) 233-6871.

Theodore A. (Ted) Feitshans, NorthCarolina State Univ., Raleigh, NC.

CAFOs be required to obtain either an airpollution control permit or a multimedia(water and air) permit in order tostrengthen odor control.

The courts of Iowa and Minnesota de-cided cases disputing the use of local landuse laws in cases involving swine opera-tions. The Iowa Supreme Court ruledthat local political subdivisions had lim-ited authority to regulate swine opera-tions through local ordinances. 28 By con-trast, the Minnesota Court of Appealsaffirmed a local ordinance regulating theodor of a swine operation. 29

The Iowa Supreme Court ruled on Sep-tember 23, 1998 that the Iowa statutoryimmunity from nuisance suits for agri-cultural operations resulted in a takingof neighbors private property rights to acommon law nuisance remedy. The courtdeclared the immunity unconstitutional. 30

Special Committee on AgriculturalSpecial Committee on AgriculturalSpecial Committee on AgriculturalSpecial Committee on AgriculturalSpecial Committee on AgriculturalManagement ProgramsManagement ProgramsManagement ProgramsManagement ProgramsManagement Programs

In light of the importance of theseissues relating to CAFOs, SONREEL hasrequested the Special Committee topresent three educational programs onCAFOs in 1999.

At the Keystone Conference in Key-stone, Colorado in March 1999, the Spe-cial Committee has helped design andorganized a general sessionTheAdministrations Clean Water Act Initia-tive: Political Packaging or a ParadigmShift? The session will focus on water-shed planning under section 303(d) of theClean Water Act for a hypothetical BlissRiver. As part of the watershed planning,

participants will address issues relatingto CAFOs and agriculture generally.

In May 1999, in Minneapolis at theconference facilities of the Whitney &Dorsey law firm, the Special Committeewill host its second Roundtable on Envi-ronmental Issues in Animal Feedlots.This Roundtable focuses solely on federaland state developments concerningCAFOs.

The Special Committee has proposed

a break-out session on CAFOs, entitledAnimal Feeding Operations and theEnvironment, to take place at the Fall1999 SONREEL meeting. If accepted,the break-out session will include infor-mation from the all-day May Roundtablein order to acquaint the non-agriculturallawyer with CAFO issues.

Drew L. Kershen, Earl Sneed Centennial Professor of Law, University

of Oklahoma, College of Law.

1For general discussion of these issues, read e.g. ,Comment, Saving the Wetlands from Agriculture: AnExamination of Section 404 of the Clean Water Act and the Conservation Provisions of the 1985 and 1990 FarmBills , 7 J. Land Use & Envtl. L. 299(1992); Comment,Protecting Wetlands Through the Clean Water Act and the 1985 and 1990 Farm Bills: A Winning Trio , 28 U. Tol.L. Rev. 867 (1997).

233 U.S.C. 1311(l)(1), 1362(14) (1998).3Id. 1362(14).4Id. See also , 40 C.F.R. 122.23 and Appendix B to

Part 122 (1998). Appendix B gives the detailed definitionof CAFOs but also states, Provided, however, that noanimal feeding operation is a concentrated animal feed-ing operation as defined above if such animal feedingoperation discharges only in the event of a 25 year, 24-hour storm event.

5Carr v. Alta Verde Industries, Inc. , 931 F.2d 1055 (5 th

Cir. 1991); Concerned Area Residents for the Environ-ment v. Southview Farm , 34 F.2d 114 (2 nd Cir. 1994) cert.denied 514 U.S. 1082 (1995), overruling 834 f. Supp.1422 (W.D. N.Y. 1993).

6EPA, NPDES General Permit for Discharges FromConcentrated Animal Feeding Operations , 58 F.R. 7610(Feb. 8, 1993; eff. March 10, 1993). For informationabout the Erath County donnybrook, read e.g. HelenThompson, Stink Big , 21 Tex. Mon. 66 (Aug. 1993).

7David Shorr, Director, Mo. Dept. Natural Resources

as reported in Law and Policy for Feedlots: A Report of the ABA-Special Committee on Agricultural Manage-ment Roundtable on Environmental Issues in AnimalFeedlots , < http://www.cast-science.org/9711aba2.htm>; Paul Strandberg, Off. Atty Gen. Minn., State AnimalFeeding Regulations , 19 th Ann. Mtg. & Educ. Symp.,American Agricultural Law Assoc. (Oct. 1998).

862 Fed. Reg. 60448 (Nov. 7, 1997).963 Fed. Reg. 50192 (Sept. 21, 1998).

CAFOs /Cont. from page 6

Documents

Agriculture Law: 02-99