| November 24, 2008 Senator Tom Harkin's Agriculture Newsletter Dear Friend, The results of this year's elections begin a new era in Washington and a new hope for agriculture and rural America. President-elect Obama has already pledged to increase production of biofuels, strengthen the farm and rural economy, and boost conservation efforts, to name just a few initiatives. With the economy on the minds of all Iowans, and all Americans for that matter, these investments are much-needed. For my part, I'm taking advantage of Congress's return by introducing a measure that will bring financial derivatives trading onto regulated exchanges to add more transparency and restore integrity to our financial markets. I've also recently written to Farmer Mac asking for periodic updates to monitor whether the agricultural credit system is stable for borrowers. Please keep reading to learn more. Yours, Tom In This Edition: - Harkin Legislation Calls for Regulation of Financial Derivatives Trading
- During Economic Downturn, Harkin Asks Farmer Mac for Periodic Financial Updates
- USDA Move Maintains Payments for Small Farms as Harkin-Grassley Requested
- Harkin Pleased with Release of Emergency Conservation Program Funds
- "We Must Give a Nod to the Iowa Windpower Industry," says Harkin
- Harkin Calls for Increased Diligence in Food Safety and Security
- Harkin Applauds USDA Change in Start Date for the National Organic Certification Cost Assistance Program
Harkin Legislation Calls for Regulation of Financial Derivatives Trading The swaps industry, a form of trading in futures contracts, has largely gone unregulated, operating through privately-negotiated deals without the transparency and accountability that come from exchange trading. The recent economic downturn brought to light the impact on the marketplace of one category of financial derivatives called credit default swaps. According to the International Swaps and Derivatives Association, the total outstanding notional, or face, value of all forms of swaps exploded to a high of some $531 trillion for the middle of this year – eight-and-a half times the world GDP of $62 trillion. In October, Senator Harkin in his capacity as Chairman of the Senate Committee on Agriculture, Nutrition and Forestry called a hearing to explore the role of these financial derivatives in the current financial crisis, and after listening to testimony, announced his intention to introduce a bill to regulate these financial derivatives contracts. Senator Harkin expressed his particular concern about credit default swaps, one example of the financial derivatives his proposed legislation addresses. "Credit default swap contracts function somewhat akin to insurance, but are purposely not written like insurance and thus avoid the safeguards of insurance policies," said Harkin. "Swaps contracts also function much like futures contracts, but they are not regulated as futures contracts because of a statutory exclusion from the authority of the Commodity Futures Trading Commission. So they need not be traded on open, transparent exchanges, and as a result, it is nearly impossible to know whether swaps are being traded at fair value or whether institutions trading them are becoming overly leveraged or dangerously overextended." Earlier this week, Harkin introduced the Derivatives Trading Integrity Act, a bill to bring more transparency, accountability and integrity into the marketplace and trading of financial derivatives and other contracts that function as futures. Specifically the legislation: - Eliminates the distinction in futures contracts among "excluded" and "exempt" commodities and regulated, exchange-traded commodities. Futures contracts for all commodities – including swaps and all financial derivatives that function as futures -- would be treated the same.
- Eliminates the statutory exclusion of swap transactions from regulation and ends the Commodity Futures Trading Commission's authority to exempt such transactions from the requirement that a contract for the purchase or sale of a commodity for future delivery can only trade on a regulated board of trade. In effect, this means that all futures contracts, including financial derivatives that are futures, must trade on a designated contract market or a derivatives transaction execution facility.
During Economic Downturn, Harkin Asks Farmer Mac for Periodic Financial Updates In a letter to the Federal Agricultural Mortgage Corporation (Farmer Mac) on Thursday, November 6, 2008, Senator Harkin requested that Farmer Mac keep the Senate Agriculture, Nutrition, and Forestry Committee informed about its financial circumstances. At issue are the recent announcements of capital losses in Famer Mac's non-program investment portfolio. While Farmer Mac has been able to raise enough capital to meet minimum capital requirements established under the Farm Credit Act, capital levels remain a concern. Given Farmer Mac's capital levels, the unresolved issue of compensation to the agency's departing Chief Executive Officer is also of interest. "While Farmer Mac has managed at this point to obtain capital to meet minimum statutory requirements, its situation is very serious," said Harkin. "In particular, considering the deterioration of Farmer Mac's financial condition, the company surely does not have extra money to spare to provide golden parachutes or unearned compensation for departing or removed executives who have been managing the corporation for years and have already been handsomely rewarded for doing so." Follow to read the full text of the letter.
USDA Move Maintains Payments for Small Farms as Harkin-Grassley Requested On November 7, 2008, USDA announced implementation of legislation passed by Congress to repeal for the 2008 crop year a prohibition adopted in the new farm bill against payment of direct and countercyclical payments for farms with crop acreage bases of 10 acres or less. USDA also announced that owners and operators of farms with 10 acres or less of base would be allowed to reconstitute farms so that the combined base acreage would exceed the 10-acre eligibility threshold for direct and countercyclical payments. The decision to allow farm reconstitutions is consistent with Congressional intent in the farm bill. Last summer, Senators Harkin, Grassley and others wrote to Secretary Schafer urging him to allow such combinations of small bases acreages as Congress intended. Follow this link for a copy of their letter. When the Department had not modified its position by late September, Congress enacted a comprehensive fix for the 2008 crop year. Now the Department has announced that it will allow reconstitutions of smaller base acreages for the future. "This is welcome news for small farms in Iowa and around the country," said Harkin. "Congress acted to streamline USDA's process in administering payments to small farms in the farm bill. But Congress clearly intended that farmers would be allowed to combine farms with small base acreages into larger farms that would be eligible for direct and countercyclical program payments. It did not make sense for USDA to ignore this directive, and the USDA position was unnecessarily punitive toward small farmers. USDA rightly corrected its implementation procedures." Eligible producers may sign up for DCP at any FSA office or enroll on the FSA website. Click on Access eDCP Services. Producers who were earlier disqualified from DCP signup because of the so-called 10-acre rule now have an extended period, until November 26, 2008, to sign up in order to receive DCP payments for the 2008 crop year.
Harkin Pleased with Release of Emergency Conservation Program Funds Senator Harkin praised USDA's release of $77 million in funding for the Emergency Conservation Program (ECP) on November 13, 2008. Of this total, $17.56 million will go to address remaining conservation related damage in Iowa from flooding this spring. ECP is used to restore land to productive use, by addressing conservation problems caused by the flooding that materially affects the land's productive capacity. Senator Harkin worked to secure funding for ECP in two supplemental appropriations measures passed in June and September. "This funding is coming out just in time," said Harkin. "It is vitally important that the work under ECP to go forward as quickly as possible before the winter sets in and work has to stop." Senator Harkin continues to pursue full funding for the Emergency Watershed Program, including funding to allow farmers and landowners to receive payments for floodplain easements. "Following the 1993 floods, federal funding allowed producers and landowners to take vulnerable land that is likely to be repeatedly flooded out of crop production," he said. "Funding for this purpose is greatly needed in Iowa once again."
"We Must Give a Nod to the Iowa Windpower Industry," says Harkin As Senator Harkin has traveled Iowa recently, he has noted with pride that the state is third in the nation in wind-generated electricity. But even more remarkable is that fact that Iowa's windpower capacity is expected to double in the very near future, from about 1400 megawatts in September to almost 2900 megawatts when plants currently under construction are completed. "I can't tell you how proud I am when I travel Iowa these days and see the rapid growth of our windpower industry," said Harkin. "And, it's especially important to me to see the numerous smaller individual or community windpower systems as well as the larger windfarms developed by the big power companies like Alliant or MidAmerican. The benefits of windpower to Iowa truly are multidimensional. This is clean, renewable electric power that doesn't depend on importing and burning fossil fuels." Wind is already contributing about 11 percent of the state's total electricity needs and that is likely to exceed 15 percent by the end of 2008. Windpower projects also provide income to farmers who lease wind turbine sites to developers. Moreover, Iowa has 5 major wind turbine manufacturing facilities that provide hundreds of jobs as well as state and local taxes to our economy. Iowa also started the nation's first wind power technician training program at Iowa Lakes Community College. Iowans also have been remarkably successful in utilizing the Rural Energy for America Program (REAP, which is the former section 9006 program authored by Harkin in the Farm Security and Rural Investment Act of 2002) to support smaller wind power projects. A total of 51 locally-owned wind projects, each consisting of 1 to 10 wind turbines, have been installed in Iowa by individuals or small businesses with support from this program.
Harkin Calls for Increased Diligence in Food Safety and Security On November 12, 2008, the Food and Drug Administration (FDA) issued an Import Alert for all dairy products, and food and feed products that contain dairy ingredients, imported from China. The action requires detention of all milk products from China until they are tested for melamine. This increased scrutiny of imported food products associated with a widening food safety scandal overseas is vital to protecting U.S. consumers. Melamine has been linked to ingredients used in animal feed and other food products and is used to fool tests that measure protein levels in food, making a food appear to be of higher protein content than its true value. Specific tests for melamine have turned up trace amounts in several foods imported from China that contain dairy products. The recent safety scares associated with food and other products from overseas prompted FDA to open an office with FDA personnel in Beijing, China, with more offices slated to open in China, India, and Latin America. "The growing melamine scandal involving food and feed products from China is very concerning," said Harkin. "FDA took appropriate action with its Import Alert and its recent opening of an office in China. I urge the agency to continue to increase its presence overseas and to step up greatly its inspection and testing of food and feed products to ensure the safety of our nation's food supply." "During the next Congress I will work to ensure that the agencies responsible for food safety increase the effectiveness and efficiency with which they protect our food," said Harkin. "I joined with a bipartisan group of my Senate colleagues to introduce the FDA Food Safety Modernization Act, a bill that will give FDA new authorities, tools and resources to comprehensively reform the nation's food safety systems. This bill should serve as a starting point for legislation during the next Congress." More information available on the FDA Food Safety Modernization Act. A list of products found to contain melamine, is available at the FDA website.
Harkin Applauds USDA Change in Start Date for the National Organic Certification Cost Assistance Program On November 7, 2008, USDA announced it would allow producers and handlers to apply for reimbursement for costs incurred at any point in fiscal 2008 toward gaining or continuing organic certification (that is, costs incurred from October 1, 2007 and later). USDA had previously said that only costs incurred after October 1, 2008 could be reimbursed. Senator Harkin pushed USDA for this change to benefit organic producers and handlers. "Despite all of the advancements in organic agriculture, production still cannot keep up with demand for organic products in this country," said Harkin. "By changing this eligibility date, USDA will increase the number of producers who are eligible to apply for and receive cost assistance for gaining or maintaining organic certification." In the 2008 farm bill, Senator Harkin secured $22 million in mandatory funds, starting in fiscal year 2008 and to remain available until expended, to help organic producers and handlers offset the cost of obtaining or maintaining USDA organic certification. To be eligible, a producer or handler must be located within a qualified state, comply with USDA National Organic Program regulations and have received certification or continuation of certification by a USDA-accredited certifying agent. An eligible producer or handler can receive up to 75 percent of the organic certification costs, not to exceed $750. The Iowa Department of Agriculture and Land Stewardship administers this program for Iowa.
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