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‘Estate Tax’

Farmers, ranchers say the estate tax needs to be reformed sooner rather than later | 4 November 16, 2009 Vol. 88

‘Health care reform’

All eyes on the Senate | 3

‘Election’ Ag-backed ballot measures pass in Ohio, Texas | 7

Classic Thanksgiving dinner costs decline for 2009

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Late harvest to fuel interest in year-end crop report Wet and cold weather over much of the country in October put a dent in corn and cotton yields, but the Agriculture Department is still forecasting corn yields will be the highest on record and that total corn production will be the second-highest ever recorded. USDA released its November crop report on Nov. 10, and economists with the American Farm Bureau Federation said estimates were generally in line with what analysts expected. Because of delayed harvest over much of the corn, cotton and soybean produc-

ing areas of the U.S., USDA’s December and January crop reports could show some significant adjustments compared to November, which is unusual. There is typically little change between the November and January reports. “Because of late harvest, I would expect to see another drop in corn production in the January report,” said Terry Francl, AFBF senior economist. “USDA’s January crop report will be watched a lot closer than normal because of the late harvest.” “The real concern over much of the country for corn is not yields,

but quality and drying costs due to the wet weather,” he added. “Particularly in Illinois, there are reports that yields are good, but drying costs are up, which will put a real crimp on farm income.” USDA’s November crop report showed a 1 percent drop in corn production and a 2 percent jump in soybean production compared to the October forecast. The biggest change was in cotton production, which dropped 4 percent from October’s estimate. Megan Provost, AFBF southern Crop Continued on Page 6

Partisan vote may hamper climate bill

Menu items for a classic Thanksgiving dinner including turkey, stuffing, cranberries, pumpkin pie and all the basic trimmings dropped 4 percent in price this year, according to the American Farm Bureau Federation’s 24th annual Thanksgiving meal price survey.

Continued on Page 8

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Randall Dasher, president of the Suwanee County, Fla., Farm Bureau, was one of hundreds of Florida Farm Bureau members who joined in the “Don’t CAP Our Future” campaign by signing farm caps at their annual meeting in late October. The caps will be sent to members of Florida’s congressional delegation along with a message asking them to oppose cap-and-trade climate legislation that would hike farmers’ and ranchers’ production costs and could drive up food prices. Climate legislation advanced with the Nov. 5 passage of the bill by the Senate Environment and Public Works Committee. However, the way it was done could poison the well of support by moderates on both sides of the aisle that Democratic leaders will need to tap in order to pass the bill in the full Senate. Republicans on the committee boycotted committee meetings as they demanded an economic analysis. They did not participate in the vote on S. 1733. Committee Chair Barbara Boxer (D-Calif.), who is also a sponsor of the bill along with Sen. John Kerry (D-Mass.), sidestepped the boycott by using the unusual procedure of passing the bill by a majority vote of Democratic com-

mittee members. No amendments can be considered under this procedure, which Republicans dubbed the “nuclear option.” The committee’s ranking minority member, Sen. James Inhofe (R-Okla.), said that Boxer’s move would not help the bill in the long run. “Her action signals the death knell for the Kerry-Boxer bill,” he warned. Inhofe said Boxer had ignored entreaties from ranking members of other committees with jurisdiction over the bill as well as leading moderates in the Senate to work on a compromise. The vote to report the bill out of the committee was 10-1, with Sen. Max Baucus (D-Mont.) the lone dissenter. As the end of 2009 draws near-

er, and with Congress more focused on getting the health care bill passed, time could run out for the climate bill. Next year, members of Congress will become more interested in politics than policy. Few moderate Democrats will be willing to support a bill that could endanger their chances of getting reelected in next November’s tough mid-term elections. That would push the climate debate off until as late as 2011. “The climate bill’s chances are looking worse by the day,” said Mark Maslyn, American Farm Bureau Federation public policy executive director. “There is no consensus on the bill in the Senate, Climate Continued on Page 6

Viewpoint

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November 16, 2009

America watches an explosion of trade agreements By David Salmonsen As support for an active international trade agenda and the opportunities of globalization recede in the United States, other nations are steadily expanding their trade ties. The Asia-Pacific region is where the action is today. Australia is working toward an agreement with China. New Zealand and Australia are engaged in talks with a group of Southeast Asian nations. Malaysia and New Zealand have concluded an agreement. There are currently 64 ongoing trade negotiations in the East Asian region worth billions of dollars in new trade re-

lationships that work against the economic interests of the U.S. The European Union has just completed a trade agreement with South Korea while the U.S.-South Korea Free Trade Agreement (FTA) has been stalled in Congress for two years. Japan is also holding trade talks with the EU. At the same time that these growing economies are forging new avenues for expansion, the U.S. is stalled on moving negoti-

Abundant food—it takes all of agriculture By Lynne Finnerty There’s a lot of excitement these days about buying food from local farmers. It is a winwin-win. Consumers get fresh produce and maybe even cheese, eggs and meat. Farmers and ranchers make more money by selling directly to consumers. Supporting those farmers also helps support the local economy. But when was the last time you saw a sack of flour, sugar or cornmeal at your farmers’ market? We can’t buy everything we want to eat or cook with from within a hundred miles or so—a goal that some have established for themselves. It takes all kinds of farms across the country to provide the staples we depend on and expect to see stacked aplenty in our grocery store. The Agriculture Department advises in its Dietary Guidelines that we should eat a variety of foods. Reality is that most of us eat from a variety of food sources, too. Why does it have to be all or nothing? I grew up a country girl. We didn’t have any money trees so we planted fruit trees and a big vegetable garden every summer to stretch the food budget. My dad was a child of the Great Depression and he planted a garden to ensure that, like Scarlett O’Hara, we would “never go hungry again!” Sweet potatoes were one of his favorites so we always had a few rows of those along with tomatoes, squash, bell peppers, green beans, butter beans, field peas, sweet corn, okra, cucumbers, cabbage, “Irish” potatoes and

just about anything else my dad planted to see what it would do. Kids who didn’t like vegetables were hard for me to understand. Our fresh vegetables were so good, I developed a taste for them as soon as I was big enough to wander out into the garden and eat tomatoes off the vine like nature’s candy. I know the seductiveness of a ripe, farm-fresh tomato. That’s why, now that I’m a city girl, I’m one of the first ones lined up at the farmers’ market on a Saturday morning. As delighted as I am to support my local farmers and buy locally grown peaches and other treasures, I know I will need to stop by the store to pick up the essentials needed to turn the peaches into a cobbler. And while I’m there I might even buy some of those reviled “processed foods” we like to keep in the pantry, such as breakfast cereal to have with my farmers’ market berries. Buying local is trendy and that’s great, but we owe some respect to the farm families who raise the staples, as well. We should all be thankful that somewhere on the high plains and rolling hills that may be thousands of miles from our homes, a farmer is working—probably late into the evening—against the odds presented by uncooperative weather, markets and governments—raising the grains, oilseeds, meats, dairy products and fruits and vegetables that round out our abundant and diverse food supply. It may take a village to raise a child, but it takes a whole country to put a meal on the table.

FBNews

Don Lipton, Director, Public Relations Lynne Finnerty, Editor Erin Anthony, Assistant Editor Phyllis Brown, Assistant Editor

November 16, 2009 Vol. 88

ated FTAs through Congress and is insistent on renegotiating the completed FTAs with Colombia, Panama and South Korea, further holding back opportunities for economic growth. The “jobless recovery” in the U.S. will only be lengthened by the administration’s and congressional leadership’s lack of political commitment to trade growth. Our major competitors in world trade—the European Union, Can-

ada, China, Japan and Brazil— are continuing to work for market opening agreements that will give their products dutyfree access, placing U.S. goods and services at a competitive disadvantage. Other nations are facing the same economic challenges at this time as the U.S. They are reacting in an aggressive manner, counting on future economic growth and recovery to energize their economies. The world is moving, while America is only watching. David Salmonsen is a senior director of congressional relations at AFBF, where he deals with global agricultural trade issues.

Pesticide case merits Supreme Court’s attention By John Hart Not every legal dispute merits the attention of the U.S. Supreme Court. Only the most serious and far-reaching issues tend to make it to the highest court in the land. A case that should be considered is titled “National Cotton Council v. the U.S. Environmental Protection Agency.” The American Farm Bureau Federation filed a petition with the U.S. Supreme Court on Nov. 2 seeking a review of the 6th U.S. Circuit Court of Appeals’ ruling on that case. The lower court’s decision forces pesticide users, such as farmers, to secure an additional permit to apply pesticides “on, over or near water.” At issue is a clear overstepping of federal regulations by the lower court that will impact farmers, ranchers and others who safely use approved pesticides. If the Supreme Court does not reverse the lower court decision, production agriculture will face an EPA permitting requirement that could strangle the use of crop protection products. The problem stems from a January 2009 ruling by the 6th U.S. Circuit Court of Appeals that struck down a 2006 EPA rule that said the Clean Water Act did not regulate pesticide applications near water, as long as the pesticide use complied with EPA-approved label restrictions. In practical terms, allowing the lower court ruling to stand would pose serious challenges to farmers battling pests. An im-

portant part of every farmer’s job is to carefully inspect crops for pests that rob yields and steal profits. When a farmer finds pests and determines the application of pesticides is needed, time is of the essence. A lengthy permitting requirement for products that are already approved as long as label restrictions are followed would be disastrous. By the time federal regulators approve the application, it may be too late and the pest damage would be done. The case is complicated because EPA views “waters of the United States” very broadly, which means wetlands and even some ditches are considered “waters of the United States.” This broad interpretation means the misguided 6th Circuit decision could impact hundreds of thousands of farmers in all 50 states. This is an unnecessary regulatory burden that farmers and ranchers should not be required to bear. The Supreme Court is expected to decide by the end of the year whether to hear the case. Relief from costly and time-consuming pesticide permitting for America’s farmers and ranchers now awaits the consideration of nine justices. We must hope wisdom and common sense prevail, and the lower court decision will be reversed. John Hart is director of news services for the American Farm Bureau Federation.

No. 21

Published semimonthly, except monthly in August and December, by the American Farm B ­ ureau Federation, 600 Maryland Ave., SW, Suite 1000W, Washington, DC 20024. Phone: 202-406-3600. E-mail: [email protected]. Web site: http://www.fb.org. Periodical postage paid at Washington, D.C., and additional mailing offices. Subscription rate for officers and board members of county and state Farm Bureaus—$6, which is deducted from dues. For other subscribers—$10. Postmaster: Send address changes to FBNews, (ISSN 0197-5617) 600 Maryland Ave., SW, Suite 1000W, Washington, DC 20024.

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Capitol View

With House approval of the Affordable Health Care for America Act (H.R. 3962), the center of the health care debate has shifted to the Senate. However, Senate Majority Leader Harry Reid (D-Nev.) has said he and his colleagues would not be “bound by any timelines” to push a health care bill through. The House bill, passed on Nov. 7 during a rare Saturday session, would have huge repercussions for businesses large and small. The legislation would require employers either to provide health care coverage or pay an 8 percent excise tax on payroll. Employers with payrolls at or under $500,000 would be exempt. For those with payrolls up to $750,000, the tax would be phased in. Small businesses with 25 or fewer employees and average wages of under $40,000 would receive tax credits of up to half the cost of employee health insurance for two years. A few days before the House voted on the measure, American Farm Bureau Federation President Bob Stallman sent a letter to lawmakers outlining farmers’ and ranchers’ concerns with the proposal. “While tax incentives in the bill are designed to help small employers cover health care expenses, there are no allowances for seasonal workers common to our industry,” Stallman wrote. “We are opposed to an employer mandate and view an 8 percent payroll tax imposed for noncoverage as excessive and as burdensome as mandated coverage.” Stallman said health insurance costs are an ongoing and signif-

©iStockphoto.com/mstahlphoto

House passes health care bill, Senate now in hot seat

icant expense for agricultural employers, and health care reform must not unduly burden farm and ranch businesses with costs they can’t afford. Stallman explained that farmers and ranchers believe “that health care is primarily the responsibility of individuals, and we are opposed to provisions in the bill that mandate individual coverage. Most farmers and ranchers are self-employed and would already cover themselves if they could afford it. Passing a mandate accompanied by the threat of a tax for noncompliance only makes the situation worse for people unable to afford coverage in the first place.” Farm Bureau supports private, market-based reforms and is opposed to the “public option,” as government-operated health insurance is more commonly known. A public option provi-

sion is included in the House bill. “We believe that the creation of an exchange where individuals and businesses can easily compare and purchase privately offered insurance will encourage the competition necessary to bring about cost savings,” Stallman wrote. Pat Wolff, AFBF health care specialist, pointed out that while lawmakers intend for the bill to push down health care costs, there’s no guarantee that will actually happen. The status of health savings accounts (HSAs), used more frequently by rural residents than their urban—and more likely insured—counterparts, is another worry for farmers and ranchers. “As it stands now, investments in HSAs will not necessarily qualify for the health care-purchase mandate,” Wolff said. HSAs enable participants to pay

for current health expenses and save for future medical and retiree health expenses on a taxfree basis. They are used in conjunction with traditional “highdeductible” health insurance policies. The two health care reform proposals in the Senate with the most traction have been produced by the Senate Finance Committee and the Health, Education, Labor and Pensions (HELP) Committee. Reid said he intends to combine the bills. One of the biggest differences between the two Senate bills is the public option. HELP’s bill would require a public option, while the Finance Committee’s version would create health care insurance cooperatives, an approach that’s more palatable to farmers and ranchers. Reid said the bill he brings to the floor will include a public option. Another issue up in the air in the Senate is that of employer mandates. The HELP bill requires employers with more than 25 workers to provide health care coverage or pay a $750 annual fee ($375 for part-time workers). Seasonal and temporary workers don’t count toward the threshold. Under the Finance bill, employers are not required to provide health insurance but an employer of more than 50 workers that does not offer coverage would have to pay a fee when an employee claims a tax credit for purchasing health insurance. Reid and other Democratic leaders said they are waiting for Congressional Budget Office estimates before trying to move toward a floor vote.

Farm Bureau petitions Supreme Court on pesticide case The American Farm Bureau Federation earlier this month filed a petition with the U.S. Supreme Court, asking the high court to review a lower court ruling that would impose Clean Water Act permitting requirements on the application of pesticides on, over or near water. “Allowing the lower court ruling to stand would pose serious challenges to farmers battling pests,” said AFBF President Bob Stallman. “When pests strike, time is of the essence, and any length of time waiting for permit approval for products that are already approved would be disastrous.” The problem stems from a January 2009 ruling by the 6th U.S. Circuit Court of Appeals, which struck down a 2006 Environmental Protection

Agency rule that interpreted the Clean Water Act did not regulate most pesticide applications into, over or near “waters of the United States,” so long as the pesticide use complied with EPA’s requirements (such as EPA-approved label restrictions). The 6th Circuit found in National Cotton Council v. EPA that EPA must require National Pollutant Discharge Elimination System permits for pesticide application in water or near waters where pesticide falls into the water. In August, the court denied AFBF’s request for a rehearing. If the decision is allowed to stand, farmers and others who use pesticides, such as mosquito abatement districts, will be required to obtain permits in order to apply pesticides on or near water. Since EPA views “waters of the United States” very broadly— including wetlands and even some ditches—thousands of farmers could be affected. Julie Anna Potts, AFBF general counsel and secretary, pointed out that farmers already follow very strict EPA rules governing the use of pesticides. Many of these rules are the result of the Federal Insecticide, Fungicide and Rodenticide Act, commonly known as FIFRA. “FIFRA was enacted right

around the same time as the Clean Water Act, and there is nothing to suggest that Congress intended for pesticide applications to be regulated under the Clean Water Act,” Potts said. “FIFRA is in place to do that.” The agency estimates 365,000 pesticide applicators that perform about 5.6 million pesticide applications annually would be required to apply for Clean Water Act permits if the 6th Circuit’s ruling stands. That number overwhelms even a large bureaucracy like EPA. The agency

asked for and was granted a two-year stay on the permit requirements so that it would have enough time to finalize the permit required by the ruling. The lengthy Clean Water Act permit process involves public notice and comment. “If an individual permit is required, many farmers are going to have to choose between losing a crop or facing a lawsuit,” Potts said. The Supreme Court is expected to decide by the end of the year whether to hear the case.

USDA to purchase pork, fruit products Agriculture Secretary Tom Vilsack on Nov. 11 announced that USDA would purchase an additional $50 million of pork for use in federal food nutrition assistance programs. He also said the department would buy $12.2 million of tart cherries, $1.8 million of dried plums and $18.6 million of apples. Vilsack said the purchases would help producers “who are currently struggling due to depressed market conditions.” He said the purchases would also help Americans in need of nutrition assistance. Pork prices are low due to a

drop in exports, the poor U.S. economy and the mislabeling of the H1N1 flu virus as “swine flu.” The tart cherry, dried plum and apple purchases will help ease the stress caused by high inventories and low prices, USDA said. All of the food products will be used in the school lunch and breakfast programs and food distribution programs for the needy. American Farm Bureau Federation President Bob Stallman in September called on the administration to purchase as much as $100 million worth of additional pork products.

Estate Ta

Time is running out on estate tax reform In just a little over a year, the estate taxes farm estates are expected to owe will go up about 300 percent compared to this year, unless Congress enacts permanent estate tax reforms. USDA’s Economic Research Service (ERS) has estimated that, under current law, as many as 10 percent of farm estates would owe estate taxes in 2011, compared with about 1.5 percent of farm estates in 2009, and the amount of taxes owed by farm heirs would increase to about $2.55 billion in 2011 from $683 million in 2009. That’s because temporary estate tax relief enacted in 2001 will expire at the end of 2010. The Economic Growth and Taxpayer Relief Reconciliation Act of 2001 phased out estate taxes over 10 years, with the tax eliminated altogether for one year only, 2010. Because Congress could only find enough funding offsets to enact temporary tax relief, pre-2001 tax law, with its lower estate tax exemptions and higher tax rates, will kick back in when the law expires at the end of next year. The American Farm Bureau Federation has endorsed a bill that would make permanent both a higher exemption level and lower tax rate. The Estate Tax Relief Act of 2009 (H.R. 3905), introduced in October by Reps. Shelley Berkley (DNev.), Kevin Brady (R-Texas), Artur Davis (D-Ala.) and Devin Nunes (R-Calif.), would phase in a $5 million exemption, with a top tax rate of 35 percent, over the next 10 years. President Obama’s budget proposed freezing the estate tax at this year’s $3.5 million ($7 million for a married couple) exemption level and 45 percent

rate. AFBF President Bob Stallman said that was a “non-starter” for Farm Bureau, which supports a $10 million exemption per person. H.R. 3905 doesn’t go that far, but Stallman said it “brings us one step closer to Farm Bureau’s goal of permanent repeal.” “Estate taxes threaten familyowned farms and ranches and the livelihoods of families who make their living in production agriculture,” Stallman said in a statement the day after H.R. 3905 was introduced. “Eighty percent of farm and ranch assets are land based. When estate taxes exceed cash and other liquid assets on hand, surviving family members can be forced to sell land, buildings or equipment needed to keep their businesses operating. Sadly, it takes two and a half years of farm returns for a moderate-sized farm operation to pay off the estate tax owed.” The Berkley bill would increase the estate tax exemption $150,000 per year until it reached $5 million and decrease the estate tax rate 1 percent each year until it reached 35 percent in 2019. After that, the tax would be indexed for inflation. Many farm households look wealthy on paper because land values have increased by an average of 14 percent per year since 2004, according to ERS. The agency says farm equity has more than doubled since 2000, primarily due to the increase in land values. Land, however, is not a liquid asset and is the most important input needed to produce crops and livestock. ERS says that the rise in property values means that farm estates are more likely than the typical estate to owe federal estate taxes. There is action on estate taxes on the Senate side, as well. Last

Estate Tax

The share of farm estates required to file a return and pay federal estate tax could rise sharply in 2011

f — Forecast based on 2007 data

spring, Sens. Blanche Lincoln (DArk.) and Jon Kyl (R-Ariz.) proposed an amendment to the Senate budget resolution in support of an immediate $5 million exemption and 35 percent tax rate. That amendment passed with 51 votes. Budget resolutions are merely blueprints of recommended spending levels, not law, so the Senate would have to pass a separate bill to enact the estate tax changes. Lincoln and Kyl have said they are committed to working for the 5/35 plan before 2010. “Many in Congress would rather see a higher estate tax exemption and lower tax rate made permanent rather than letting it expire in 2010,” Pat Wolff, AFBF tax policy specialist, said. “If they are going to achieve that goal, then they must take action soon.” If Congress was known for moving that fast, then the old joke about it taking “an act of Congress” to do something wouldn’t be very funny. But Wolff says the legislative process can move quickly when members are motivated. “Time is running out, and they know that,” she said. “We have

Source: USDA, ERS

a good piece of legislation on the table and they need to get to work on it. It would be a win for them and a win for farm and ranch families.” H.R. 3905 also would extend the current “stepped-up basis” rule, which also will expire at the end of next year. Steppedup basis limits the amount of property value appreciation that is subject to capital gains taxes if the assets are sold. Because farm land typically is held by one owner for several decades, setting the basis on the value of the estate on the date of the owner’s death under stepped-up basis is an important tax provision for farm heirs. “This is something that benefits the heirs, but it also can be very beneficial to new and beginning farmers and ranchers,” Wolff explained, “because if the heirs are off doing other things and don’t want to farm the property, then they should be able to sell it to someone who does. With stepped-up basis, there is less of a disincentive to sell the land to new farmers and ranchers.”

Estate taxes have a lon Estate taxes in the United States date back to Revolutionary War times and between then and the Civil War, various inheritance taxes were imposed temporarily to finance wars and then they were repealed after the wars were over. As the following history shows, it didn’t take long for that practice to change, and property owners have faced rising estate taxes for much of the time since the early 20th century.

1916-1917 The modern estate tax got its start with the Revenue Act of 1916, signed by President Woodrow Wilson, which also raised the income tax, to make up for a loss in tariff revenue as worldwide conflicts caused a drop in trade. The estate tax exemption was $50,000 (over $11 million in today’s dollars), and tax rates started at 1 percent and went up to 10 percent on estates worth more than $5 million (over $1 billion in today’s dollars). The estate tax was increased in 1917 as the U.S. entered World War I, but this time, it wasn’t repealed after the war ended.

1920-1940 Tax rates increased dramatically between 1920 and 1940 as a way to prevent the concentration of wealth. The tax rate on the wealthiest estates climbed to 77 percent by 1940, where it remained until 1976.

1976

The Ta at clos ers, the farm e marke for far of the estate’ over 14

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The Ec Reagan with th

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S P E C I A L

R E P O R T

As members of Congress potentially turn their attention to tax reform this fall, a group of young farmers and ranchers from Montana visited the nation’s capitol to let their delegation know that reforming capital gains taxes and, especially, the estate tax is critical to helping the next generation of farmers get started in food production. They brought with them a 10-minute DVD, hoping to send more of a message than a short visit in a congressional office will allow. The DVD tells the stories of four farm and ranch families who say that estate taxes are a big obstacle to keeping families farming. Tucker Nelson is a fourth-generation beef cattle producer from Livingston, Mont. He says that reforming the estate tax would be the best way to keep young agricultural producers on the land. “Our biggest obstacle is the estate tax,” he said. “My grandparents passed away in 2001 and 2002, and we lost half of the place because we had to split it up to avoid the estate tax. So already, with the transfer from my grandparents to my parents, we’re half the size we were, which has cut our production. We’re to the point where we can only support two families on this place. If that cut happens again, I’m afraid we won’t be able to pass it on to my kids’ generation.” It’s an especially big problem in the Big Sky country where Nelson’s family ranches. A 2,000-acre ranch near them is on the market for $38 million. No beginning farmer or rancher can afford to buy it at that price. And hardly anyone can afford to pay the estate taxes with a property value at that elevated level. Livingston is surrounded by national parks and scenic mountain ranges. The mountains collect rainwater that makes the farmland productive, but they also bring buyers from out of state with deep pockets and more interest in views and recreation than in food production. “That’s the kind of hurdle we are trying to climb to stay in productive agriculture,” he explained. “For us, at those kinds of prices, it’s obviously not about the money. It’s about a love for the land, the stewardship we want to continue to practice on the land, and it’s about keeping our family roots there,” roots that Nelson says go all the way back to when his ancestors were original settlers on the place. So he went to Washington to tell his story. “I figured I can either sit back and let it hap-

pen or I can go to Washington, D.C., and give it my best effort to try to change it.” This year might be the right time for Nelson and others to try to change the estate tax. Some Democrats in Congress would rather make permanent reforms to the estate tax this year than let it expire for just one year, next year, as scheduled under current law. Nelson and his wife, Jacquie, don’t have children yet but they hope to one day raise a family on the ranch. He said that in their part of the country, keeping land in agriculture also benefits wildlife, because farmers and ranchers practice good stewardship. “We love to share our land with the wildlife,” he said. “But the problem is when you have a ranch that gets sold and subdivided, that stewardship discontinues and it’s just left to go wild. Some people think of that as a good thing and it can be in some instances, but you can’t take something that has been managed for 100 years and then just let it go wild, because what you see is the grass matures and then the wildlife tends to shy away from that. Over years of not harvesting that grass, it’s not as productive as it was to support wildlife that we’re blessed with in Montana.” Joining Nelson on the trip to Washington was Jim Willis who runs a cow-calf operation and raises wheat in Buffalo, Mont., in the central part of the state. Both Nelson and Willis think it’s great that Congress wants to take action sooner rather than later. Both said time is of the essence in addressing the problem, because the current crop of farmers and ranchers isn’t getting any younger. The average age of farmers and ranchers in the U.S. is 57. Many will retire within the next decade or so. If something isn’t done before then, the chance to keep farms from being split up and sold for development will slip away. “I think that’s a problem that’s coming down the line for all of us,” said Nelson. Willis echoed those thoughts. “I’d say this is critically urgent,” he said. “If we wait until these producers are actually retiring, the problem may be already past a tipping point where the tax reform won’t mean much because a big portion of the land has already been transferred to entities other than new producers.” Willis does not stand to inherit a farm or ranch. Instead, he is working out a transition

PHoto by Rebecca Colnar, Montana FB

Young farmers & ranchers take tax message to D.C.

Tucker Nelson (left) farms with his dad, Roger (right), in southwestern Montana on a farm that’s already half the size it used to be because of the estate tax. He worries that if the farm gets split up again, it won’t be big enough to support the next generation of Nelsons. plan with a retiring producer. He is more interested in reducing the capital gains tax burden so it’s easier for older farmers and ranchers to sell their land to a new generation of producers. He would like to see an exemption from capital gains taxes when a retiring producer is willing to sell to a new producer. Both young farmers said their members of Congress were receptive to their message and seemed to understand the problem. But they also say it’s tough to cut taxes when the nation is already facing a budget deficit. Willis insists that reducing capital gains and estate taxes would have a positive impact. “When you equate all of the taxes generated by the specific taxes we’re talking about, it really doesn’t amount to much,” he said. “But in the long term, it is better for society, it is worth the money spent, to keep new people coming into the agricultural sector.”

ng, interesting history

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ax Reform Act of 1976, signed by President Gerald Ford, was aimed sing loopholes in the estate and gift taxes. For farmers and ranche 1976 Act also put in place a special-use valuation that allowed estates to be valued based on their actual use, rather than fairet value. The 1976 Act also established installment payment terms rm heirs. Normally, estate taxes must be paid within nine months owner’s death. Under the 1976 Act, if at least 35 percent of an ’s value is a farm or closely held business, estate taxes may be paid 4 years and 9 months, with interest due for only the first 5 years.

1

conomic Recovery Tax Act of 1981, signed by President Ronald n at his California ranch, further reduced federal estate tax rates, he top rate dropping from 70 percent to 50 percent.

1997-2004 The Taxpayer Relief Act of 1997, signed by President Bill Clinton, brought the exemption for a donated conservation easement. The 1997 Act also provided a $675,000 deduction, on top of the $1 million unified estate and gift tax exemption, for farmers and other small business owners. However, the total allowable exemption was capped at $1.3 million. (The basic exemption level rose above this cap (to $1.5 million) in 2004, negating the special farm exemption.

2009 The Economic Growth and Tax Relief Reconciliation Act of 2001, signed by President George W. Bush, phased out estate taxes over 10 years through progressively higher exemptions and lower tax rates. It culminated in a $3.5 million exemption and a top tax rate of 45 percent this year.

Capitol View

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November 16, 2009

The American Farm Bureau Federation is partnering with USDA’s National Agricultural Library to create the National Curriculum and Training Clearinghouse for Beginning Farmers and Ranchers. The new information-sharing program will help those who have decided to pursue a career in agriculture and will help support Farm Bureau’s commitment to rural development. The clearinghouse is a component of the Beginning Farmer and Rancher Development Program (BFRDP), a competitive grant initiative that is part of the 2008 farm bill. The clearinghouse will be supported by a five-year, $1.5 million grant from USDA. BFRDP was initially authorized in the 2002 farm bill, but it was not funded during Congress’ yearly appropriations process. The program was reauthorized in the 2008 farm bill and has $75 million in mandatory funding over the next five years. One-quarter of BFRDP’s funds are allocated for projects serving limited resource and socially disadvan-

taged farmers and ranchers, including minority, immigrant and women farmers and ranchers, as well as farmworkers. “This is a great opportunity for Farm Bureau to provide information to beginning farmers on how to start and stay in farming and ranching,” said AFBF President Bob Stallman. “We are providing in-kind support to the National Ag Library with outreach, publicity, educational seminars and our annual conference where other project grants will be highlighted.” The clearinghouse will use the grant money to develop a Web site and databases to serve beginning farmers and ranchers, with particular focus on those categorized as underserved. The clearinghouse will provide education, training, outreach and mentoring materials to beginning farmers and ranchers across the United States. AFBF will serve as a conduit for distribution of the information. “Our goal at Farm Bureau is to help farmers be successful and to move agriculture forward,” said Dan Durheim, coordinator of AFBF’s Young Farmers and

Ranchers program. “The projects included in the clearinghouse are fascinating and diverse: an agricultural entrepreneurial program in Missouri, legal and technical support for beginning and immigrant farmers in Minnesota, effective business practices to Navajo farmers in Arizona, business planning and sustainable practices for women in the Northeast, and absentee forest landowner training in Tennessee.” Farm Bureau will host a beginning farmer and rancher conference annually that will be held in conjunction with the AFBF Young Farmer and Rancher Conference, beginning in Orlando, Fla., in February 2011. Among the other projects to receive funding is California FarmLink, which was awarded $525,000 over three years to build on its decade of experience facilitating farm transitions, providing technical assistance, hosting workshops, financing farm operations and empowering farmers to build assets through the California FarmLinks Individual Development Account program.

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Beginning farmers, ranchers to benefit from grant

In addition, the Midwest Organic and Sustainable Education Service, based in Spring Valley, Wis., was awarded $151, 515 over three years to produce a book, workshops and a twoday mini conference for beginning farmers on farm financial management so they can use basic tools and resources to assess their financial situation.

Partisan vote may hamper climate bill Crop report Continued from page 1 and there are at least six other committees that will get a turn at debating it before it ever reaches the Senate floor. Then you have a lot of Republicans and moderate Democrats with no reason to believe that Democratic leaders are going to hear their concerns or reach across the aisle to address them. As the mid-term election approaches, it’s only going to get harder for them to go on record in support of something that would harm our already severely crippled economy.” But Farm Bureau members who oppose the climate bill’s cap-andtrade regime aren’t taking any chances. They are continuing to barrage their senators’ offices with signed farm caps bearing the message, “Don’t CAP Our Future.” Farmers and ranchers signing the caps say that the higher fuel prices and other energy-related

costs that will come from capand-trade will make it difficult for them to continue farming. “As a small businessman, I cannot pass along my increased fuel costs to my customers without running the risk of losing them. That means I would have to absorb any increased costs and have it consume my bottom line,” said Texas farmer and cattle producer Richard Cortese at a Capitol Hill news conference hosted by Sens. Kit Bond (R-Mo.) and Kay Bailey Hutchison (R-Texas) in late October. Bond and Hutchison released a report that found that under the House-passed climate bill farmers and ranchers would be hit with $550 million in higher fuel costs in 2020 and $1.65 billion in 2050. Florida Farm Bureau members signed “Don’t CAP Our Future” caps at their annual meeting, Oct. 28-30. More than

American Farm Bureau Federation President Bob Stallman (second from left) participated in a panel discussion on climate policy. He said the climate bills Congress is considering would create an energy gap.

200 caps were signed and most were signed by more than one person. Florida Farm Bureau in December will deliver the caps, along with additional ones signed at Farm Bureau events held throughout December. Meanwhile, in Washington, AFBF President Bob Stallman has continued to make the case that both the House and Senate climate bills would create an energy deficit and cost farmers and ranchers too much in higher production costs. At a climate policy debate hosted by The Washington Times on Nov. 4, Stallman said the climate legislation does nothing to plug the gap in the energy supply that it would create. He also said it could result in more greenhouse gas emissions, not less, if U.S. agricultural production is replaced by production in developing countries that would not be subject to carbon and methane caps. “U.S. agriculture is highly efficient,” he said. “By downsizing U.S. agriculture, cap-and-trade legislation would send more of our food production to countries that are not as efficient and emit more greenhouses gases for the same amount of production.” He also noted that not all producers would be able to participate in the agricultural offsets program that was included in the House bill. The Boxer-Kerry bill does not include an agricultural offsets provision. Sen. Debbie Stabenow (DMich.) recently unveiled a proposal for an agricultural offsets program to be overseen by USDA. That provision most likely will be combined with the BoxerKerry bill during Senate Agriculture Committee consideration.

Continued from page 1 crops economist, said the drop in cotton production can be solely blamed on lower yields, particularly in the Delta region of Mississippi, Arkansas and Missouri where fields have been pelted with rain over much of the normal October harvest season. Texas cotton producers also expect lower yields due to the impact of cool, wet weather on a late-planted crop. “This is the lowest cotton yield in five years, but it is still a decent yield when compared to historical records,” Provost said. Cotton production for 2009 is forecast at 12.5 million 480pound bales, down 2 percent from last year. Soybean production nationwide is forecast at a recordhigh 3.32 billion bushels, up 12 percent from last year. Based on Nov. 1 conditions, yields are expected to average 43.3 bushels per acre, up 0.9 of a bushel from last month and up 3.6 bushels from 2008. Compared with last month, yields are forecast higher or unchanged in all states except Arkansas, Georgia, Iowa, Mississippi and Texas. The largest decrease in yield from the October forecast is expected in Mississippi, again reflecting the impact of October’s excessive rainfall. This year’s total corn production is forecast at 12.9 billion bushels, 7 percent higher than in 2008. Based on Nov. 1 conditions, yields are expected to average 162.9 bushels per acre, down 1.3 bushels from October’s estimate but 9 bushels above last year’s yields and still an all-time high.

November 16, 2009

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State FB Links

Agriculture wins with ballot measures in Ohio, Texas The efforts of farmers and ranchers in Ohio and Texas paid off earlier this month with passage of ballot amendments considered vital to the success of agriculture in both states. The ballot measure in Ohio related to livestock care, while voters in Texas took up the issue of property rights. “It’s clear that when voters have an opportunity to endorse straight-forward ballot language that supports traditional values and hard working farm and ranch families, they will do so overwhelmingly,” said American Farm Bureau President Bob Stallman, congratulating the Ohio and Texas Farm Bureaus on their leadership in ensuring voter support for the ballot measures. The Ohio Farm Bureau-supported ballot initiative provides for the creation of a committee to oversee decisions on how farm animals are treated. The 13-member Ohio Livestock Care Standards Board will comprise a broad base of Ohioans knowledgeable in livestock and poultry care, including family farmers, veterinarians, a food safety expert, a representative of a local humane society, representatives from statewide farm organizations, the dean of an Ohio ag-

riculture college and members representing Ohio consumers. The ballot initiative, known as Issue 2, passed with about 64 percent of the vote. The board will set standards for livestock and poultry care that take into account food safety, local availability and affordability of food and farm management practices for animal wellbeing. “Voters made a solid statement that acknowledged the role farmers play in caring for farm animals and providing a safe and quality food supply in the Buckeye State,” Stallman said. “Clearly, Ohio has blazed a bold new trail for other states to follow on the issue of livestock care and well-being. It is clear that voters in that state know farmers and ranchers share their values regarding the care of farm animals.” The board is intended to head off efforts by activist groups that want to impose their agendas on the state’s livestock and poultry producers. Wayne Pacelle, president and CEO of the Humane Society of the United States, implied that his group may seek to counter the new livestock board with its own ballot initiative in Ohio elections next year in the form

of a constitutional amendment that would contain language similar to California’s Proposition 2. “We haven’t made a final decision, but it’s very likely,” Pacelle said. In Texas, the Farm Bureaubacked Proposition 11, which bars the government from taking a person’s land to benefit another’s economic gain or boost tax revenue, passed with support from about 81 percent of voters. The ballot measure is the state’s response to the U.S. Supreme Court’s ruling in 2005 in Kelo v. New London, which authorized eminent domain for economic development, but left the door open for states to make their own law preventing these kinds of takings. Along with amending the state constitution to limit the taking of private property for eminent domain, Proposition 11 requires new entities seeking condemning power in Texas to first obtain approval by at least two-thirds of the Texas Legislature. In addition, the ballot measure specifically prohibits the taking of private property to give to another private entity for the primary purpose of economic development or enhanced tax revenues. It also limits the use and own-

State Focus

ership of property taken by eminent domain to either the state, the public at large or an entity specifically given the power of eminent domain. Proposition 11 will force condemning entities to address each individual property involved in an urban blight condemnation, rather than simply rub out entire neighborhoods. “The ability to productively use and manage private property is vital to all facets of agriculture, and clearly, Proposition 11 is an important citizen endorsement of property rights in that state and sets the stage for additional eminent domain reform in the Lone Star State,” Stallman said. Kenneth Dierschke, TFB president, called passage of the amendment an “important but incomplete victory” because Texas eminent domain laws still favor the condemner. “True reform will happen only when additional protections are added to eminent domain law such as offers to landowners that represent fair market value, compensation to landowners for lost access to their property and the right of landowners to repurchase land not used for condemning purposes,” Dierschke said.

Newsmakers

California Farm Bureau sees progress in water legislation

New York FB: DOT truck ban will cost farmers millions

Virginia FB invites consumers to sample state’s holiday offerings

A series of water-related bills passed by the California Legislature earlier this month represent real progress toward meeting the long-term water challenges facing the state’s farmers and ranchers, according to the California Farm Bureau. “Severe water shortages have forced family farmers in parts of California to spend many sleepless nights, trying to figure out how to save their farms and continue to produce food for our people,” said Doug Mosebar, CFB president. “The Legislature has moved California toward solutions needed to restore reliable water supplies for everyone.” Emphasizing that there is still much to be done, Mosebar said that new water storage both above ground and underground must be added and the ability to move water has to be improved. In addition, he called for the protection of water rights and the enhancement of the delta ecosystem. “The bills move us in that direction,” Mosebar said. “We’ll continue to work with the administration and state agencies as they implement the bills, to make certain that they recognize how important it is to grow food and strengthen rural economies in California.”

New York Farm Bureau is protesting a proposal by the state Department of Transportation to ban truck traffic on New York’s rural roads, which will add millions in transportation costs to the state’s already struggling farm industry. “It makes no sense at all to propose regulations that make New York more hostile to business than it already is,” said Dean Norton, NYFB president. “Our farm families are facing the worst economic climate for agriculture in three decades as a result of fallout from the global fiscal crisis, and the state transportation department’s response is to make it even costlier to do business here.” The department is calling for all trucks 45 feet or longer to first use major interstates before traveling on rural roads, where most farms are located. This will force hundreds of farmers to reroute produce and milk deliveries, making trucks travel countless miles out of their way to deliver local agricultural products to consumers in New York City and beyond. NYFB warned that the added transportation costs would result in higher food prices for New York-grown farm products for the state’s consumers.

Virginia Farm Bureau will host its first Save Our Food Holiday Festival on Dec. 12. Save Our Food is a VFB campaign launched in 2008 to encourage consumers to buy local and American foods whenever possible and to recognize the wealth of safe, fresh, locally grown products available throughout the state. The festival will highlight the array of local products available to Virginia consumers. Visitors will be able to taste, purchase and order products and services from vendors. There will be two “Iron Chef”-style cooking shows featuring a celebrity chef and Virginia chefs using regional foods to create a meal, as well as a holiday plant and décor show during which festival goers can learn how to create holiday arrangements using items from their own yards. Four main exhibit areas will showcase foods, wines, microbrews, specialty food companies and more from Northern Virginia, Tidewater, Southwest Virginia and Central Virginia. Among those sponsoring the event are Anthem Blue Cross and Blue Shield, the Children’s Museum of Richmond and the Virginia Department of Agriculture and Consumer Services.

Eric Thomason joined West Virginia Farm Bureau as the new assistant Mobile Ag Science Education Lab coordinator. A graduate of Emmanuel School of Religion and West Virginia University, Thomason spent the past eight years as a campus minister at Ohio University. Mississippi Farm Bureau named Samantha Cawthorn public policy director. Cawthorn served as interim public policy director since January and previously served as governmental relations coordinator. She graduated from Mississippi State University with a bachelor’s degree in political science and communication. Brad Mitchell is Massachusetts Farm Bureau’s new director of governmental relations. He most recently served as director of public affairs at Monsanto Co. in St. Louis, Mo. Mitchell holds a master’s degree in public health from the Boston University School of Public Health and a bachelor’s degree from Emerson College. Curt Williams has joined Florida Farm Bureau as assistant director of government and community affairs. Williams earned a bachelor’s degree in turfgrass science and a master’s degree in agribusiness management from the University of Florida.

Grassroots

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November 16, 2009

Heritage turkeys are growing trend with gourmet consumers A handful of foodies—chefs, food bloggers and local food enthusiasts—gathered in early November at Ayshire Farm in Upperville, Va., for the farm’s second annual “Timeless Turkey” blind tasting of nine heritage turkey breeds. The Royal Palm won first place as judged by a panel of five expert tasters, but the Midget White was the favorite with the crowd of about 50 guests. Ayrshire raises over 1,200 turkeys for direct marketing. Buyers pay anywhere from $100 to $200 for these rare birds, significantly more than the price of a supermarket turkey, either because they prefer the taste or just want to help preserve heritage breeds. At that price point, the market is a niche one, admits Margie Bender, research and technical programs director for the American Livestock Breeds Conservancy (ALBC). “We are not trying to replace commercial turkey production. We are trying to provide something that is unique and preserve genetic diversity,” she said. The market for heritage breeds is small but growing. ALBC does not keep data on sales, but it does take a census of the breeding population, a reliable indicator of the market since the animals would not be bred and produced if there wasn’t a market for them. In 1997, there were just 1,335 heritage turkey breeder birds in the whole U.S. The 2006 census found that number had shot up to 10,404. Another good indicator of trends these days

The Narragansett turkey is one of nine heritage breeds grown at Ayrshire Farm in Loudoun County, Va. The market for heritage turkeys is small but growing. is how often something is mentioned on the World Wide Web. Google searches turned up zero Web sites that mentioned “heritage turkeys” in 2000. By 2009, the term was found on 36,600 Web sites. All domesticated turkeys are descended from wild turkeys indigenous to the Americas. However, selective breeding and regional genetic isolation have led to “landrace” breeds that can vary greatly in color, size and taste. The nine heritage turkey breeds raised at Ayrshire, located near Washington, D.C., and owned by Cisco Systems co-founder and Virginia Farm Bureau member Sandy Lerner, include the Bourbon Red, Standard Bronze,

Black, Chocolate, Midget White, Narragansett, Royal Palm, Slate, and White Holland varieties. The Standard Bronze is the most popular heritage variety in the U.S. Most popular with the panel of expert judges, though, were the Royal Palm followed by the No. 2 choice, the Midget White, and at No. 3, the Chocolate turkey. Ayrshire raises its turkeys from day-old poults to market size. The farm has its own processing facility, an advantage that many other heritage turkey farms don’t have. Ayrshire’s turkeys, priced at around $10 per pound, are targeted to a high-end market. The price can vary greatly across the country, according to Bender, with growers near cities getting higher prices. “Growers will charge as much as the market can bear,” Bender said, in order to recoup their higher cost of production. One reason for the higher cost, she says, is that the feed conversion rate for the heritage breeds is typically around 4 pounds of feed per pound of meat, compared to 2 pounds of feed per pound of meat with a commercial broadbreasted white turkey. Heritage growers also typically use more expensive organic feed. The price tag puts a heritage turkey out of reach for the masses, but for the host who is always looking for the newest trend and is willing to pay top dollar, a Standard Bronze, Chocolate or Narragansett turkey is one way to impress holiday guests this season.

Classic Thanksgiving dinner costs decline for 2009 cents per pound, or a total of 44 cents per turkey compared to 2008. Milk, at $2.86 per gallon, dropped 92 cents and was the largest contributor to the overall decrease in the cost of the 2009 Thanksgiving dinner. “Consistent with the retail food price declines seen throughout the year, consumers will pay just a bit less for their Thanksgiving feast this year,” said Jim Sartwelle, AFBF economist. “Consumers are benefiting at the grocery store from significantly lower energy prices and the effects of the economic slowdown. Again this year, the cost per person for this special meal is less than a typical ‘value meal’ at a fast-food outlet,” Sartwelle said. Other items showing a price decrease this year were: a half-pint of whipping cream, $1.55; a dozen brown-n-serve rolls, $2.08; a 1-pound relish tray of carrots and

celery, 72 cents; and a 12-ounce package of fresh cranberries, $2.41. A combined group of miscellaneous items, including coffee and ingredients necessary to prepare the meal (onions, eggs, sugar, flour, evaporated milk and butter) also dropped in price, to $2.50. Items that increased slightly (less than 5 percent) in price this year were: a 14-ounce package of cubed bread stuffing, $2.65; two 9-inch pie shells, $2.34; and a

30-ounce can of pumpkin pie mix, $2.45. Two items, green peas and sweet potatoes, stayed the same in price at $1.58 per pound and $3.12 for three pounds, respectively. Farm Bureau volunteers are asked to look for the best prices but not take advantage of special promotional coupons or volume purchase deals. More than 200 volunteer shoppers in 35 states participated in this year’s survey.

Corner Post

U.S. Turkey Consumption Turkey consumption has increased 108 percent since 1970 due to consumers’ recognition of turkey’s good taste and nutritional value.

In 2008, U.S. consumption of turkey was 17.6 pounds per person.

Pounds/Per Capita

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Continued from page 1 The survey indicates the average cost of this year’s feast for 10 is $42.91, a $1.70 price decrease from last year’s average of $44.61. “As we gather this Thanksgiving for food and fellowship, it’s fitting to take a moment to recognize and give thanks, not only for the abundant food we enjoy as Americans, but for the hard working farm and ranch families across our nation who produce it,” said AFBF President Bob Stallman. The survey shopping list includes turkey, bread stuffing, sweet potatoes, rolls with butter, peas, cranberries, a relish tray of carrots and celery, pumpkin pie with whipped cream, and beverages of coffee and milk, all in quantities sufficient to serve 10 people. The cost of a 16-pound turkey, at $18.65 or roughly $1.16 per pound, reflects a decrease of 3

Source: National Turkey Federation