news11-19

The congressional agriculture committees are expected to focus much of their attention in 1999 on proposals to reform crop insurance and on legislation to reauthorize the Commodity Futures Trading Commission, congressional staff members told the NGFA's International Trade/Agricultural Policy Committee during its Nov. 18 meeting in Washington.

The NGFA has learned that the U.S. Department of Agriculture has submitted a request to the Office of Management and Budget to boost current federal funding of crop insurance by $1 billion as part of the president's fiscal year 2000 budget proposal. That would nearly double the current cost of the crop insurance program. It is uncertain at this writing whether the proposal will be supported by the administration and, if so, whether OMB will require USDA to target certain other USDA-funded programs for budget cuts to pay for such an increase. The president's budget proposal for fiscal year 2000 is expected to be unveiled in late January of February.

Meanwhile, the House Agriculture Committee's Risk Management and Specialty Crops Subcommittee, chaired by Rep. Thomas Ewing, R-Ill., plans to conduct field hearings on crop insurance next year. But eventual enactment of substantive reforms of crop insurance will be linked heavily to the availability of increased funding, congressional staff said.



	Congress Unlikely to Fundamentally Change Farm Law: Following enactment of a massive spending bill in October that included nearly $6 billion in additional agricultural spending, congressional staff members said they expect the fundamental structure of the 1996 farm law to remain unchanged in 1999. If relatively low market prices continue, they indicated it would be more likely for Congress to provide additional funding under the current farm law structure -- by increasing direct payments rather than increasing loan rates or permitting loan extensions. Protracted Debate Predicted on Future of CFTC: With the Commodity Futures Trading Commission seemingly alienating most of its core constituencies, congressional staff members predicted a protracted series of hearings on reauthorization of the agency before the House and Senate Agriculture Committees. While the CFTC's current authorization to exist continues through the year 2000, congressional interest in conducting oversight hearings on the agency has been peaked by the CFTC's issuance of a concept release on regulating over-the-counter derivatives (swaps). Congress this fall passed legislation that imposes a "freeze" through March 1999 on the CFTC's ability to unilaterally impose any new restrictions on the swaps market. In a related matter, Senate Agriculture Committee Chairman Richard G. Lugar, R-Ind., on Nov. 17 announced the committee will conduct hearings on Dec. 16 on regulation of over-the-counter derivatives and hedge funds. Senate staff members told the NGFA that Lugar has invited all five of the current CFTC commissioners to testify, as well as several past CFTC chairmen and members of the president's Working Group on Financial Markets, which includes representatives from the CFTC, Treasury Department, Federal Reserve and Securities and Exchange Commission. At the hearing, Lugar is expected to announce his committee's plans for conducting CFTC reauthorization hearings. Prospects for Fast-Track Trade Legislation Uncertain: Although the Clinton administration plans to propose legislation early next year that would grant it fast-track trade negotiating authority, congressional staff said that prospects for enacting such legislation are uncertain. One of the problems they cited was what they termed a "lack of clear cut goals and a strategy" by the administration for the upcoming round of World Trade Organization negotiations. Those negotiations are scheduled to begin in earnest in January, 2000. USDA officials told the NGFA that even in the absence of fast-track trade negotiating authority, they are working on several preparatory fronts. They said that a WTO Committee on Agriculture in Geneva continues to monitor performance of various countries in complying with the Uruguay Round trade agreement. In addition, Analysis and Information Subgroups of the committee are identifying specific agricultural trade issues to be negotiated in the WTO round. USDA predicts that issues of concern to lesser-developed countries will receive more emphasis in the next series of trade negotiations. USDA also is involved in a U.S. consultative council that is meeting with Argentina, Brazil and Chile in preparation for the next round of trade talks. Those discussions are scheduled to be expanded to other Latin American countries early next year, as well as with African and lesser-developed nations later. Once the next round of agricultural trade negotiations begin, it appears that the same structure will be followed as was used in the Uruguay Round. Under that model, negotiations would be centered in four major areas: 1) market access, including tariffs, reference prices and tariff-rate quotas, as well as how they should be changed and administered. Non-tariff measures and state trading enterprises (such as China's, which allegedly restricts imports) also would be examined; 2) export competition, including subsidies, credit programs and food assistance; and 3) domestic supports for producers. USDA expects that biotechnology and sanitary and phytosanitary standards also will be key discussion topics during the next round of trade negotiations. Back



	CRP Signup Results Likely to be Announced in February U.S. Department of Agriculture officials have told the NGFA that it appears that the results of the 18^th enrollment for the Conservation Reserve Program likely will not be announced until sometime in February, if all goes well. The CRP signup began on Oct. 26 and is scheduled to end on Dec. 11. Importantly, USDA officials said that if successful CRP bidders are not notified until February, it could be June before the Farm Service Agency is able to review and approve the CRP compliance plans that are required to be submitted by those bidders before CRP contracts are awarded. Thus, the CRP contracts for successful bidders would not take effect until then, and CRP payments would be pro-rated for the remainder of the year. USDA is not authorized to make retroactive CRP payments, officials said. This could be an important consideration for producers who submit a CRP offer and forego planting next spring, since they would not receive CRP payments until their CRP contracts are finalized and approved. Back Donnelly Announces Final Appointments to Arbitration Appeals Panel NGFA Chairman Michael F. Donnelly has completed making appointments to the NGFA's Arbitration Appeals Panel, which was expanded from eight to 12 members under changes to the NGFA Bylaws that were ratified by the membership at the March convention. The final appointee is Steven L. Colthurst, procurement manager, Western Feed Division, Land O'Lakes Inc., Seattle, Wash. The other new appointees were announced in the Oct. 8 *NGFA Newsletter. The NGFA Bylaws vest in the Arbitration Appeals Panel the responsibility for hearing appeals of arbitration decisions rendered by arbitration committees. Back*

Tech Talk

by Thomas C. O'Connor

Director of Technical Services

GIPSA: Mexico Still Requiring TCK, Ergot Certification

The U.S. Department of Agriculture's Grain Inspection, Packers and Stockyards Administration alerted the NGFA this week that Mexico still is requiring U.S. wheat to be certified as being free of TCK smut and that U.S. sorghum be certified as containing less than 0.05 percent ergot.

GIPSA initially reported that Mexico had indefinitely suspended its TCK smut and ergot certification requirements. [See NGFA Newsletter, Nov. 5, 1998.] However, GIPSA said this week that its interpretation was based on its understanding of verbal remarks made by Mexican government officials. But GIPSA said written confirmation received by the agency on Nov. 3 revealed that Mexico has only rescinded its original requirement that the TCK and ergot certifications be provided by USDA. Instead, Mexico now will allow private laboratories to provide the required certification, so long as they are on a list of laboratories previously approved by the Mexican government.

Thus, under this clarification, Mexico is requiring the following:

For sorghum, an official or approved private lab inspection certificate must indicate that the shipment contains less than 0.05 percent of ergot (sclerotia of Claviceps sorghi and/or Claviceps africana), which Mexico specifies as 90 sclerotia per kilogram of sorghum.

For wheat, an official or approved private lab inspection certificate must show that the shipment is free from TCK smut (illetia controversa).

The requirements took effect on Nov. 2 as part of series of new rules (known as NOM-FITO-1995) that were issued on Oct. 12 by Mexico's Secretaria de Agricultura, Ganaderia y Desarrollo Rural (SAGAR). [A summary of the Mexican regulations prepared by the U.S. embassy in Mexico City is found on the NGFA's web site at http://www.ngfa.org. Click on the "What's New" icon.] As reported in the Oct. 22 edition of the NGFA Newsletter, the rules also prescribe fumigation methods for imported grains and seeds; and require the cleaning and fumigation of surface transport vehicles if Mexican border officials determine they are contaminated with vegetation or soil.

The Mexican rules also contain phytosanitary certification, inspection and fumigation requirements for products transshipped through the United States, as well as restrictions on ports of entry for certain products, including corn, sorghum, soybeans, wheat and rice.

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Update: EPA Plans to Proceed with Proposed Phosphine Rule

The Environmental Protection Agency has told the NGFA that it plans to proceed with a proposal within the next several weeks that would impose new risk-mitigation measures on the use of phosphine gas as a fumigant.

The controls are being considered as part of the agency's reregistration of aluminum and magnesium phosphide, which produce phosphine gas. EPA said there will be a 60-day comment period followed by a "stakeholder" meeting in Kansas City, currently scheduled for May 1999. EPA also said there may be an additional "stakeholder" meeting in California during the same period. EPA said input obtained during the stakeholder meetings and comment period will be used to fashion a final rule, scheduled to be issued during summer 1999.

The NGFA also has learned that the U.S. Department of Agriculture has formed a six-member task force to interact with EPA on this issue. The task force is being headed by Dr. Al Jennings, director of USDA's Office of Pest Management Policy, and includes Dr. Jim Chriswell of Oklahoma State University, Stillwater, Okla.; Dr. Linda Mason of Purdue University, West Lafayette, Ind.; and Dr. Franklin Arthur of USDA's Agricultural Research Service, Manhattan, Kan. The two other task force members have expertise in fumigation of tobacco and peanuts. The NGFA and 25 other national and state agricultural organizations -- including many State/Regional Grain and Feed Associations affiliated with the NGFA -- had submitted a letter on Oct. 29 to Secretary of Agriculture Dan Glickman urging that USDA intervene with EPA on this important matter. [See NGFA Newsletter, Nov. 5, 1998.]

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by Randall c. Gordon

Vice President, Communications/Government Relations

U.S. Wheat Export Marketing Group Urges Japan to Tighten Dockage Limits on U.S. Wheat Purchases

The export marketing organization representing U.S. wheat producers in 18 states has written to the Food Agency of the Japanese Ministry of Agriculture urging that it reduce the maximum dockage levels permitted in U.S. wheat shipments.

The Aug. 24 letter, which appears verbatim alongside, was signed by U.S. Wheat Associates President Alan T. Tracy. The NGFA was alerted to this development by the Pacific Northwest Grain and Feed Association, one of the NGFA's 36 state and regional affiliated associations.

In the letter, U.S. Wheat Associates noted that the Japanese Food Agency currently specifies a 0.5 percent maximum dockage limit in U.S. wheat shipments, which the U.S. wheat group called a "considerable improvement over what it used to be."

But citing what it said were concerns expressed by Japanese flour millers, U.S. Wheat Associates said it was proposing that the Japanese Food Agency announce in April 1999 that it will implement a two-phase reduction in the maximum allowable levels of dockage in all classes of U.S. wheat purchases to:

0.4 percent starting on Nov. 1, 1999; and

0.3 percent effective Nov. 1, 2000.

Further, the letter stated that "consideration may be given to a further reduction (in maximum allowable dockage) at a later date."

The Pacific Northwest Grain and Feed Association reports that the letter has sparked concern in the region over the ability of producers to deliver wheat with dockage levels approaching the new limits being proposed by U.S. Wheat Associates. There also is concern whether there is sufficient cleaning capacity at Pacific Northwest export elevators to meet a significantly tighter wheat dockage restriction, as well as the impact such a requirement would have on the price-competitiveness of U.S. wheat exports to Japan. "With annual purchases exceeding 3 million metric tons, the (Japanese) Food agency is the largest export customer for wheat produced and shipped from the Pacific Northwest," wrote the Pacific Northwest Grain and Feed Association in its Oct. 31 News Bulletin.

U.S. Wheat Associates (USW) states that it is "the export market development organization representing the U.S. wheat industry….USW strives to increase the level of U.S. wheat exports. The goal of export market development is achieved by demonstrating the unique role of the United States as a reliable producer and supplier of a wide range of quality wheats and by encouraging the growth of world consumption of wheat and wheat products through technical assistance and service. USW does not buy, sell or process wheat. Its resources are devoted exclusively to export market development, with activities performed in the United States providing support for the work carried out by USW offices around the world."

State wheat producer organizations that are members of U.S. Wheat Associates are: Arizona, Arkansas, California, Colorado, Idaho, Kansas, Minnesota, Montana, Nebraska, North Carolina, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Virginia, Washington and Wyoming.

U.S. WHEAT ASSOCIATES

August 24, 1998

Mr. Shin-ichi Yahagi, Director

Trade Division

Food Agency

Ministry of Agriculture, Forestry & Fisheries

Tokyo, Japan

Dear Mr. Yahagi:

This letter is a follow-up to discussions held with you during your recent visit to Washington, D.C. regarding proposed changes in the Food Agency's specifications for dockage in wheat purchased from the United States.

As we discussed, the current maximum of 0.5% was achieved gradually over a three-year period through close cooperation between the Food Agency and the U.S. wheat industry. This has been very much appreciated by the Japanese flour milling industry. Although 0.5% maximum dockage is a considerable improvement from what it used to be, it is still of concern to Japanese millers. Consequently, we are proposing the following.

In April 1999, the FA would announce that beginning November 1, 1999, the maximum dockage content allowed in purchases of all classes of U.S. wheat will be 0.4%, and that beginning November 1, 2000, the maximum dockage allowed will be 0.3%. Consideration may be given to a further reduction at a later date. All dockage should be deductible from gross weight.

We very much appreciate the close relationship that exists between U.S. Wheat Associates and the Food Agency and hope you will give the above suggestions your serious consideration.

Sincerely,

Alan T. Tracy

President

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	Farm Broadcasters Interview NGFA NGFA President Kendell W. Keith and Vice President for Communications and Government Relations Randall C. Gordon conducted more than two dozen interviews with farm broadcasters on Nov. 12-13 during the annual convention of the National Association of Farm Broadcasters. In the photo at top Keith is interviewed by Rich Balvanz (left), farm director at WMT Radio in Cedar Rapids, Iowa, while in the bottom photo, he is queried by Gene Williams (left), farm director at KKYA Radio in Yankton, S.D. The most prevalent interview topics were NGFA's historic rail arbitration agreement, the future direction of farm policy and the ways to encourage producers to make more use of risk-management tools. Grain Grades and Weights Committee Meets Members of the NGFA's Grain Grades and Weights Committee are shown during their Nov. 5 meeting at the NGFA's Library/Conference Room in Washington. During its deliberations, the committee focused on: 1) the proposed fee increase for official inspection and weighing services by the U.S. Department of Agriculture's Grain Inspection, Packers and Stockyards Administration; 2) the Food and Drug Administration's guidelines for utilizing the export exception for aflatoxin; 3) proposals by some state wheat groups to use tax funds to install wheat cleaners at public elevators in the Texas Gulf; 4) proposals from some wheat groups concerning a survey for Karnal bunt in 1999; and 5) several other grain inspection issues. Pictured are (seated, from left): David T. Richelderfer, manager, Grain Division and Human Resources, Pendleton Flour Mills, Pendleton, Ore.; David Krejci, executive vice president, Grain Elevator and Processing Society, Minneapolis, Minn.; Committee Chairman Robert C. Smigelski, Agriculture Group operations manager, The Andersons, Maumee, Ohio; and Warren Duffy, vice president, export operations, ADM/GROWMARK Inc., Ama, La. Also pictured are (standing, from left): NGFA Director of Technical Services Thomas C. O'Connor; Ron Olson, vice president, grain operations, General Mills Inc., Minneapolis, Minn; Paul C. Hughes, president, Farmers Soybean Corp., Blytheville, Ark.; Arvid L. Hawk, grain handling coordinator, Grain Division, Cargill Inc., Minneapolis, Minn.; Harold E. Reese, vice president, Bunge Corp., Destrehan, La.; and Jon R. Setterdahl, grain merchandiser, Farmers Cooperative Co., Farnhamville, Iowa. Also attending the meeting, but not pictured, was Tim Paurus, assistant vice president, terminal operations, Harvest States, St. Paul, Minn. Back

From the Bench

by David C. Barrett Jr., Counsel for Public Affairs

CFTC Administrative Law Judge Finds Flex HTA Contracts to be Futures

A Commodity Futures Trading Commission administrative law judge has issued a lengthy opinion in which he found the now-defunct Grain Land Coop's flex hedge-to-arrive contracts to be illegal, off-exchange futures contracts under the Commodity Exchange Act.

The CFTC administrative law judge's decision conflicts with a Minnesota federal district court, which issued an October 1997 decision on the same contracts involving Grain Land and the producer-sellers. That Minnesota federal district court ruled that Grain Land's flex HTA contracts were cash forward contracts excluded from regulation under the Commodity Exchange Act.

The 53-page decision of the CFTC administrative law judge, George H. Painter, was issued on Nov. 6 and entered under a CFTC administrative enforcement action brought against Grain Land in November 1996. The CFTC opinion contained detailed factual findings on Grain Land's contracts and distinguished the Grain Land case from other state and federal court cases finding HTA contracts to be legitimate forward contracts.

In his decision, the administrative law judge:

rejected Grain Land's contention that the Minnesota federal district court's decision prevented or estopped the CFTC from reexamining the facts and law applicable to Grain Land's contracts.

concluded that Grain Land's contracts merely provided producers with "optional delivery." Specifically, the administrative law judge found that "[a] producer who entered into [Grain Land's] Flex HTA contract was not binding himself, at the time he signed the Flex HTA contract, to deliver grain -- but only to deliver grain if the producer chose to set basis or if the producer failed to set basis by a certain time and [Grain Land] did." [Emphasis in original.]

said that Grain Land's "attempt to characterize its Flex HTA contract as `identical' to the hedge-to-arrive contracts in [cited court cases addressing other HTA contracts] to be disingenuous at best. [Grain Land] overlooks the fact that none of those hedge-to-arrive contracts contained a cancellation clause similar to Grain Land's Flex HTA. Even the Grain Land employee who created the Flex HTA contract testified that he constructed the Flex HTA by adding a cancellation provision to a `standard' hedge-to-arrive contract."

concluded that Grain Land's contracts "served substantially the same function as exchange-traded futures contracts: providing participants with an opportunity to assume or shift the risk of price changes in an underlying commodity without the forced burden of delivery." [Emphasis in original.]

entered a "cease-and-desist order" to prevent Grain Land from "continued efforts to collect grain pursuant to its Flex HTA contracts, through deliveries made to its agent."

declined to issue a monetary penalty against Grain Land because its "wrongdoing has caused its demise….A civil monetary penalty would serve no purpose in the case and, therefore, such a sanction will not be imposed."

The administrative law judge's initial decision [in CFTC Docket # 97-1] becomes final 15 days from entry of the Nov. 6^th order unless an appeal is filed with the full commission or the commissioners decide on their own to review it. In the latter case, the five CFTC commissioners would review and rule on the claims brought by the CFTC Division of Enforcement.

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Ohio Appellate Court Upholds NGFA Arbitration of Hedge-to-Arrive Cases

An Ohio appellate court has upheld an Ohio trial court's decision to send three cases involving "flexible hedge-to-arrive" contracts to NGFA arbitration.

The three cases had been consolidated for appellate review.

Each of the cases involved a NGFA-member agricultural cooperative and producer-sellers. Likewise, each of the "flex-HTA" contracts contained the following provision:

"Seller and Buyer agree that all disputes and controversies of any nature whatsoever between them with respect to this contract shall be arbitrated according to the arbitration rules of the National Grain and Feed Association, and that the decision and award determined thereunder shall be final and binding on the Seller and Buyer."

Both the trial and appellate courts rejected the producers' arguments that counterclaims based on alleged violations of the Commodity Exchange Act, the Securities Exchange Act and the Ohio Consumer Sales Practices Act were not arbitrable. The court found that "[e]ven if we assume that the flex-HTA provisions of the contract were illegal, the resulting invalidity of those provisions would not extend to the arbitration clause….[T]he arbitration clause would remain enforceable, and issues of illegality would properly belong to the arbitrator." [Emphasis added.]

The producers also contended that since they did not sign all of the contracts, they did not agree to arbitrate all of their contractual disputes. Again, both the trial and appellate courts found that the contract confirmations sent by the buyer bound the producers because they were considered "merchants" under Ohio law. "[A]lthough Ohio requires that arbitration agreements be in writing, it does not require the signatures of the parties in order to enforce them," the appellate court ruled.

A copy of the Ohio appellate court's opinion is available on the by clicking here.

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Membership Matters

by Todd E. Kemp, Director of Marketing

`How's Membership?'

Q: How's Membership?

That's the question most-asked of your director of marketing when NGFA members call the NGFA office. With the 1998-99 membership year (convention-to-convention) roughly two-thirds gone, now is a good time to take stock of our membership successes so far and plot a course for finishing with a bang at our San Francisco convention.

Statistics: New Members -- 64; Non-renewals -- 56

NGFA membership is on course to finish at or beyond the century mark for the second consecutive year. Slightly higher non-renewals this year are attributable to unfavorable economic conditions in isolated geographic regions, as well as the continuing consolidation within the industry.

Q: Where Do We Go From Here?

Several compelling recruiting approaches may be important in helping us reach the magical goal of 100 new member companies by San Francisco:

Rail Arbitration: This historic agreement with the railroads should provide yet another reason for nonmembers to join the ranks of the NGFA.

Regular Arbitration: This tested-and-true staple used by NGFA recruiters over the years is still an invaluable benefit for buyers and sellers of grain, oilseeds, feed and grain products.

Conferences/Educational Resources: Encourage your prospect to attend an NGFA conference and expose him or her to the professional development opportunities and educational resources available from the NGFA. Membership often follows.

Materials on all of the preceding membership-recruiting tools are available from the NGFA. Contact Todd Kemp at (202) 289-0873 to tailor an approach for your prospect.

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Committee Action

by Randall c. Gordon

Vice President, Communications/Government Relations

International Trade/Ag Policy Committee Meets

Members of the NGFA's International Trade/Agricultural Policy Committee are shown during their Nov. 18 meeting at the NGFA's Library/Conference Room in Washington. During its deliberations, the committee focused on anticipated congressional action next year concerning the farm bill, international trade agreements, crop insurance, U.S. laws that impose export sanctions on foreign countries, crop insurance, the harbor maintenance tax and the reauthorization of the Commodity Futures Trading Commission. They also met with officials from the U.S. Department of Agriculture and congressional staff members.

Pictured are (seated, from left): James Mayer, president, James Mayer & Associates Inc., Northfield, Ill.; John L. McClenathan, vice president, grain marketing, GROWMARK Inc., Bloomington, Ill.; Charles A. Nelson, vice president, Bunge Corp., Washington, D.C.; and Pat Ptacek, executive vice president, Nebraska Grain and Feed Association, Lincoln, Neb.

Also pictured are (standing, from left): Bonnie Raquet, vice president, Cargill, Inc., Washington, D.C.; Allen J. Anderson, senior vice president, administration and public affairs, Harvest States, St. Paul, Minn.; Claude Alexander, director, government affairs, Ralston Purina Co.; Washington, D.C.; Ken Keithley, director, agricultural products, LIT Division of First Options, Chicago, Ill.; David C. Lyons, vice president, government relations, Louis Dreyfus Corp., Washington, D.C.; M. Ann Tutwiler, director, agribusiness policy, Central Soya Co. Inc., Washington, D.C.; Richard L. Gady, vice president, public affairs, ConAgra Inc., Omaha, Neb.; and NGFA President Kendell W. Keith.

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