National%20affairs%202012

Farm Bureau Policy Development Fact Sheet No. 1 — 2012

NATIONAL AFFAIRS AFLATOXIN TESTING FOR CROP INSURANCE Frequently producers will find their grain docked for aflatoxin when it is offered for sale at the local elevator, but when submitted for crop insurance reimbursement, the grain is found to be free of aflatoxin. The Texas Department of Agriculture has developed a “single test” procedure at the initial point of sale that is then tagged to that grain throughout.

Related Policy: Risk Management/Crop Insurance N-225, Aflatoxin-Vomitoxin N-335 1. What common procedures might be established?

2. How could that information be used with crop insurance?

3. Would it be beneficial to have a federal “single test” procedure that could be used nationwide?

4. Should this “single test” be mandatory?

ANIMAL DISEASE TRACEABILITY Foreign animal disease outbreaks have the potential to create massive financial losses in the livestock sector through loss of access to foreign markets, a decline in meat demand by domestic consumers, and direct production losses (death loss and morbidity). Disease outbreaks also put export markets at risk, as was amply demonstrated by the 2003 Bovine Spongiform Encephalopathy (BSE) event. Meat exports have increasingly become a key component of meat demand. In fact, the major US meat sectors have never been more export-dependent than they are now.

Related Policy: Livestock Identification N-309 1. Is the mandatory identification of animals for interstate shipment in USDA’s proposed traceability system acceptable to Farm Bureau under current policy?

2. Are the exemptions in the proposed rule (outlined in discussion sheet) broad enough to make implementation manageable?

3. Can states coordinate to provide timely and complete trace-back capability in the event of a disease outbreak?

PORT INFRASTRUCTURE The Mississippi River is used to transport agricultural goods from across the country. There is a problem with silt/soil removal along the Mississippi River, causing barges and carriers to load their cargo in increasingly shallow waters. Currently

Harbor Maintenance Trust funds are used to dredge and maintain waterways for navigation.

Related Policy: Transportation Policy N-128, Waterways N-549 1. What would the impact be on American consumers if the inland waterway system were to fail?

2. How would failure of the inland waterway stem affect farmers’ agricultural transportation options in each state?

3. What level of funding is necessary to properly operate and maintain the inland waterway system?

4. Should Farm Bureau support an increase in the barge diesel fuel tax?

PREHARVEST FOOD SAFETY Pre-harvest food safety has become a topic of increasing focus, particularly in the beef industry. USDA’s Food Safety and Inspection Service announced at the 2011 AFBF annual meeting that their next step in reducing E. coli is through pre-harvest intervention, and they have repeatedly re-stated their intentions. Farm Bureau does not currently have policy on the role of pre-harvest steps or treatments in meat safety.

Related Policy: Inspection and Grading of Meat, Poultry and Seafood Products N-358 1.

2.

3.

4.

What should the role of the producer be in pre-harvest food safety?

What role should government play?

Are there specific E. coli tools that producers would be willing to use?

Should Farm Bureau push for USDA approval of E. coli management tools?

RETAIL AG More farmers and ranchers are getting closer to their customers, and finding that they can capture a higher margin when they grow vegetable or meat products with a specific consumer market segment in mind. This sector can be called “Retail Agriculture.” Retail Ag is a type of “value added agriculture” where the value that is added is the two-way information flow between farmer and consumer. In addition to being a significant contributor to net farm income, Retail Agriculture describes the nature of a growing number of Farm Bureau members’ farm operations and offers new business opportunities to young and beginning farmers.

1. Should Farm Bureau identify Retail Agriculture as an issue area for policy action?

2. Should Farm Bureau work to enhance producer access to additional marketing channels and infrastructure for local and regional food systems?

3. What can be done to encourage the federal agencies’ use of locally grown food in school lunch programs and increase access to this market for farmers?

4. Would economic growth in rural areas be spurred by supporting “regional” food branding initiatives?

SALES TAX ON INTERNET SALES Many rural communities find themselves losing their retail base. Local retailers are competing with Internet retailers who do not have a physical presence (brick and mortar) in that state. This also deprives local and state government of tax revenue needed to provide essential services. Legislation has been introduced in Congress to allow states to collect sales tax from online companies that do not have a physical presence in their state, while providing an exemption for small businesses. Farm Bureau policy currently opposes requiring out-of-state sales tax collection.

Related Policy: Taxes 153, Sales, Fuel and Excise Taxes N-436 1. Do you agree or disagree that remote sellers have an unfair price advantage by not collecting state and local taxes?

2. Does this have an impact in your community?

3. With tight budget pressures nationwide, how important is it to increase tax revenue for state and local governments?

4. Is your county/state considering a tax increase or cuts to services?

5. Should Farm Bureau policy be changed to support allowing states and local governments to collect sales taxes from out-of-state sellers?

[If you need additional information on these or other national issues or if you desire assistance with your county policy development meeting contact Jeffery Hall, Associate Director of National Affairs, at (501) 228-1842 or via email at jeffery.hall@arfb.com.]

Aflatoxin Testing for Crop Insurance AFBF Policy Development May 2012 Issue: Frequently, producers’ grain is docked because of the presence of aflatoxin when offered for sale at the local elevator although the grain is subsequently found to be free of the fungus when samples are submitted for crop insurance reimbursement. In Texas, state officials have developed a voluntary program to remedy this situation. The One Sample Strategy (OSS), administered by the Office of the Texas State Chemist (OTSC), allows grain elevators choosing to participate to use the same aflatoxin test results for both grading and for valuing an insured loss. This single test procedure is conducted at the initial point of sale and the test result is then tagged to the grain to satisfy regulatory requirements and to collect insurance indemnities.

Questions: Would it be beneficial to have a federal “single test” procedure that could be used nationwide?

What common procedures might be established?

Will the Federal Grain Inspection Service (FGIS) be responsible for evaluating the procedures and technologies to ensure uniformity and accuracy among the regulatory agencies and the private sector?

How could that information be used with crop insurance?

Background: Aflatoxin is a naturally produced mycotoxin from the Aspergillus family of molds that are common and widespread in nature. These molds are found in the soil, decaying vegetation, hay and decaying grain. Stressful growing conditions, like drought or intense heat, can increase the likelihood of aflatoxin problems in harvested grain. Aflatoxin is not uniformly distributed in each ear of corn, each plant or across a corn field. Its presence, measured in parts per billion, means that just a few kernels in a sample could trigger a positive aflatoxin test result. Currently, many elevators test a truckload of corn multiple times, varying the sample collection points. In fact, a 30 percent variation in levels among aflatoxin samples is common when a truckload of corn is tested multiple times using official procedures. When the official procedures are not followed, a 60 percent variation in aflatoxin samples can occur. Consequently, each separate sample is likely to yield different results that create uncertainty in testing results, and on though to the corn market.

The Food and Drug Administration limits the use of grain with aflatoxin because it is a “Group One” carcinogen.

Contamination is both a public health and an animal health issue because a high dose of the toxin can cause illness, including acute liver cirrhosis, and cancer leading to death in both humans and animals.

Usually corn with aflatoxin levels less than 20 parts per billion (ppb) can enter commercial marketing channels. The exception is corn for use in dairy feed, which has a zero tolerance level for aflatoxin. When aflatoxin levels exceed 20 ppb, the ability to use corn becomes more complicated as the concentration levels affect the feed value to various livestock species.

Corn with aflatoxin levels of 20 ppb or higher may trigger an insurance indemnity. Crop insurance policies can value a loss due to aflatoxin prior to harvest, in the combine or in a grain truck before entering on-farm or commercial storage. The quality loss from aflatoxin is an insurable loss with discount factors determined by the aflatoxin level and reduction in grain value.

To be considered a covered loss, crop insurance policies require that samples must be pulled by a disinterested thirdparty. USDA’s Risk Management Agency (RMA) uses the sampling guidelines and procedures developed by the FGIS to

test and grade grain. Careful attention to the sampling procedures is crucial in obtaining an accurate test result. FGIS reports that 90 percent of the errors in aflatoxin testing result from improper sampling, which reinforces the need to ensure there is an accurate sampling protocol such as in the OSS framework. Similarly, thorough recordkeeping that accurately matches the grain samples to the farmer is important for crop insurance purposes.

The purpose of the OSS program is for the result from a single sample set of aflatoxin tests to be used in determining purchasing, regulatory and crop insurance aflatoxin-related decisions regarding a particular truckload of corn. To fulfill this purpose, the program trains and verifies the proficiency of individual grain elevator employees to accurately pull samples and conduct tests to measure aflatoxin levels in corn using quality, standardized sampling, grinding and testing equipment and methods. The OTSC procedures prescribe the recommended testing kits and require the testing equipment to be cleaned between tests following a prescribed methodology. The OTSC conducts spot checks of the participating elevators throughout harvest to ensure all procedures are being followed. These results, when generated by an approved elevator participating in the OSS, will be recognized by the Office of the Texas State Chemist for regulatory compliance and by USDA’s Risk Management Agency (RMA) for crop insurance purposes.

Farm Bureau Policy: 335 – Aflatoxin-Vomitoxin Lines 1-3: Uniform sampling and grading system that takes into account the actual aflatoxin levels; Lines 4-5: The present uniform test for aflatoxin for use in all states and supports the development of an accurate method for testing and sampling in the marketplace.

Animal Disease Traceability AFBF Policy Development May 2012 Issue: Foreign animal disease outbreaks have the potential to create massive financial losses in the livestock sector through loss of access to foreign markets, a decline in meat demand by domestic consumers, and direct production losses (death loss and morbidity). Disease outbreaks also put export markets at risk, as was amply demonstrated by the 2003 Bovine Spongiform Encephalopathy (BSE) event. Meat exports have increasingly become a key component of meat demand. In fact, the major US meat sectors have never been more export-dependent than they are now. USDA estimates that for 2012, beef exports will amount to almost 11 percent of production, a record level. Pork exports in 2012 are projected to amount to almost 23 percent of production, up from less than 10 percent a decade ago. The loss of this component of demand in the event of a disease outbreak would be devastating. It is worth noting, too, that virtually all of our major meat export market competitors (e.g. Canada, Brazil, Australia, New Zealand, and Uruguay) have implemented a traceability program; the US has not.

The combined effect of domestic and export demand declines and production losses from a disease outbreak could be dramatic. For example, it has been estimated that a Foot and Mouth Disease (FMD) outbreak alone would result in average losses to the U.S. beef and pork industries of $12.9 billion per year. Keeping these losses to the lowest possible level would require timely and effective disease identification, containment, and eradication efforts. These efforts would rely heavily on efficient trace-back and trace-forward capabilities based on a reasonably complete animal identification system.

Last year, USDA Animal and Plant Health Inspection Service (APHIS) proposed a rule to establish minimum identification and documentation standards for animals shipped across state lines. This is not quite the same thing as establishing a uniform national identification system. In this respect, the US approach to identification and traceability is substantially different from other major livestock producing countries, which typically have adopted uniform national systems with mandatory participation. US producers, most notably in the cattle sector, have strenuously resisted mandatory programs in the past. This past resistance accounts for USDA’s recent approach which, while mandatory for interstate shipment, would be administered at the state rather than federal level and would include numerous exemptions to facilitate implementation.

Questions: Is the mandatory identification of animals for interstate shipment in USDA’s proposed traceability system acceptable to Farm Bureau under current policy? Should AFBF clarify policy to address the mandatory nature of the ADT system for interstate movements?

Are the exemptions in the proposed rule (outlined in background below) broad enough to make implementation manageable? Are they too broad to provide the data that will be required to achieve full traceability?

Can states coordinate to provide timely and complete trace-back capability in the event of a disease outbreak?

Background: In 2004, following the first US case of Bovine Spongiform Encephalopathy (BSE), the federal government proposed the National Animal Identification System (NAIS). The goal of this system was to provide complete trace-back within 48 hours of an animal disease outbreak. The program would have provided an unique premise ID number to any farm in the country containing livestock. The program would have been administered at the federal level.

The NAIS concept was generally supported by poultry and pork industries but was incredibly unpopular among cattle producers. In early 2010, the Congressional Research Service found that participation in premise ID registration amounted to 95 percent of poultry operations, 80 percent of swine operations, and 18 percent of cattle operations. In response to the strong resistance to NAIS, USDA essentially abandoned the program in February 2010.

In August 2011, USDA proposed a new Animal Disease Traceability (ADT) rule to replace the withdrawn NAIS program.

The proposed rule establishes minimum national standards for identification and documentation of animals moving in interstate commerce. Administration of the identification program and responsibility for traceability in the event of a disease outbreak would remain with relevant state authorities. The federal government would develop traceability standards, but state/tribal authorities would actually run the program.

Under the proposed program, identification would not be required until animals are shipped between states. Cattle shipped interstate would, in general, be required to have an official eartag. There are some exceptions to this individual tag rule. For now, animals under 18 months of age and those going directly to a “recognized slaughtering establishment” would not have to be identified; though USDA notes that this is only an interim situation. At some point in the future, a rule governing identification of these currently exempt classes will be put forth. Another key exception to the individual tag rule is that states may make agreements among themselves on what constitutes acceptable identification for the shipment of animals between those particular states. In general, this would be used to accommodate states that require branding and accept brands as an official form of ID. When interstate shipment occurs, animals will have to be accompanied by an interstate certificate of veterinary inspection (ICVI) which would be issued by an accredited veterinarian and would include the unique identification for the animal(s) being shipped. Alternatives to the ICVI are mentioned similar to the exceptions made for identification. For example, individual states can enter into agreements with other states to accept alternatives to the ICVI. More significantly, USDA proposes not requiring the listing of individual ID numbers for loads of cattle going directly to slaughter or to “an approved livestock facility approved to handle ‘for slaughter only’ animals and then directly to a recognized slaughtering establishment,” which could presumably include commercial feedlots.

The US approach of establishing national standards applied essentially only on interstate shipments and then leaving the satisfaction of those standards to state officials appears to be unique in the world. Most major livestock producing countries have national programs that are mandatory or that are transitioning to mandatory. Canada, Brazil, Australia, New Zealand, and Uruguay all fit this description. Programs in these countries also generally include not only an animal identification requirement but also a premise registration similar to that offered in the now-abandoned NAIS program.

Farm Bureau Policy: 309 – Livestock Identification - deals with disease traceability issues. The fundamental principles of Farm Bureau policy on this issue are summarized as follows: Lines12-20: We support the establishment and implementation of a voluntary national animal identification system capable of providing support for animal disease control and eradication. Individual states and/or tribes should have control of the animal ID program, not a private “for profit” company. We support the opportunity for each state to decide the entity controlling their respective animal ID program database. However, in the event of a disease outbreak, the controlling entities must be equipped to communicate and utilize the system to track and trace animals in a timely manner.

Other key principles supported in Farm Bureau policy: Cost share to defray ID expenses for producers.

Collect only information necessary for disease trace-back and exempt producer information from the Freedom of Information Act. Consolidate with current animal disease programs (e.g., scrapie, TB, Brucellosis) so that there is only one program.

Exclude animals under 18 months of age and those going directly to slaughter.

No ID required until animals are shipped across state lines.

Port Infrastructure AFBF Policy Development May 2012 Issue: The Mississippi River is used to transport agricultural goods from across the country. There is a problem with silt/soil removal along the Mississippi River, causing barges and carriers to load their cargo in increasingly shallow waters.

Currently Harbor Maintenance Trust (HMT) funds are used to dredge and maintain waterways for navigation.

Questions: What would the impact be on American consumers if the inland waterway system were to fail? How would failure of the inland waterway system affect farmers’ agricultural transportation options in each state?

How much would shipping costs increase if U.S. agricultural exports had to transit through a transshipment port?

What level of funding is necessary to properly operate and maintain the Inland Waterway System? Should Congress allocate more general treasury funds to the Inland Waterways Trust Fund (IWTF)? Should AFBF support an increase in the barge diesel fuel tax?

How would privatization work?

Background: As the American economy has grown, the United States has become more and more dependent on its waterborne trade.

Today, international trade through U.S. ports, directly and indirectly, supports 25-30 percent of U.S. GDP and 13 million jobs. For U.S. agriculture the impact is even larger, 30-35 percent of agricultural income is derived from exports, the vast majority of which is transported via water. Overall, deep draft ports accommodate ocean-going vessels which carry more than 99 percent of U.S. overseas trade by weight and 64 percent by value.

Our country’s inland navigation system plays a critical role in our nation’s economy, moving hundreds of millions of tons of domestic commerce. Incredibly important to the agriculture industry, approximately 60 percent of the nation’s grain exports move by barge on the inland waterway, primarily on the Mississippi River. Across all trade, the transportation cost savings alone are estimated to exceed $7 billion annually compared to the cost of shipping this type of tonnage by alternative means.

Development and maintenance of U.S. inland waterways and ports is a shared responsibility of federal, state, and local governments, with extensive private sector participation. The federal government, through the U.S. Army Corps of Engineers (USACE), maintains harbor access channels, while individual ports construct and maintain the landside terminal facilities, dredge their own berths, and contribute to channel improvement cost-sharing programs. Without routine dredging, rivers can accumulate sediment at a rate of five to six feet each year, prohibiting many ships from entering channels or forcing ships to carry only a fraction of their intended load. Since 1986, the HMT and the IWTF have supported maintenance of coastal and Great Lakes harbors and rivers, respectively.

Congress established the IWTF to help pay for the modernization of nationally vital locks and dams on America’s inland navigation system. The funds in the trust fund are meant to pay for one-half of the cost of new construction and major rehabilitation of locks and dams. These contributions are generated by a 20-cent-per-gallon diesel fuel tax, which is deposited into the trust fund. The other half of the cost, reflecting the broad distribution of all those who benefit from the other uses of the waterways like national defense, water supply, flood control and recreation, is paid from general revenues.

Funding (in constant dollars) for operations and maintenance (O&M) on America’s inland navigation system has remained flat for more than two decades. During this period, operations costs have continued to increase, yielding fewer funds that can be devoted to proper system maintenance. As a result, an increasing amount of routine maintenance on waterways infrastructure has been deferred. In fact, 50 percent of the locks and dams are over 60 years of age. As funding has stagnated and infrastructure has deteriorated an increasing percentage of available maintenance dollars has gone into emergency repairs.

The HMT was developed to recover O&M costs at U.S. coastal and Great Lakes harbors from maritime shippers. O&M is mostly the dredging of harbor channels to their authorized depths and widths. The tax is levied on importers and domestic shippers using coastal or Great Lakes ports. The tax is assessed at a rate of 0.125 percent of cargo value. The tax revenues are deposited into the HMT from which Congress appropriates funds for harbor dredging. Most, if not all, of the busiest ports in the country generate more than sufficient HMT revenue to cover USACE O&M expenditures at their port, even at exceptionally dredging intensive ports like those on the Mississippi River in Louisiana. While the top ten ports account for nearly 70 percent of the total value of foreign goods shipped through U.S. ports, these ports have received about 16 percent of total HMT expenditures over the last decade. Given the amount of HMT collections unspent on harbor maintenance and the amount spent on shallow draft or little used deep draft harbors, a rough estimate is that only 30 to 45 cents of every HMT tax dollar paid is being spent on harbors that shippers readily use.

Unlike the IWTF, the HMT balance has grown considerably over the last decade. In 2001, the balance of the fund was $1.8 billion. By 2011, the balance had grown to $6.4 billion. However, despite this growth, disbursements to USACE have remained fairly stagnant, averaging $723 million. Despite a large surplus, the busiest U.S. harbors are presently under-maintained. USACE estimates that full channel dimensions at the nation’s busiest 59 ports are available less than 35 percent of the time. Further, significant amounts of HMT funds are spent at harbors and channels that see little or no ship traffic, says USACE. Lack of maintenance and expansion of the nation’s marine assets including the navigable channels, waterways and infrastructure maintained by USACE will be further exacerbated when the expanded Panama Canal opens in 2014. Once completed, the new locks will allow post-Panamax ships, ones that can carry volumes of cargo up to three times the current limit, to pass through the expanded canal. In order to handle these larger ships infrastructure improvements will be required, including: deeper channel depth, increased berth capacity, crane outreach capacity, and intermodal capacity.

These improvements are especially necessary at the Atlantic and Gulf coast ports. Currently, there are no ports in the Gulf and only Baltimore and Norfolk on the Atlantic coast able to accommodate these larger ships. It is unlikely that a few ports will be able to handle the tremendous influx of cargo.

Without adequately maintained shipping channels and port infrastructure, U.S. participation and benefits will not be maximized. Despite this, the IWTF is woefully low of funding and the HMT may only be used to fund maintenance, not new construction. To increase a channel’s authorized depth or width requires an act of Congress, which is referred to as construction or “new work” by USACE and is funded from the General Treasury, not the HMT. Multiple other proposals for collecting additional revenues have surfaced. Some have proposed raising the current waterways fuel tax, taxing recreational users, initiating additional user fees, privatization and combinations thereof.

Farm Bureau Policy: 128-Transportation: Lines 1-9 (paraphrased): We support development of a long-range national transportation policy that views transportation as a holistic system. It should encourage exploration of public/private partnerships and be designed to support global competitiveness while developing the most economical and energy efficient methods of meeting future transportation needs. We support the maintenance and improvement of our transportation infrastructure.

549-Waterways: Lines 1-2: Public policy should encourage expansion of inland water transportation since it represents the most energyefficient mode.

Lines 65-73 (paraphrased): We support educating the general public in regards to the economic importance of the Mississippi River and other waterways used in transporting agricultural commodities and farm inputs.

We support reauthorization of the Inland Waterway Trust Fund. We support the Corps’ efforts in updating locks and dams and cleaning of channels in the Mississippi River system to accommodate new, larger barges.

Pre-harvest Food Safety AFBF Policy Development May 2012 Issue: Pre-harvest food safety has become a topic of increasing focus, particularly in the beef industry. USDA’s Food Safety and Inspection Service (FSIS) announced at the 2011 AFBF annual meeting that their next step in reducing E. coli is through pre-harvest intervention, and they have repeatedly re-stated their intentions. Farm Bureau participated in a pre-harvest food safety meeting for cattle hosted by USDA on November 9, 2011.

Research on pre-harvest interventions is ongoing. Pre-harvest interventions that can eliminate fecal shedding of enteric pathogens have yet to be discovered; however, current research suggests that at least two pre-harvest interventions, certain probiotics and vaccines, have the potential to be effective in reducing fecal shedding in cattle. FSIS encourages slaughter establishments to share this information with their suppliers and to use it in designing their food safety systems.

The National Institute of Food and Agriculture also plays a key part on the pre-harvest initiative, making competitive grants available to universities and labs conducting cutting-edge food safety research, some of which looks at pre-harvest. From 2005 to 2010, the National Institute of Food and Agriculture provided approximately $26 million to fund research projects and a broad variety of topics.

Questions: What should the role of the producer be in pre-harvest food safety? What role should government play?

Are there specific E. coli tools that producers would be willing to use? Should Farm Bureau push for USDA approval of E. coli management tools?

How can cattle producers and processors work together to ensure that cattle arrive at the processing facility with lower presence of E. coli?

Background: FSIS is responsible for examining and inspecting the carcasses and parts of cattle at slaughter plants and meat processing plants that will be used for human consumption. FSIS has the authority to prescribe rules and regulations concerning the sanitation at slaughter plants and meat-processing plants. FSIS’s inspection authority is limited to the processing plant and meat products and does not extend to the live animal prior to its delivery at the harvest facility.

However, the agency encourages beef producers to use pre-slaughter interventions. FSIS has stated that such interventions offer a significant opportunity to improve food safety because they may reduce the level of Shiga toxinproducing Escherichia coli (STEC) entering the slaughter plant.

During the 1990s, research programs conducted by ARS on pre-harvest efforts to reduce pathogens included projects to evaluate technology and management methods to help producers achieve lower contamination levels in animals presented for slaughter. In 1994, FSIS named STEC O157:H7 an adulterant. The Federal Meat Inspection Act prohibits the sale of adulterated meat or meat products—products bearing or containing a poisonous or deleterious substance that may render them injurious to human health, among other things.

In 2008, FSIS began to promote cattle pre-harvest interventions to prevent foodborne illness and improve food safety throughout the farm-to-table continuum. The condition of the animals entering plants, and at slaughter, and the contamination rates on their hides and elsewhere, affect the ability to mitigate risk at slaughter and through the rest of the food system.

In May 2010, FSIS issued informational guidance to beef slaughter establishments on pre-harvest management controls for reducing E. coli O157:H7 shedding in beef cattle. The guidance described several pre-harvest interventions and

management practices. It encouraged pre-harvest interventions as the first control steps in an integrated beef products safety system.

In September 2010, and again in September 2011, FSIS solicited input from the National Advisory Committee on Meat and Poultry Inspection (NACMPI) on pre-harvest Hazard Analysis and Critical Control Point (HACCP) controls for Salmonella Enteritidis, Escherichia coli O157:H7, antimicrobial-resistant pathogens, and chemical residues. Further, in September 2011, USDA determined that six other STEC strains, known as O26, O45, O103, O111, O121, and O145, were adulterants in raw ground beef and beef trim. USDA has tests for these six strains and plans to use them in slaughter plants starting in June 2012. However, it may be difficult and time-consuming to confirm positive test results because certain test components are either not commercially available for all strains or do not always provide clear results. USDA is working to improve the tests and to find a commercial supplier of the tests.

U.S. Department of Agriculture (USDA) and university researchers identified several treatments administered before cattle are slaughtered, or pre-slaughter interventions, that could reduce STEC in cattle. Such pre-slaughter interventions include bacteriophages (viruses that infect and kill bacteria), probiotics (live bacteria that can benefit the digestive system), vaccines, and sodium chlorate (chemical that kills the STEC O157:H7 strain). However, few manufacturers have submitted applications for pre-slaughter intervention products to target STEC according to officials from USDA and the Food and Drug Administration.

One exception is for vaccines to reduce STEC O157:H7. For pre-slaughter interventions, USDA exercises responsibilities for licensing and regulating STEC vaccines. However, USDA’s approval requirements for these vaccines are unclear, according to some industry representatives. Specifically, USDA’s general guidance does not address some of the unique challenges faced by manufacturers of animal health products seeking STEC vaccine approval. For example, the guidance does not explain that, if studies conducted in the laboratory are insufficient to demonstrate efficacy, the manufacturer would also need to demonstrate that the vaccine is effective in a field setting such as a feedlot. Without guidance that gives manufacturers clear and more specific information they need to submit for an acceptable application, the approval process for STEC vaccines could face potential delays.

Since 2006, the U.S. beef industry has recalled over 23 million pounds of beef because of contamination from pathogenic strains of STEC. These bacterial STEC strains can live in the intestines or on the hide of cattle without harming them, but they may contaminate meat during the slaughter process.

The Centers for Disease Control and Prevention (CDC) does not have estimates specific to beef or poultry, but it estimates that STEC contamination of food consumed domestically causes approximately 176,000 illnesses, 2,400 hospitalizations, and 20 deaths annually. Illnesses caused by STEC O157:H7, the most common STEC strain in the United States, cost those infected $489 million annually, in 2010 dollars, according to a USDA estimate.

Farm Bureau Policy: Farm Bureau does not currently have specific policy on the role of pre-harvest steps or treatments in meat safety.

358 - Inspection and Grading of Meat, Poultry and Seafood Products Lines 5-7 contain general language regarding pathogen reduction: “We urge USDA to adopt a program taking advantage of new techniques proven by research to be effective in reducing bacterial contamination.”

Retail Agriculture AFBF Policy Development May 2012 Issue: More farmers and ranchers are getting closer to their customers, and finding that they can capture a higher margin when they grow vegetable or meat products with a specific consumer market segment in mind. Whether they sell direct-to-retail or through wholesale channels, if it is sold with special product attributes such as being local, organic, grass-fed, or small farm-raised it may have a higher value. A significant portion of the value is based on retail consumer demand. This sector can be called “Retail Agriculture.” Retail Ag is a type of “value added agriculture” where the value that is added is the two-way information flow between farmer and consumer. In addition to being a significant contributor to net farm income, Retail Agriculture describes the nature of a growing number of Farm Bureau members’ farm operations and offers new business opportunities to young and beginning farmers.

Questions: Should Farm Bureau identify Retail Agriculture as an issue area for policy action?

Should Farm Bureau work to enhance producer access to additional marketing channels and infrastructure for local and regional food systems?

What can be done to encourage the federal agencies’ use of locally grown food in school lunch programs and increase access to this market for farmers?

Would economic growth in rural areas be spurred by supporting “regional” food branding initiatives?

What national policy is needed to support our agricultural entrepreneurs?

Background: Retail Agriculture includes value-added agriculture and agritourism, but is widely seen as being driven by the concept of local food. Unlike organic food, there is no legal or universally accepted definition of local food. Some USDA programs define local food as being grown within state boundaries or within 400 miles, and this definition has been echoed in recently introduced legislation. Local food is a geographical concept related to the distance between food producers and consumers. In addition to geographic proximity of producer and consumer, however, local food can also be defined in terms of social and supply chain characteristics. This trend was described by the Food Channel as being “about growing and tending—if someone, somewhere, is personally growing and tending to this product… then it’s local. It means someone is personally committed to it. Someone has made sacrifices to bring it to market.”

Retail food systems have evolved over time and can be divided into two over-arching systems: direct-to consumer sales and direct-to-retail/foodservice marketing sales. Of course many operations market products through both channels.

Direct-to-consumer marketing includes farmers markets, Community Supported Agriculture (CSA) operations, pick-yourown, farm stands and on-farm stores. Direct-to-retail/foodservice marketing includes sales to grocery stores, restaurants, schools and institutions such as hospitals and nursing homes.

Given that “local” is difficult to define, it is also difficult to measure. However, a December 2011 national survey from USDA Economic Research Service estimated that in 2008 sales of local foods topped $4.8 billion and total food and beverage sales topped $1.3 trillion. While many equate local with farmers markets, there are additional important sales channels that make up local and regional food sales—sales to supermarkets and restaurants and sales to schools and institutions. USDA’s survey measured sales to supermarkets and restaurants at $2.7 to $3.8 billion, 56-79 percent of total sales. The remaining 21-44 percent of measured sales took place through direct to consumer marketing, like farmers

markets and CSAs. Sales to schools and institutions were not included in this survey and no good measure of their impact exists. However, the National Farm to School Network estimates that there are nearly 2,400 Farm to School programs in operation in the U.S, involving over 2,300 school districts and 9,800 schools.

A growing number of state Farm Bureaus are engaging consumers with locally grown food programs such as pick your own produce, farmers markets, and roadside stands. Following are just a few being offered: AZ, Fill Your Plate; HI, Farmer’s Markets on Oahu; CA, San Diego County Farm Bureau Farmers’ Market; IN, Farmers Market Boot Camp (for farmers market managers); KY, Certified Roadside Farm Market program; and Tennessee, Farm Fresh.

Outlets for making direct-to-consumer sales have increased rapidly over the last decade. USDA Agricultural Marketing Service reported that there were 7,175 farmers markets in 2011, up 17 percent from 2010 and up 150 percent from 2000.

According to the 2007 Census of Ag, there are 78,418 farms producing and selling value-add commodities. The 2007 Census of Ag further reveals that CSAs are present in 78 percent of all U.S. counties, remarkable growth considering there were only two CSAs in 1986.

Growth of direct-to-retail/foodservice marketing sales outlets has exploded. A recent inspection of the top 10 U.S. food retailers’ websites provides some insight into mainstream-retailer ventures into local food marketing and prominence attained by the local food movement. Nine sites have some reference to local foods. Further, a 2007 study by Packaged Facts revealed that in 2006, 87 percent of fine-dining establishments served local items, as did 75 percent of family dining and casual dining restaurants.

Given the strong growth of local foods it is not surprising that the 2007 Census of Agriculture found that direct-sales activities surpassed custom-work to become the leading on-farm entrepreneurial activity measured by farm household participation. Integrating other on-farm entrepreneurial activities with direct-sales ventures appears to capture synergies, which lead to increased income from direct sales to consumers. USDA found that bundling other on-farm entrepreneurial activities with direct sales appears to be an important strategy for small farms, as they constituted 77 percent of all farms combining direct sales with other retail and conventional ag activities.

A USDA study found that retail ag farms operate fewer acres while generating higher gross sales per acre than field crop or livestock farms, which is a reflection of the fact that vegetable, fruit, and nut farms dominated local food sales. Further, small and medium-sized farms dominate local foods sales marketed exclusively through direct-to-consumer channels (foods sold at roadside stands or farmers’ markets, for example) while large farms dominate local food sales marketed exclusively through intermediated channels.

Despite increased production and consumer interest, locally grown food accounts for a small segment of U.S. agriculture.

For local and regional foods production to continue to grow, marketing channels and supply chain infrastructure must deepen. For producers of direct- to- consumer products, who often run small-scale farm operations, it can be difficult to meet intermediary demands for high volumes, consistent quality, timely deliveries, and out-of-season availability. Lack of infrastructure related to distribution of local and regional food has also been reported as a barrier to local food market development. Further, concerns exist that trace-back abilities could be impaired in the event of food safety concerns, given that most small farmers must combine their products with other farmers’ products to make processing and shipping more economical. Finally, uncertainties exist in regulatory scope and enforcement jurisdiction of local food requirements across state, county, and municipal lines that restrict expansion of local food systems.

Farm Bureau Policy: No single policy. Individual statements scattered throughout the policy book.

Sales Tax on Internet Sales AFBF Policy Development May 2012 Issue: Many rural communities find themselves losing their retail base. Local retailers are competing with Internet retailers who do not have to collect sales tax if they do not have a physical presence in that state. This deprives local and state government of tax revenue needed to provide essential services.

Questions: Do you agree or disagree that remote sellers have an unfair price advantage by not collecting state and local sales taxes?

Does this have an impact in your community?

With tight budget pressures nationwide, how important is it to increase tax revenue for state and local governments? Is your county/state considering a tax increase or cuts to services?

Should Farm Bureau policy be changed to support allowing states and local governments to collect sales taxes from outof-state sellers?

Background: The development of new technologies and digital processes has had a profound effect on the U.S. economy. According to the most recent U.S. Census, e-commerce sales have grown from $995 billion in 1999 to $2,385 billion in 2006. Since Internet retailers do not have to collect sales tax if they do not have a physical presence in that state, many rural communities are finding themselves losing tax revenues and their retail base. Currently, Farm Bureau opposes requiring out-of-state sales tax collection.

The Commerce Clause of the Constitution gives the federal government power to regulate interstate commerce and prohibits certain state actions that interfere with trade among the states. In 1992 the Supreme Court ruled, in Quill Corps. v. North Dakota (Quill), that out-of-state sellers can only be required to collect sales tax if they have a store or other physical presence in the customer’s state. However, the court explicitly stated that Congress can overrule the decision through legislation.

As a result of Quill, 45 states and the District of Columbia responded by working with local governments and the business community to adopt a comprehensive interstate system to harmonize and simplify their sales tax rules and administrative requirements called the Streamlined Sales and Use Tax Agreement. To date, 24 states have changed their laws to comply with this interstate agreement. The Quill decision made it clear Congress would need to authorize and sanction such an agreement.

Sens. Dick Durbin (D-Ill.), Mike Enzi (R-Wyo.) and Lamar Alexander (R-Tenn.), and a bipartisan group of seven other senators, have introduced a bill, S. 1832, the Marketplace Fairness Act. Under the proposed legislation, states would have the option to collect sales and use tax revenues from out-of-state sellers through the new simplified tax system.

There is an exemption in the legislation for remote sellers with less than $500,000 in annual remote nationwide sales.

Some companies that do business over the Internet oppose the collection of sales taxes on Internet sales because doing so will erase one of the benefits of remote shopping as well as increase the cost of doing business. These costs will likely be passed on to consumers and will have a disproportionate impact on those who must rely on Internet sales because they live in places with limited shopping options.

Brick and mortar retailers have long supported a level playing field where all retailers operate by the same tax rules regardless of whether they sell merchandise in a traditional store, through the mail or over the Internet. They argue online

retailers who are not required to collect sales tax from the majority of their customers enjoy an unfair price advantage over local merchants who are required to collect sales tax from everyone. When this disadvantage forces a business to close, the loss of “main street� businesses is especially hurtful to already struggling rural towns.

In addition to placing local merchants at a disadvantage, this disparity deprives state and local governments of tax revenue they need to provide essential services. A report from the University of Tennessee indicates the United States’ expected loss of tax revenue from e-commerce sales from 2007 to 2012 equals approximately $56.4 billion. Since local governments and schools rely heavily on property taxes for funding, when sales tax revenues decline they often turn to increased property taxes to make up for the shortfall. This is often damaging to land-based businesses like farming and ranching.

Farm Bureau Policy: 436 - Sales, Fuel and Excise Taxes Line 30: We oppose requiring out-of-state sales tax collection.