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Interview With NGFA President Randy Gordon

Date Posted: November 21, 2013

This interview which was conducted in mid-November with National Grain & Feed Association President Randy Gordon appears in the November/December issue of Grain Journal.

Despite the end of the government shutdown, there appears to be continued gridlock between the two chambers of Congress, and between Congress and the administration. How is this affecting the grain and feed industries?

For the grain, feed, and processing industry, the most contentious issue to resolve likely will be the farm bill, and more specifically, the huge divide that exists between the House- and Senate-passed versions on the Supplemental Nutrition Assistance Program – formerly known as food stamps.

But on some other legislative initiatives very important to our industry – such as waterways infrastructure – we’ve seen remarkable consensus in both the House and Senate, which each passed bills by overwhelmingly wide margins.

But the continued discord does threaten the prospects for trade legislation and some other key priorities.

What’s the latest on the farm bill? And on what policy outcomes is the NGFA most focused?

The four main principals – House Ag Committee Chairman Frank Lucas, R-Okla., and ranking member Collin Peterson, D-Minn., and Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., and ranking member Thad Cochran, R-Miss., and their staffs continue to meet privately to see if they can reconcile the considerable differences between the House- and Senate-passed bills.

Their goal is to reach agreement by mid-December, so that a bill potentially can be passed before the end of the year – to avoid triggering the so-called dairy cliff that would dramatically escalate milk prices.

NGFA has three main priorities in our continuing discussions with the House-Senate conferees.

First is to decouple farm program income supports from actual planted acres.

As it now stands, both the revenue-assurance provisions in the Senate-passed bill and the target price provisions in the House-passed bill would link producer income support payments to whether they planted a specific crop and on the specific number of acres planted.

That’s considered to be a trade-distorting subsidy by the World Trade Organization, which could expose U.S. agriculture and other U.S. businesses to trade retaliation.

NGFA also is concerned that target price levels for some commodities are at such high levels – and would be frozen for the five-year life of the bill – that it could risk distorting producer planting decisions, particularly if those payments are not decoupled from actual production.

A second major NGFA focus is to seek further reforms of the Conservation Reserve Program (CRP).

On CRP, we favor the House-passed farm bill, which would reduce the mandated CRP cap from the current 32 million acres to 24 million acres, compared to the 25-million-acre cap in the Senate bill.

In addition, the House bill would provide a one-time opportunity to remove productive, sustainable farmland from the CRP without penalty or interest payments that currently are so high they discourage producers and landowners from doing so.

Third, the NGFA supports maintaining a strong but cost-effective federal crop insurance program as the foundation of U.S. farm program to protect the producers from yield and revenue losses.

NGFA continues to work on CFTC regulations and whether or not they offer sufficient protection to FCM customers. What would NGFA like to see in this area, and what is the likelihood of success?

The NGFA continues to advocate that Congress, when deliberating the CFTC reauthorization bill, consider reforms to the U.S. bankruptcy code to ensure that customers with segregated funds are first in line when it comes to prioritizing claims and distributing funds following an FCM bankruptcy.

We also continue to explore the concept of creating a voluntary customer-protection insurance fund. We are awaiting results of a Futures Industry Association study in this regard.

And NGFA supports establishment of a pilot program to test the concept of introducing an optional, fully-segregated FCM account structure for futures market customers to eliminate risk of misuse of customer funds by FCMs or fellow customers.

As you note, the CFTC also continues to issue rules designed to protect customers from FCM bankruptcies.

Some of those rules are constructive.

But the NGFA and like-minded producer and agribusiness groups are very concerned about what we believe to be a couple of misguided customer protection rules approved recently by the agency that we believe would have the perverse effect of significantly increasing the amount of margining money that country elevators and producers would need to send to FCMs.

One of those provisions would require FCMs to take a capital charge for accounts that are under-margined for more than one business day after a margin call is issued.

A second rule would require FCMs to ensure at all times that their residual interest in customer funds exceeds the sum of margin deficits of all customers.

Our analysis has shown that the impact would more than double the amount of margin money that a typical country elevator would need to send to their FCMs, putting increased strain on capital requirements and potentially putting more – not less – customer money at risk.

There also is tremendous concern that the CFTC requirements would lead FCMs to require margin money up front – before the day’s trading is even done – just so they could be in compliance.

The saving grace right now is that these rules will not take effect for five years, which gives us some time to work with Congress and the CFTC to see if these deficiencies can be corrected.

What things will NGFA be doing in the area of safety in the coming year?

We continue to place a tremendous amount of effort on safety education and training.

For one, the National Grain and Feed Foundation has invested funds at Kansas State University to restart its collection of annual grain dust explosion data so the industry can again have accurate metrics on what we believe to be a continuing decline in these tragic incidents.

We’re also working with producer groups, as well as within the grain, feed and processing industry, to disseminate info on grain bin safety awareness.

In addition, the NGFA continues to partner with State Grain and Feed Association affiliates to offer a series of highly popular, one-day regional seminars focusing on key elements of the Occupational Safety and Health Administration (OSHA) grain handling standard [29 CFR 1910.272].

These courses highlight industry practices that foster the safety and health of employees working in grain-handling, processing, feed and export facilities. They focus heavily on preventing explosions and engulfments.

So far, we have four such events scheduled for 2014, including:

• Rocky Mountain Agribusiness Association: Jan. 13, Denver, CO.

• Nebraska Grain and Feed Association: Jan. 21, Grand Island, NE.

• Oklahoma Grain and Feed Association and Texas Grain and Feed Association: Feb. 5, Oklahoma City, OK. • North Dakota Grain Dealers Association and South Dakota Grain and Feed Association, March 26, Fargo, ND.

2014 Safety Conference. NGFA also continues its partnership with Grain Journal to host an annual safety and health conference.

The 2014 event is scheduled for July 29-31 at the Westin Crown Center in Kansas City, MO and will focus on facility management. Topics will include hazard analysis, employee training, audit/investigation and communications/coaching of employees, among other things. We’re also planning soon to distribute an industry guidance document to address the methods and procedures for operating sweep augers inside grain bins.

It was developed with input from the NGFA Safety, Health and Environmental Quality Committee and the Grain and Feed Association of Illinois.

The document is designed to provide guidance in developing and implementing a sweep auger operations safety policy, based on the ten safety principles included in OSHA’s May 3 memorandum to its regional administrators.

What progress is being made on moving forward with upgrades to our transportation infrastructure?

In a promising development, a joint House-Senate conference began meeting Nov. 20 to come up with a final version of a waterways infrastructure bill – the first such bills in six years.

Both bills are positive in that they would streamline and reduce the time it takes for the U.S. Army Corps of Engineers’ to approve much-needed projects to rebuild the lock-and-dam system.

Both bills also would reduce the level of user-fee funding required to complete the Olmstead lock and dam on the Ohio River, which has been subject to repeated delays and cost-overruns.

The one missing piece that NGFA, the Waterways Council Inc., and other groups are seeking to have added in conference is to increase the barge diesel fuel user fee to provide the needed funding to actually perform the lock replacement projects that would be authorized under both bills.

Without that increased user-fee funding – which the barge and towing industry and its customers, including the grain industry and farmers favor – we’ll not be able to create the kind of waterway infrastructure U.S. agriculture needs to be competitive in the future.

In addition to these issues, what other important issues does NGFA plan to address in 2014?

NGFA is placing a major effort in representing the feed and grain industry in trying to shape the Food and Drug Administration’s final rules implementing the Food Safety Modernization Act (FSMA) – the most fundamental reform of our nation’s food and feed safety laws since the 1930s.

It’s a huge undertaking, with more than eight significant FDA rulemakings underway or soon to be initiated that would establish a new hazard analysis and prevention-based regulatory approach.

In addition, NGFA continues to expend considerable efforts in working with the North American Export Grain Association (NAEGA), producer groups and technology providers to address in a collaborative way marketing-related issues associated with the introduction of new biotech-enhanced traits.

In an effort spearheaded by the American Soybean Association and National Corn Growers Association, this is the first time that biotech providers, producers and the grain handling, feed, processing and export industries have come together to discuss these issues.

Our focus is on addressing market-related disruptions that can arise if a biotech trait that is planted in the United States is not yet approved in U.S. export markets, as well as biotech events that have functionally different output traits that make their presence in food or feed inappropriate above a certain threshold level.

We’ll also have a very active year planned on rail issues, examining potential expansion of NGFA’s unique Rail Arbitration Rules and involvement in several key federal Surface Transportation Board proceedings – including one on competitive switching and one that has not been issued yet on creating a more workable system that shippers can use to challenge grain rail rates that are believed to be unreasonable.

NGFA also plans to invest significant time on agricultural sustainability issues that are becoming increasingly important to domestic and foreign customers of U.S. agricultural products.

And we’re working closely with NAEGA on international trade issues, including the Trans Pacific Partnership and U.S.-EU trade negotiations.

On the education and training front, we’ve just completed a survey of our membership on what it considers to be the most important areas in which the NGFA should invest resources in the coming year.

The topics identified run the gamut, including more education on grain contracting practices, trade rules and arbitration in which the NGFA plays a clear leadership role, to compliance guidance on FDA’s new food and feed safety rules, to safety, health and environmental issues.

The results are being evaluated by our Country Elevator; Feed Manufacturing and Technology; and Safety, Health and Environmental Quality Committees, among others, and I’m really excited about the potential NGFA has to serve these member needs.

In addition, NGFA has just launched a new Committee Apprenticeship Program, in which we’re involving persons who are relatively new in the grain, feed and processing industry to serve as apprentices on NGFA committees where they can learn more about the issues that affect the industry and the strategies NGFA uses to address them.

This was one of the major outcomes of NGFA’s most recent Long-Range Plan, completed in 2012, and has real promise in helping develop some of the best and brightest future talent for our industry.