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‘Taxes’
Estate tax makes it harder to keep the farm in the family | 4 April 2, 2012 Vol. 91
‘BSE’
Proposed reg boosts trade opportunities | 3
‘New York Hops’ Brewing up agritourism | 7
Crude oil driving diesel, gas prices up Crude oil prices are rising right along with the temperature—and taking gasoline and diesel prices with them. Crude oil averaged $94.86 per barrel in 2011, but this year they’re expected to shoot past the $100 mark for an average of $105.71 per barrel.
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AFBF identifies priority spending for ag budget Programs that promote animal health, renewable energy and rural communities are among farmers’ and ranchers’ top priorities for funding in the fiscal 2013 agriculture spending bill, American Farm Bureau Federation President Bob Stallman recently told lawmakers. Other programs on the list include: conservation, export markets for agriculture, food safety, crop protection tools, wildlife services and agricultural research. Of its priorities, AFBF supports a $5.3 million increase for the Animal and Plant Health Inspection Service to a total of $14 million for
voluntary animal disease traceability. As for conservation, the organization supports funding for conservation programs but prioritizes working lands programs over retirement-type programs. Within food safety, AFBF would like to see increased education and training of inspectors, as well as additional science-based inspection, targeted according to risk. Indemnification for producers who suffer marketing losses due to inaccurate government-advised recalls or warnings is also important. In addition, agricultural research funding is critical, the organization
said in letters to the House and Senate agriculture appropriations subcommittees last month. “Agricultural research is vital, particularly research focused on meeting the growing challenges of production agriculture,” said Stallman. “The United Nations’ Food and Agriculture Organization predicts that farmers will have to produce 70 percent more food by 2050 to feed an additional 2.3 billion people around the globe. America’s farmers are the most efficient in the world, but Budget Continued on Page 3
Senate bill would rein in EPA overreach A bill introduced in the Senate in late March would prevent the Environmental Protection Agency and Corps of Engineers from using guidance they developed to broaden federal control over more water bodies and land. The Farm Bureau-supported Preserve the Waters of the U.S. Act (S. 2245) also would prevent the agencies from using their guidance document as a basis to write new federal rules to expand their authority. The EPA “continues to act as if it is above the law,” said Sen. John Barrasso (R-Wyo.), who sponsored the bill along with Sens. Jim Inhofe (R-Okla.), Dean Heller (RNev.), Jeff Sessions (R-Ala.) and 26 others. “It is using this overreaching guidance to pre-empt state and local governments, farmers and ranchers, small business owners and homeowners from making local land and water use decisions.” AFBF has said that the guidance document drafted last spring is, in essence, a menu of options for agency staff to use to support a determination that a water body is subject to EPA’s jurisdiction. AFBF said that under the guidance document the burden of proof that a water body, and even in some cases dry land, does not fall into the classification “waters of the U.S.” would shift from the EPA to landowners. “The issues raised by the guidance should be decided by elected officeholders on Capitol Hill,” Stallman wrote to senators, urging them to support the bill. “In the absence of congressional approval, the agencies should not move forward and assert federal regulatory power—especially through an informal guidance document—where Congress has not approved such a step.” Only Congress can change the Clean Water Act, AFBF says, which the Supreme Court has affirmed limits federal jurisdiction to waters of the U.S., i.e. navigable waters and waters that have a significant connection to navigable waters. According to Barrasso, EPA and the Corps have confirmed that
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CLEAN WATER ACT GUIDANCE would, in effect, expand the Environmental Protection Agency’s jurisdiction over more water bodies and even dry land, according to Farm Bureau, resulting in more farmers having to get federal permits. A new Senate bill would prevent the agency from using the guidance to broaden its regulatory reach. their guidance will result in an increase in determinations that they have jurisdiction over water bodies and lands and will result in more farmers and other landowners having to get permits to use their property. Another example of EPA overreach was recently shot down by none other than the Supreme Court. In a March 21 decision in Sackett v. EPA, the court decided unanimously that landowners can challenge an EPA compliance order under the Clean Water Act. The decision was a big victory for landowners, according to AFBF, which had filed a friend of the court brief in the case. “Today’s decision vindicates the rights of landowners like the Sacketts to challenge EPA compliance orders that improperly assert jurisdiction over their land,” said Stallman in a written statement. “The decision gives landowners like the Sacketts their day in court….” The high court ruled in favor of Michael and Chantell Sackett,
homeowners in Idaho whom the EPA accused of violating the Clean Water Act by bringing in fill material and building their home on land that the agency said was a wetland. The Sacketts believed their land was not a wetland; however, they were denied any opportunity to challenge the EPA compliance order and faced fines of up to $75,000 per day for non-compliance. After being denied an EPA hearing, the couple went to court charging that they were being denied due process of law. The Supreme Court agreed, saying that the federal government had put individuals’ property rights too much at the mercy of EPA and its employees. Stallman said that Farm Bureau hoped the Supreme Court decision would “help curtail EPA’s efforts to illegally expand its regulatory jurisdiction over farming and other land-based activities.” “At the very least,” he added, “landowners have another tool to hold EPA accountable.”
Viewpoint
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April 2, 2012
The
Bob Stallman
President, American Farm Bureau Federation
Update our ports or miss the boat
S
omeone once said that it’s not leaving port, but coming in, that determines the success of a voyage. While this has some truth to it, the port that one departs from is just as important to a successful endeavor. It may surprise many that if the planned expansion of the Panama Canal was completed tomorrow, the United States, one of the world’s largest trading powers, would have only six ports deep enough to handle the new larger ships that will pass. Yet, we are competing with all other parts of the world that are updating their ports. Since agricultural goods play a significant role in U.S. trade, modernizing our ports is extremely important for farmers and ranchers to be able to continue to thrive in the world market. If you build it, they will come Even more surprising than the U.S. only having six large ports is the fact that all of these ports are isolated on the East and West Coasts. That’s right, Gulf Coast ports, including New Orleans, do not currently have the capacity to handle larger ships. If upgrades to U.S. ports are not completed in time, for major trade leaving the U.S. Gulf, smaller boats will need to be utilized to trans-ship our goods to ports like those in the Bahamas and Dominican Republic, where they would offload to larger vessels traveling to Latin America, Asia and other parts of the world. Similarly, goods coming from other countries would potentially have to go through the same routine in the Caribbe-
an, offloading to smaller vessels to enter ports in the U.S. Gulf. If you are scratching your head, you aren’t the only one. This process of loading and offloading ships costs a lot of money. Inadequate port size also leads to higher transportation costs because vessels may be loaded to less than capacity and more vessels may be required to ship the same amount of commodities. In the meantime, our competitors around the world fare much better. Because their ports are deep enough, it is easier and less expensive to move products in and out. Further, Europe, Africa, Asia, Latin America and the Caribbean are all undergoing major new port projects or expansion of existing facilities. Latin America, for example, is rapidly continuing with some of the world’s most sizable port development projects. The region is catching up with others through large port investments, which stand at almost $12 billion. This means China will have access to sell its farm products to Latin America, where Asia never had access before. For right of way, gross tonnage rules The expansion of the Panama Canal will allow significantly larger ships to move through the waterway. The project, expected to be completed in 2014, should increase cargo volume by an average of 3 percent per year, doubling the 2005 tonnage by 2025. Currently, the largest ship able to pass through the canal can hold up to 3,500 TEUs
(20-foot equivalent units), a measure used for capacity in container transportation. To maximize the canal’s new dimensions, shipbuilders are making larger vessels that can hold up to 12,000 TEUs and require 50-51 feet of draft. These larger ships require deeper and wider shipping channels, greater overhead clearance and larger cranes and shore infrastructure—all of which make the U.S. Gulf a non-player in trade. Some U.S. ports can accommodate the larger vessels. Most, however, cannot, including many ports that are very important to U.S. agricultural exports. The U.S. exports approximately one-quarter of the grain it produces. In 2011, more than 58 percent of our grain exports departed from the U.S. Gulf. This may change dramatically as larger ships carrying grain from our competitors are able to access our trading partners. The Panama Canal could shift world trade as U.S. exporters will be unable to pass on higher transportation costs when customers can purchase similar products from other countries. As the saying goes, “For right of way, gross tonnage rules.” This law, known as the rule of common sense on the water, is also common sense for international trade. In other words, those with the biggest ships and ports to accommodate them will win every time. To maintain our competitiveness in the world market, it is essential that the U.S. update and modernize its ports to accommodate larger ships. Without this investment in infrastructure, we will literally miss the boat.
Homes sales may signal economic recovery By Bob Young It was interesting to listen to the market pundits’ spin on February new home sales data released recently by the U.S. Commerce Department. On one hand (we are economists, after all), the data showed that sales slowed 1.6 percent from the January sales level. Clearly the world is on the brink of collapse. On the other hand, this level was fully 11.4 percent above the same time last year. Clearly the world is ready to go through a major round of inflation. The truth is probably somewhere in between. Digging into the data tells some interesting stories. One of the most encouraging is that the inventory has now been drawn
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down to much more manageable levels. Toward the end of 2008 we had well over a full year’s inventory of new homes sitting around waiting to be sold. Today that inventory is only 5.8 months worth, down more than 25 percent from February 2011. Part of this is because we all but quit building new homes there for a while, but also because those sales figures—admittedly down from January—are that much better than last year. It is also interesting to look at where these increases in sales are occurring. The southern region is by far the largest sales area. It runs from Florida up to Maryland and across to Oklahoma and Texas. That region accounts for nearly half the overall sales and is actually showing lower figures
Don Lipton, Executive Director, Public Relations Lynne Finnerty, Editor Erin Anthony, Assistant Editor Phyllis Brown, Assistant Editor Sarah Bittner, Contributing Writer
April 2, 2012 Vol. 91
this February than occurred last year, but only by 1 percent. This is well within the margin of error. But the rest of the country is looking at new home sales that have increased 30 percent compared to last year. Also interesting is what folks are paying for new houses. Part of this is due to what the builders are building, obviously, but there is a clear shift toward the middle— toward homes in the $200,000 to $300,000 range and away from the under-$200,000 and over-$300,000 homes. The price of existing home sales slid pretty substantially through all of 2011 on a national average basis. They now average 4 percent lower than a year earlier. February’s existing home sales prices
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showed an uptick—by a walloping 0.3 percent, but at least it was an uptick. And sales of existing homes also are up 9 percent this February relative to 2011 levels, so there’s some good news there as well. Inventories of existing homes are also down to just over the six-month level, a darn sight better than the 10-month hangover we had in 2008. The bottom line in all this data seems to be that the housing sector, while still anemic compared to a few years ago, has found bottom and should give us something to build from. (Pun intended.) Bob Young, Ph.D., is the American Farm Bureau Federation’s chief economist.
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Capitol View
Proposed BSE reg boosts beef trade opportunities A new rule proposed by USDA’s Animal and Plant Health Inspection Service would bring U.S. import regulations for bovine spongiform encephalopathy in line with the international standards of the World Organization for Animal Health (OIE). When the rule is in place, USDA will base its beef import policies on a country’s risk classification as determined by OIE. “The proposed rule, which beef producers consider a positive step, would also allow APHIS to conduct its own assessment when deemed necessary, such as when a country is not yet classified by the OIE for BSE risk and requests that APHIS conduct a risk evaluation using criteria equivalent to that used by OIE,” explained Kelli Ludlum, American Farm Bureau Federation livestock specialist. The biggest benefit of the proposal is that it aligns U.S. policy with internationally recognized standards. “A comprehensive rule like this will strengthen the U.S.’ position when we negotiate with foreign countries and insist on sciencebased food safety regulations,”
AFBF trade specialist Dave Salmonsen said. “Without the rule, our trade representatives are talking the talk about a science-based approach to beef imports, but we aren’t walking the walk with our own policies.” APHIS’ proposal has no bearing on BSE protocols in place inside the U.S., including the Food and Drug Administration’s ruminantto-ruminant feed ban and the BSE surveillance program, Ludlum said. However, changes would be made to how beef and beef products from outside the U.S. are treated. “For years the U.S. has been asking our trading partners to base trade decisions on the actual risk of BSE and to follow OIE’s guidelines on import safety,” Salmonsen added. “This proposed rule will ensure that we’re also following OIE guidelines.” The proposal has been in the making since 2004 when USDA announced it was working on a comprehensive BSE rule, as requested by U.S. beef producers. According to a letter sent by Sens. Charles Grassley (R-Iowa), Ben Nelson (DNeb.) and more than 30 of their colleagues to the Office of Management and Budget and APHIS, the
rule’s delay has caused U.S. beef producers to lose millions of dollars each year in Mexico alone. “Since 2004, Mexico has not allowed the importation of U.S. cattle that are over 30 months of age. Mexico has traditionally been one of the top export markets for U.S. beef; however, due to the 30-month age restriction, it is estimated U.S. beef producers are losing $100 million annually,” the senators wrote on Feb. 12. Under the OIE standards, beef
and beef products from cattle of all ages from both the U.S. and Mexico can be safely traded and consumed once specified risk materials have been properly removed. The OIE risk categories are negligible, controlled and undetermined risk. The U.S. remains classified as controlled risk by the OIE but has requested consideration for negligible risk status. AFBF will submit comments on the rule before the comment period closes on May 15.
The emerging importance of ‘retail agriculture’ By Gary Matteson Consumer trends such as personal electronics technology, women’s fashion or even popular vegetable varieties start with a good product idea that is amplified by the buzz of media, advertising and social networks. Trends that stick create reliable, mature markets that are engines of economic demand, stimulating additional new products and market opportunities. Many farmers and ranchers have benefitted from the trend in local foods, finding ways to sell direct-to-retail and capture a higher profit margin. Young, beginning and small farmers in particular have been able to enter into farming at the smaller
scale of direct-to-consumer sales in the local foods marketplace, like farmers’ markets, roadside stands and through community supported agriculture (CSA). If the evolution of this trend in consumer demand for farm products stopped at local farmers’ markets, it would be easy to dismiss. However, the impact of this trend—if recognized, described and labeled properly—shows that it is economically significant, commonly practiced and geographically widespread. None would argue that $7 billion in sales of cotton and rice are insignificant, yet in the same Ag Census year of 2007, organic, direct-toretail and local food sales conservatively added up to $8 billion. Perhaps those of us in agriculture
missed that comparison because it is so difficult to extract such statistics from USDA data sources, which are based on counting commodity products rather than following marketing channels. If the direct-to-consumer marketing channel were counted as if it were a commodity product, then it would be the fifth most common farm activity by number of farms. As for geographic distribution, CSA farms were present in nearly 2,100 counties according to the 2007 Ag Census. If you raise cattle, you are in good company with the ag sector that is most likely to sell direct-to-retail; three out of five cattle producers use that marketing channel. If you don’t see some kind of consumer demandbased agriculture, you’re not look-
ing, or maybe you see it and don’t know it. That illustrates a big part of the problem—we don’t have a name to call this trend of interrelated agricultural marketing channels that centers on the emergence of retail consumer demand as a driving factor. 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 or small farm-raised, then a significant porRetail ag Continued on Page 6
AFBF identifies priority spending for ag budget Continued from page 1 without a commitment to further agricultural research and technological advancement, even America’s farmers could be hard-pressed to meet these challenges.” Stallman also addressed the farm bill. “Farm Bureau strongly opposes any cuts to funding of the farm safety net,” he wrote. “The farm bill discussion has begun, and the House and Senate Agriculture committees should continue to have the primary responsibility to ensure farmers and ranchers have a viable farm safety net.” The House’s recently passed budget resolution, however, instructs the House Agriculture Committee to reduce commodity, crop insurance and conservation spending by $33.2 billion over 10 years, including $8.3 billion in 2012 and 2013. These cuts combined with reductions in nutrition spending amount to slashing farm bill funding by $180 billion. “That’s a considerably larger cut than the $23 billion, 10-year spending reduction House and Senate Agriculture committee leaders agreed to last year in their draft farm bill,” Mary Kay Thatcher, AFBF farm policy special-
ist, pointed out. The budget resolution, written by House Budget Committee Chairman Paul Ryan (RWis.), requires six authorizing committees, including the Agriculture Committee, to report a “budget reconciliation” bill by April 27. The resolution’s specifics on agriculture are limited, although the 99-page document proposes reducing the fixed payments that go to farmers irrespective of price levels and reforming “the open-ended nature of the government’s support for crop insurance, so that agricultural producers assume the same kind of responsibility for managing risk that other businesses do.” The spending reduction targets are the only numbers the House Budget Committee passes along to the Agriculture Committee. It is Agriculture Committee members who decide how the reductions are implemented, as committee chairman Rep. Frank Lucas (R-Okla.) alluded to in his statement on the budget resolution. “I would caution people about reading too much into the numbers or policy proposals in either the president’s budget or the Ryan budget,” Lucas said. “They are only suggestions. During our process, both policy and deficit re-
duction targets will be developed in conjunction with Ranking Member [Collin] Peterson [D-Minn.] and members of the committee as we write a fiscally responsible farm bill that ensures Americans continue to have a safe, affordable and stable food supply.” However, Peterson said Ryan’s proposal leaves the farm bill “high and dry.” “The Ryan budget proposes significant cuts in the farm safety net and conservation programs, and slashes spending on nutrition programs that provide food for millions of Americans,” Peterson said in a statement. “It is appalling that in an attempt to avoid defense cuts the Republican leadership has elected to leave farmers and hungry families hurting.” The Senate will almost certainly go its own way with the fiscal 2013 budget. And while the House Agriculture Committee will probably only deliver cuts to farm bill programs to the Budget Committee, rather than an entire farm bill, the Senate Agriculture Committee could have a full farm bill marked up by early May. Senate Agriculture Committee lawmakers are expected to work off of the $23 billion in savings proposed last year.
Taxes
Estate tax burden includes planning costs atop taxes owed By Jim Spinetta You have probably heard the old adage that the only two sure things in life are death and taxes. Since last harvest season, our farm has joined the 10 percent of American farms confronting the death tax, with the passing of our loving mother. Our seven-member family includes members aged 5 to 71. With vineyards and a winery, we have worked arduously over the years to produce a quality product, be stewards of the land and provide seasonal employment for dozens of other families. We were recently inducted into the California Heritage foundation. Our farm has been in operation since 1852 and we were among the first farms to be featured on the American Farm Bureau Federation’s Agriculture’s Lasting Heritage website honoring century farms. We have prepared for our family’s farm succession by attending seminars, reading books and drafting time-consuming living trusts, wills, partnerships, gift deeds, etc. The cost and incessant annual juggling of exclusions, exemptions, amounts and limits is lining the pockets of estate attorneys and accountants, while draining the farmers and ranchers growing our nation’s food, fiber, fuel, feedstocks and medicine. It’s no wonder that death taxes are the reason why only 30 percent of family farms make it to a second generation, and 10 percent to a third generation. We are fully educated university graduates, yet our family recently had to hire a full-time accountant to triage and file the volumes of appraisals, basis, forms and documents associated with the death tax within a specific time limit. To make matters worse, in 2013, unless extended, the estate tax exemption will revert to the $1 million level. Considering that the average American farm of 450 acres has a net worth of $7 million, how can we possibly extend the heritage family farm to the
Despite careful and costly estate planning, California vintner Jim Spinetta and his family had to hire an accountant and faced volumes of forms and other paperwork when his mother passed away. Spinetta says the only way to ensure farm families such as his can pass their farms on to the next generation is to repeal the estate tax. next generation when 85 percent of farm assets are illiquid? If they touch the stepped-up basis, forget about the U.S. having the most affordable, secure, safe, abundant and available food supply. Legislators need to implement the AFBF policy on estate taxes and permanently repeal the death tax for America’s farms. Something else has changed since the passing of my mom. My surviving dad has always had the cheerful fortitude to work the family farm, production or no production, regardless of what day of the week it is or the chore to be performed. To operate our winery and vineyards in California, we hold more than 32 per-
mits and licenses between state, county and federal government. Dad, just like any other hard-working farmer, will verbally grumble and plow through the piles of regulated paperwork. This estate tax mountain is different. It has taken most of his leisure time and significant financial resources, and has overwhelmed our family farm. My two brothers and I are doing extra work to fill the large gaps as we watch dad drag himself through the mundane form 706 and accompanying requirements. As you are reading this, our time to file the form has nearly passed, and we dread filing for the extension we need in order to plaster up the missing estate elements. I cannot believe that after all the years and financial commitment to estate planning this ordeal is taking so much of our time and resources. It’s hard enough to cope with the personal loss of a loved one; we shouldn’t have to also worry about losing what our family has worked for. My grandfather was a charter member of our county Farm Bureau. Dad was a county president and a state director, just like my current status. Through their foresight and yours, grassroots members feed the national Voice of Agriculture on estate taxes and other agricultural issues. Although the death tax is something we will all face, through Farm Bureau advocacy the tax issue is a topic we can permanently put to rest so that future generations can focus on growing our nation’s largest employer, agriculture. It is imperative that we continue to lobby our legislators to repeal the death tax, and equally important to keep our stepped-up basis. Jim Spinetta and his family operate Charles Spinetta Winery (charlesspinettawinery.com) in Plymouth, Calif., in the state’s Shenandoah Valley wine region east of Sacramento. Spinetta is president of the Amador County Farm Bureau and serves on the California Farm Bureau Federation board of directors.
Higher income taxes still on the horizon for 2013 As the last taxpayers file their 2011 returns, many are looking ahead warily, knowing that unless Congress acts, every month that goes by brings them a month closer to a smaller paycheck. Reduced income tax rates that were signed into law in 2001 and extended in 2003 and again this February expire at the end of this year. Individual income tax brackets now range from 10 percent for lower-wage earners to 35 percent for the top earners. On Jan. 1, 2013, those rates are set to increase to 15 percent at the low end and 39.6 percent for those in the top tax bracket. The American Farm Bureau Federation supports the extension of lower income taxes as an investment in the U.S. economy. “Farmers and ranchers plow much of their income back into operating or improving their farms,” explained Pat Wolff, AFBF
tax specialist. “If everyone’s taxes go up, many farmers won’t have as much money to reinvest in their operations and that will have ripple effects throughout the economy, especially in rural areas.” For farmers, that means thousands more dollars paid to the Internal Revenue Service instead of buying a tractor from the local farm implement dealership or building a new barn, according to Wolff. For others, it means less money to spend at the grocery store, restaurants, car dealerships and malls, just when the economy is starting to show signs of life. To fuel economic growth, Wolff says, Congress doesn’t need to pass a new economic stimulus package. “Just by extending several current but expiring tax provisions, it will free up money to be spent throughout the economy.
That keeps stores selling and factories humming.” President Barack Obama wants to make the lower income tax rates permanent for taxpayers with an income of less than $200,000, or $250,000 for married couples. On Capitol Hill, Republicans, who control only the House, want to extend all of the Bush tax cuts enacted in 2001. But as the saying goes, timing is everything. “With the November elections looming and the lack of consensus in Congress, it’s unlikely lawmakers will pass an extension of the lower income tax rates before they head to their home states to face voters,” Wolff said. What’s more likely to happen, according to Wolff, is Congress will take up an 11thhour extension bill in a December lame-duck session.
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Farmers, employers face capital gains tax hike By Rep. Peter Roskam With unacceptably high unemployment plaguing the country and the U.S. now faced with the highest corporate tax rate in the world, the White House and Washington should be working toward a simple goal: making America the most dynamic and competitive place in the world for job creation. A critical first step—supported by a broad coalition across American industries and sectors—would be to remove uncertainty and make permanent the 15 percent tax rate on capital gains. Faced with the threat of a dramatic tax increase in 2013, American employers of all sizes and sectors are hamstrung by uncertainty when making consequential investment and growth decisions. When it comes to America’s farming communities, the stakes are high. Farmers would be hurt tremendously by a capital gains tax increase because they are constantly investing in assets—like land, buildings and animals—to generate revenue and upgrade
their operations, looking ahead to the future. Production agriculture requires large investments in assets, and capital gains taxes apply when these assets are transferred to a new or expanding farm or ranch. This means any increase in capital gains taxes would make it much more difficult for farmers and ranchers to purchase or shed assets to adapt to the market. A staggering 40 percent of all agricultural producers report some capital gains, twice as many as the average American taxpayer. American farms—98 percent of which are family owned or run— would simply be devastated by a crushing new tax increase that disproportionately affects them. The threat alone of large tax hikes on capital gains next year is damaging enough on farms, employers and families. But couple that with the new 3.8 percent tax from the health care law and the potential sun-setting of the lower income tax rates of the last decade, and the American taxpayer is facing a 58 percent higher tax rate on capital gains income. That would be devastating and
have a far-reaching economic impact. As President Obama rightly insisted in August 2009, “you don’t raise taxes in a recession.” You don’t raise taxes on the families, farmers and small businesses that are simply trying to stay above water either. American businesses large and small, across many sectors, would have less money to invest in their company, hire and innovate. Farmers would have the additional burden of trying to modernize and adapt without the crucial assets to do so. And investors of all sizes would have less money and less opportunity to invest in economic growth. Whether seen on a family farm, in a small business or in a board room, America is in a global epic struggle for jobs and capital. Certainty and competitiveness are foundations for success. It’s why I recently introduced the Tax Hike Prevention & Business Certainty Act (H.R. 3091), in order to keep capital gains and dividend tax rates at their current 15 percent and ensure farms and businesses have the certainty needed to succeed. My bill and
its Senate companion (S. 1647) have support from a broad coalition of 27 American businesses and organizations, including the American Farm Bureau. America’s job creators, already saddled by a complex and disincentivizing tax system, can illafford additional barriers to job creation, particularly as America’s competitors become increasingly attractive as the world around us is lowering tax rates.
Rep. Peter Roskam (R-Ill.) is a member of the House Ways and Means Committee, the main tax-writing committee in the House.
A movement to tax Internet sales is growing The Internet has brought the world to our doors, whether we live in New York City or in rural areas. But brick-and-mortar, Main Street retailers have lost business —and states and communities have lost tax revenue to pay for schools and other services—as tax-free retail sales over the Internet have boomed. Now there’s a growing movement to establish an Internet sales tax to level the playing field, as supporters put it, between online retailers and local merchants. A bipartisan group of legislators is behind the Marketplace Fairness Act (S. 1832), which would give states the option to collect sales and use taxes from out-of-state businesses unless they have less than $500,000 a year in national sales. Sen. Mike Enzi (R-Wyo.) is the sponsor, and the 11 cosponsors include such staunch conservatives as Sens. Roy Blunt (R-Mo.) and John Boozman (R-Ark.), as well as Democrats Dick Durbin (Ill.) and Ben Cardin (Md.). The Supreme Court ruled in 1992 that states could not require companies that aren’t physically located in those states to collect sales taxes. Consumers are supposed to pay out-of-state sales taxes voluntarily but, of course, most don’t— and don’t even realize they should. Rather, most shoppers consider the Internet a largely tax-free zone. Some even scope out products in
the stores, only to log on to the Web to actually buy them tax-free. A University of Tennessee report finds that about $56 billion in sales tax revenues have been lost since 2007 because of e-commerce sales. For states with budget shortfalls, the idea of an Internet sales tax is more appealing than ever. Arkansas, California and Con-
“Different rules in different states could be very confusing for consumers,” said Pat Wolff, American Farm Bureau Federation tax specialist, “and would still leave a situation that determines winners and losers depending on which online retailers would be required to collect sales taxes.” The Supreme Court stated in its
necticut passed laws last year that require amazon.com and other retailers with in-state affiliates—businesses that sell on their behalf—to collect sales taxes from customers in those states. As other states look to follow suit, even those who aren’t fond of taxes are wondering if a national solution would be better than a state-bystate approach.
1992 decision that Congress could overrule the decision through legislation. On the plus-side for a federal policy, Wolff says, all retailers would have to operate by the same rules. On the downside, she said, people who live in remote areas and depend on the Internet because of their limited shopping options would end up paying more for what they buy.
An important factor for farmers and ranchers is that local governments often turn to property tax increases when local sales tax revenues fall. That has a disproportionate impact on land-based businesses like farming and ranching. AFBF policy currently opposes out-of-state sales tax collection. However, as the issue picks up steam, AFBF is asking county Farm Bureaus to discuss it as part of this year’s policy development process. Voting Farm Bureau members surface ideas and concerns at their county Farm Bureau meetings and vote on which policy proposals or resolutions to forward for consideration at the state and possibly national levels. Questions about whether remote sellers have an unfair price advantage and how important it is to increase tax revenue for state and local governments are aimed at getting the Internet sales tax discussion started. “Farm Bureau traditionally has supported keeping taxes at the lowest possible level needed to provide necessary services and programs. However, Farm Bureau members also are concerned with maintaining strong rural communities and local economies that offer a good standard of living for their families,” explained Wolff. “We need guidance on this issue as it gains traction at the national level.”
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April 2, 2012
Food banks face ‘perfect storm’ of challenges Food banks play a vital role in helping Americans who are struggling economically to put food on their tables. Now, many of those food banks are, themselves, struggling under the weight of increased demand and reduced food donations. Since 2006, demand has increased 46 percent across the Feeding America network of food banks as unemployment hovers at 8.3 percent and one in six Americans is food insecure—a term that means they could run out of food and money to buy it before receiving their paychecks or food assistance for the next month. Meanwhile, in a “perfect storm” of challenges for food banks and the people they serve, donations to food banks are declining as food makers have made their production lines more efficient and embraced “secondary markets” to sell products that are less than perfect rather than donating them. Food banks’ operating costs are up, and federal government donations of bonus commodities declined 30 percent in 2011, according to Feeding America. At a Capitol Hill briefing for
the Senate Hunger Caucus early this year, Scott Sink, a Virginia vegetable grower and vice chairman of the American Farm Bureau Federation Young Farmers & Ranchers Committee, spoke about ways to help stabilize food donations by enhancing farmers’ incentives. “It costs money to store and transport food for donation,” explained Sink, who often donates squash and other produce from his farm to local charities. “If the tax deduction for donated food was increased to the full market value, it would make it an easier business decision for farmers.” Farmers like Sink often let volunteers glean excess produce from their fields after first-harvest. Some even plant crops for the sole purpose of helping to feed the hungry. Sink and others at the congressional briefing said that creating a “produce to donate” tax incentive would spur more farmers to plant crops intended for donation and food makers to install donationtargeted production lines. The enhanced tax deduction for food donations by smaller businesses such as most farms and ranches let farmers write off much of the cost of producing the food. Since the small business tax
deduction expired at the end of last year, only larger businesses known as C corporations can use it. AFBF supports renewing the tax deduction for all businesses and making it permanent. Farm Bureau “believes that tax policy should encourage individuals and companies to do all they can to help people in need,” AFBF President Bob Stallman wrote last fall to several senators who have previously championed the tax incentive. Stallman expressed Farm Bureau’s support for the Good Samaritan Hunger Relief Act (S. 166) introduced by Sen. Richard Lugar (R-Ind.) to make the tax deduction permanent, as well as expand it to farmers who use cash basis accounting. Stallman said that many more farmers and ranchers would donate food if they were able to bear the costs of harvesting, processing and transporting it. Rep. Geoff Davis (R-Ky.) has introduced a similar bill (H.R. 3729) in the House. Without incentives that allowed small and mid-sized businesses to take an enhanced tax deduction when they donate food, “donations from restaurants, farms and small retailers are simply not coming in because it’s often cheaper for them to dump the extra food
Crude oil driving diesel, gas prices up Continued from page 1 Supply disruptions in the Middle East and North Africa are partly the reason forecasters ratcheted up their predictions from February, when they pegged prices at $100 per barrel on average this year, said Matt Erickson, an American Farm Bureau Federation economist. In addition, uncertainty about Iran continues to pose a threat of immediate price spikes. “Crude oil prices throughout 2012 continue to be approximately $20 per barrel above the 5-year average, and they’re likely to stay that way,” Erickson said. “Don’t be surprised to see crude oil prices remain above $100 per barrel and above the 5-year average over the coming months with the instability in the Middle East and North African region.” As crude oil prices go, so go farm diesel and gasoline prices. “On the upside, farmers, for the most part, are having great planting weather,” Erickson said. “On the downside, farm diesel prices are all the way back up to where they were in 2008, which is far from good news, especially when you’re using hundreds, if not thousands, of gallons of it.”
Erickson used Alabama, where farm diesel prices are averaging $3.68 per gallon, as an example. “To fill up a 270-gallon tractor, it’s going to cost a farmer or rancher approximately $994. That’s 82 percent higher than it cost in 2009, 48 percent higher than the 2010 average price for farm diesel and 10 percent higher than last year.” In March alone, farm diesel prices in Alabama rose 5 percent.
Since the start of 2012, they’ve gone up 6 percent. Farm diesel prices are going to be a major contributor to farmers’ and ranchers’ increased input costs, not only this planting season, but possibly through harvest season. “The news isn’t all bad though,” Erickson said. “Barring any outside events, the pain shouldn’t get much worse next year as crude oil prices are expected to remain
relatively flat from 2012 to 2013, which should give growers some relief with diesel prices.” While gas prices don’t quite cut into farmers’ and ranchers’ bottom lines the way farm diesel prices do, they aren’t untouched by rising prices at the pump. “Producers are consumers too,” Erickson pointed out. “They’re gassing up their cars, shopping at the grocery store and buying youname-it off of the Internet, just like everyone else. At some point, gas prices may reach beyond what manufacturers and other entities can absorb and they’ll pass those costs along to the people who use their electricity, their home, farm and ranch products, their packaging and their shipping.” The Department of Energy’s Energy Information Administration expects regular-grade motor gasoline retail prices to average $3.79 per gallon in 2012, compared with $3.53 per gallon in 2011. During the peak summer driving season, which starts this month and goes through September, prices are forecast to average about $3.92 per gallon, with a peak monthly average price of $3.96 per gallon in May. Diesel prices, which averaged $3.84 per gallon in 2011, are expected to come in around $4.15 per gallon this year.
in a landfill than to donate it,” said Diana Aviv, president and CEO of Independent Sector, a coalition of nonprofit groups, in a recent op-ed article in the Capitol Hill newspaper Roll Call. Meanwhile, food banks could see even more demand under the budget proposal put forward by Rep. Paul Ryan (RWis.), chairman of the Budget Committee, and passed by the House last week. In addition to slashing farm bill spending by $180 billion over 10 years, over $157 billion more than proposed under last year’s unsuccessful “supercommittee” deficit-reduction effort, the budget plan would convert the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, to a capped state block grant program. Feeding America says that would cut food assistance 20 percent and result in more people depending on food banks. “Any cuts to SNAP would only increase the number of people turning to local charities for assistance, and already over strapped food banks would not be able to make up the difference,” said Vicki Escarra, president and CEO of Feeding America.
Retail agriculture Continued from page 1 tion of the value is based on retail consumer demand. Let’s name it “retail agriculture.” Retail agriculture is analogous to “small business,” which is also a term that describes a wide variety of very different businesses in order to allow effective policy discussion. We can talk about “the role of small business in new job formation” and nobody blinks an eye at the idea of lumping sole proprietors with corporations of 500 employees—both fitting into the generalized definition. Retail agriculture is a shorthand way to talk about this subject in agricultural policy discussions. We need the term “retail agriculture” as we describe its modest yet growing economic significance, its capacity to provide opportunities for lower cost entry into agriculture and its relevance to the future.
Gary Matteson is a guest contributor to Farm Bureau’s Focus on Agriculture article series. He is vice president of Young, Beginning, Small Farmer Programs and Outreach at the Farm Credit Council.
April 2, 2012
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State FB Links
New York farmers are hopped up about brewery bill A bill that New York Farm Bureau says would recreate the once vibrant New York hops-growing industry and add to the already booming agritourism sector is making its way through the state Senate. New York’s agriculture and beer industries are already major job creators, pumping more than $4.7 billion and $1.2 billion into the state’s economy each year, respectively. The farm brewery license bill (S. 5078), approved earlier this year by the state Senate Commerce, Economic Development and Small Business Committee, will allow for better synergy between these two industries by allowing farmers to operate on- and off-premise accounts and also supply hops to other craft breweries. In the late 19th century, New York grew about 90 percent of the nation’s supply of hops, only to see the industry fade away as industrialized beer production ramped up. The rise of smaller niche and craft breweries represents a unique opportunity for hops
farming to once again flourish in New York, according to NYFB. “This bill represents a true win,” said Julie Suarez, NYFB director of public policy. “The licensing provisions will allow a farm brewer to bottle and sell their products on or off premises and in the wholesale or retail markets. This opens up new and exciting opportunities for farmers to enter the craft beer business and to increase farm-related tourism.”
The bill requires that a large percentage of the hops and other ingredients used to brew beer at a farm brewery be purchased in the state, ensuring that craft breweries’ products are New York through and through. “The provisions that require farm brewers to use an escalating percentage of locally grown hops will stimulate new opportunities for growers,” Suarez said. “Hop barns once dotted New York’s
Colorado FB collecting funds for Yuma Fire victims
Chicago moms tour farm, learn about gestation pens
Indiana FB thanks state leaders for inheritance tax reform
The Colorado Farm Bureau Federation has established a relief fund for farm and ranch families devastated by the destructive fire that swept through Yuma County on March 18. The fire endangered humans, livestock, structures and homes and has left a large swath of destruction. Farmers and ranchers lost miles of fencing, hay and grass, according to CFBF. The group will distribute all of the donations it collects to the farmers and ranchers affected by the fire. Tax-deductible donations can be made online at coloradofarmbureau. com or mailed to Colorado Farm Bureau Foundation—Yuma Fire, 9177 East Mineral Circle, Centennial, CO 80112. The CFB Foundation is a 501(c)(3) charitable foundation with a catastrophic disaster fund dedicated to helping farmers and ranchers in need after agricultural disasters such as blizzards, floods or fires. The fund was first established in 2007, after farmers and ranchers lost livestock and income to blizzards that year in southwest Colorado. High winds and dry conditions led to the Yuma fire, most likely a prescribed burn that got out of control. The fire burned about 40 square miles of a rural area just west of Denver. State and local officials are still assessing the extent of the damage, including getting a count of the number of farm animals that were killed or wandered off. The danger of wildfire remains high across much of the Rocky Mountain area due to hot, dry and windy weather.
Six Chicago-area moms who are raising kids could now tell you a little something about raising pigs too, after a recent visit to an Illinois hog farm. In early March, Kane County, Ill., hog farmer Chris Gould hosted the moms on his family’s farm. The women, who had no farming experience, connected with Gould through Illinois Farm Families, a partnership of Illinois Farm Bureau and several commodity groups in the state. The program dubs the participants “field moms.”“We have people out at our farm all the time for tours, but this experience was a little different…,” said Gould. “The Illinois Farm Families effort gives us a chance to answer all of their questions. It’s more about these field moms running the show versus us just giving them a tour of our farm.” The visitors watched a sow give birth and cuddled the baby pigs. “From what we saw, the sows are comfortable,” said Farrah Brown, a field mom from Glendale Heights. “I don’t see [gestation stalls] as being inhumane. They are comfortable and well cared for…I don’t see the big deal.”“I was surprised by the TLC and how they treat each animal as an individual even though there were so many,” said Pilar Clark, a field mom from Lisle. The field moms have toured other farms and talked with farmers, veterinarians and agricultural experts about everything from how farmers use antibiotics and ensure food safety to the legend of cow tipping. Information about Illinois Farm Families and videos of the farm tours are at watchusgrow.org.
A new Indiana law will eliminate the state’s inheritance tax by 2021. The tax will be phased out through 10 percent tax rate reductions each year starting in 2013. The current top inheritance tax rate is 20 percent. Also, the law increases the amount that each family heir can inherit tax-free from $100,000 to $250,000. The increased exemption will be in effect for the estates of anyone who died on or after Jan. 1, 2012. “Every farmer dreams of passing his farm down to his son or daughter, and the repeal of the inheritance tax eliminates at least one important barrier to that happening,” said Don Villwock, Indiana Farm Bureau president. “This has been a policy objective for [IFB] for decades, and IFB members would like to thank the governor and the General Assembly for making it happen.” Gov. Mitch Daniels (R) signed the act into law on March 20. More than half of states don’t impose any estate or inheritance tax; a few of the 20 or so that do have recently enacted changes. Ohio’s estate tax will be eliminated after 2012 under a law signed last year by Gov. John Kasich (R). North Carolina and Illinois have increased their exemption levels. A ballot initiative in Oregon would, if successful, let voters weigh in this November on whether to eliminate the estate tax there. Nebraska is debating whether to eliminate county-imposed inheritance taxes. Tennessee’s Legislature is considering eliminating estate taxes over the next five years, beginning in 2013.
State Focus
landscape, and if this bill is enacted, they will again.” The manufacturing, bottling and selling of complimentary items such as food condiments, mustards, sauces, hop seasonings, beer nuts and other beer-related foods and crafts would also be allowed under the measure. The bill was referred to the Senate Finance Committee. A companion bill in the General Assembly (A.7449) has been referred to the Agriculture Committee. Announcing his proposal to create a “Farm Brewery” license, New York Gov. Andrew Cuomo said he is also looking to promote the growth of the state’s craft breweries, increase demand for locally grown farm products and expand tourism. Under Cuomo’s legislation, the new license would allow craft brewers that use products grown in New York to operate in a similar fashion to the state’s wineries. The bill would allow farm breweries to sell New York labeled wine at their retail outlets, while wineries would be able to sell New York labeled beer for off-premises consumption. In addition, farm breweries would be permitted to open restaurants and other venues like bed and breakfasts, and both breweries and wineries would be able to conduct tastings of products on their premises. The proposal would also allow farm breweries to sell beer-making equipment and supplies, food that complements their products, souvenir items and additional products similar to those allowed under the farm winery statute. NYFB President Dean Norton said Cuomo’s proposal “is an opportunity for local farmers to bring New York back to being the premier hops growing state that we once were, creating added value markets and new jobs in our state.”
Newsmakers Michael Tobin is the new director of the commodity division for the Kentucky Farm Bureau Federation, effective April 2. For the past four years Tobin has worked in the Kentucky governor’s Office of Agriculture Policy. Fran McCall is the new commodity specialist for KFB, effective April 16. Previously, McCall served almost three years as an Extension agent in McLean County for the University of Kentucky Cooperative Extension Service. Lori Pommerenck has joined the California Farm Bureau Federation as controller. Pommerenck will manage the CFBF Financial Services, Membership and Central Services departments. Her responsibilities include preparation of the organization’s financial reports, coordination of tax filings and oversight of the membership dues processing and customer service activities as well as other duties.
Grassroots
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April 2, 2012
Campaign school teaches the A-to-Zs of elections Designed to get candidates ready for all aspects of the campaign process, the American Farm Bureau Federation staff has brought their Campaign Management Seminar to 28 state Farm Bureaus since last summer, more states than in any previous seminar cycle, which runs from July through April. With a 78 percent success rate, the campaign school has helped attendees achieve offices ranging from local zoning boards to the U.S. Congress. The day-and-a-half seminar teaches candidates, spouses and campaign managers how to evaluate the electorate, lay the groundwork for a campaign, raise money, learn the issues and develop and effectively deliver a message. Building coalitions and using polls are also covered, among other topics. The Campaign Management Seminar is presented by Linda “LJ” Johnson, AFBF director of policy implementation, and Cody Lyon, AFBF director of grassroots/political advocacy, in conjunction with the staff of the state Farm Bureau hosting the event. The seminar is theory-based, so it’s applicable to a wide range of offices, from a board of
education race with less than 400 voters to a U.S. House or Senate seat or other statewide office. “All candidates benefit from campaign school because they’ll be taking the same approach to making decisions throughout the election season, they’ll just tailor the scope of the campaign to fit the electorate,” Johnson explained. One of the best sessions the seminar offers is a mock media interview attendees do on their first day, according to Lyon. “Through our constructive critique participants understand how voters will see and hear them, what impressions they’ll leave with the public,” Lyon said. Through the mock interview and the other interactive sessions, the school helps candidates identify their strongest areas, as well as those they need to work on. While the campaign school is not exclusively for Farm Bureau members, it is designed to surface Farm Bureau members who are potential candidates for local offices. “We want political candidates who are tied to the land,” Johnson said. “Very often the critical decisions related to farming
and ranching are made on the local and county levels. It’s very important to have decision-makers who will relate to where Farm Bureau members are coming from.” Jim Bachman successfully ran for director of Nevada Irrigation District Division 4 after attending the seminar. “Having never been involved in a campaign, everything was new to me,” said Bachman, who participated in a seminar hosted by the California Farm Bureau. “Participating in the Farm Bureau Campaign Management Seminar gave me solid tools to run a successful campaign.” Applying what he learned in the seminar resulted in success on Election Day. “One of the best tips I received was in developing a campaign brochure,” Bachman said. “I heard from a number of voters that this single piece of mail helped win over their vote.” The next series of the Campaign Management Seminar will run June 2013 through May 2014. Please contact your state Farm Bureau for more information.
PAL training preps young farmers to be agriculture’s advocates Members of the American Farm Bureau Federation Partners in Agricultural Leadership (PAL) class of 2012 were in Washington, D.C., March 20-22. The 10 young agricultural leaders took time away from their farms and ranches for Module B of the program, training in policy development and the legislative process. Spring is a good time to visit Washington and focus on legislative issues, with Congress in high gear. Spring, of course, is also a busy time on the farm, but the PAL training was worth breaking away, according to Heather Hill, a PAL class member and a hog producer from Indiana. “My position has been that if I don’t tell my story, my children might not have a future in agriculture,” said the farmer, wife and mother of three. “We’ve been exposed to the inner workings of Capitol Hill, and we’ve given testimony in mock hearings. Any time you can practice, it only makes you better. This real-life scenario is preparing us to be in that situation and tell our story to have an impact with our legislators.”
Hill said she also enjoyed the chance to network with the diverse group of producers who make up the PAL 2012 class. The goal of the PAL program is to strengthen exceptional young growers’ abilities to serve as advocates for agriculture, with training in problem solving, persuasion and consensus building. It’s sponsored by Farm Credit, Monsanto and AFBF. Members of the sixth PAL class hail from Indiana, Louisiana, Massachusetts, Minnesota, Nebraska, North Dakota, South Carolina, Utah and Virginia and produce everything from corn, cattle and fruits and vegetables to sheep, sugar cane and tobacco. Terri Lawton is an 11th—yes, 11th—generation farmer from southeastern Massachusetts. A licensed producer of raw milk and cheese, as well as beef and veal, Lawton sells many of her products direct to consumers at Boston-area farmers’ markets. She said the training on legislative issues and how to approach lawmakers about those issues will be valuable to her operation. “I think that using storytelling
to move an issue is a significant tool that I learned and that I haven’t tapped into yet,” said Lawton. “These tools could be exceptionally useful in reaching the goals I have as a farmer and an innovator. Other farmers also can benefit from what the PAL participants are learning, according to Rachel Bina, who grows wheat, barley, canola, soybeans and sunflowers. She says she has shared tactics that she has learned through PAL with her fellow young farmers back home in North Dakota. North Dakota Farm Bureau is working to get a right-tofarm initiative on the November ballot to prevent the passage of laws that restrict farmers’ use of modern agricultural practices. “This training has motivated me to go back and get signatures and work with the media to support our right-to-farm effort,” Bina exclaimed as though she couldn’t wait to put what she’s learned into action.
The group went through Module A, two and a half days of rigorous media training, last September in New York City, with the idea that if the participants could make it there, they could make it anywhere. “We take them out of their element a little bit,” explained Dan Durheim, executive director of the American Farm Bureau Foundation for Agriculture and Sponsorships. “It helps them relate to urban consumers and get how to communicate with different audiences.” The next PAL module will take the participants to St. Louis in September for training in stakeholder engagement. The participants will graduate from the intensive, two-year training program next February, at the joint AFBF National Leadership Conference, Young Farmers & Ranchers Leadership Conference and Beginning Farmers and Ranchers Conference in Phoenix.
Corner Post China Becomes Major Market for U.S. Ag Exports
Source: USDA
The members of the current American Farm Bureau Federation Partners in Agricultural Leadership class are, counterclockwise from bottom-left: Misty Wall, Utah; Hilary Maricle, Neb.; Heather Hill, Ind.; Malissa Fritz Schentzel, Minn.; Rachel Bina, N.D.; Megan Gravois, La.; Jason Rodgers, S.C.; Travis Gebhart, S.D.; Terri Lawton, Mass.; and Jonathan Cavin, Va.
China was the largest market, by dollar value, for U.S. agricultural exports for the first time last year. Canada is forecast to retake the No. 1 spot this year, but China will remain a top export market.