Upcoming: 34th Annual Meeting of the American Agricultural Law Association

Posted:  July 1, 2013

The 34th Annual Conference of the American Agricultural Law Association will be held October 31 - November 2, 2013 at the Concourse Hotel in Madison, Wisconsin.  The AALA annual conference is an excellent opportunity for students, attorneys, policymakers, government employees, and other professionals to network and learn about new and emerging issues in agricultural and food law. 

This three-day event is recognized as one of the best opportunities for relevant agricultural law continuing education.  The AALA's symposia have featured presentations by national and international experts providing extensive and relevant information on agricultural and food law.  Attendees include national academic, governmental, corporate, and private practitioner experts in many areas of agricultural law.  For registration, or to learn more about AALA, visit the AALA at www.aglaw-assn.org. 

Becoming a member of AALA is very easy, and new members are welcomed and greatly appreciated. For information about joining AALA, visit the AALA site here. If you have any questions about AALA, joining, and/or membership benefits, please contact AALA Executive Director Robert Achenbach at RobertA@aglaw-assn.org.

 

Carbon Market Study in Derivatives Bill

On Wednesday, April 21, 2010 the Senate Agriculture Committee voted 13 to 8 to approve Chairman Blanche Lincoln's derivatives reform legislation that will become part of the larger financial reform legislative package that the whole Senate will soon considered.

The Wall Street Transparency and Accountability Act (Act) requires most derivative contracts "to be traded on an public exchange and to be processed, or cleared, through a third party guarantee payment if one of the parties to a trade went out of business," reports Edward Wyatt and David M. Herszenhorn of the New York Times online.

What the Act also requires, as Reuters reports, is that a government interagency group conduct a study, which will be submitted to Congress, that will examine transparency issues in current and future carbon markets. The bill says the goal of the study is to "'ensure an efficient, secure, and transparent carbon market, including oversight of spot markets and derivative markets[.]"'

The study could be vital in helping Congress shape and regulate carbon markets. Currently ten northeastern states operate carbon markets on their power plants, while the Chicago Climate Exchange has a voluntary market.

However, it is likely that the Climate Change bill being introduced sometime next week by Senators Kerry, Graham, and Lieberman will "include a carbon market on power plants begining in 2012, which could be expanded to the manufacturers years later[,]" reports Reuters.

The government agencies and officials participating in the study are the heads of the Department of Agriculture, the Securities and Exchange Commission, the Environmental Protection Agency, the Federal Energy Regulatory Commission, the Federal Trade Commission, the Energy Information Administration, the Treasury Department, and the Commodity Futures Trading Commission.

We shall see if lawmakers make this study a talking point as the larger financial reform package continues to come together and be debated.

To read the Reuters article click here.
To read the New York Times article, click here.

Posted: 04/23/10

Derivatives Bill Makes it through Senate Ag Committee

Today the Senate Committee on Agriculture, Nutrition and Forestry passed out of the committee The Wall Street Transparency and Accountability Act. Chairman Blanche Lincoln's (AR) press release touts that the bill will "bring 100 percent transparency to the nation's financial markets, prevent future bailouts . . ."

The bill will be folded into the larger financial reform legislation being considered by the Senate. The Senate Agriculture Committee has jurisdiction over the Commodity Futures Trading Commission, which oversees the derivatives market.

According to Edward Wyatt and David M. Herszenhorn's reporting for the New York Times, the bill passed out of the committee 13 to 8. The only Republican voting for the bill was Iowa Senator Charles Grassley.

As the Times reports, the larger financial reform package passed out of the Senate Banking Committee without a single Republican vote. Senator Grassley is up for reelection, and so this begs the question as to whether or not other Republicans up for reelection will also take a position on financial reform that they might see as an easier position to explain to voters.

The Times also reports that recently Republicans indicated that there are ongoing bipartisan negotiation, but they have yet to yield "major changes to the legislation." Right now financial reform is certain to dominate the Senate's legislative calendar for what could be a significant amount of time.

To read the bill click here.
To read Chairman Lincoln's press release on the bill's passage, click here.
To read the New York Times article on the bill, click here.
To read a previous US Agricultural & Food Law and Policy Blog Post on derivatives reform, click here.

Posted: 04/21/10

Oversight of financial markets affecting agriculture in the news

As recently as yesterday, the United States Senate Agriculture Committee has been working hard in developing oversight legislation for the over-the-counter-derivatives market (OTC), which is under the committee’s jurisdiction as part of the nation’s futures markets. The futures markets are used to determine what a commodity’s price should be and the markets are used to manage business risks.

Senate Chairman Blanche Lincoln, stated before the committee’s hearing on financial market regulation that “the Committee will produce a bipartisan over-the-counter derivatives bill that will provide greater oversight and transparency to the nation’s financial markets [,]” according to the Senate Agriculture Committee’s press release. Lincoln also stated that reform is a top priority for the Committee and there is “an urgency to act” on behalf of the American people.

The committee expects the bill will be part of greater regulatory reform legislation.

Meanwhile, Charles Abbott and Kevin Drawbaugh are reporting for Reuters that House Financial Service Chairman Barney Frank and House Agriculture Committee Chairman Collin Peterson have reached an agreement on their bill to provide “regulation for the first time over the over-the-counter derivatives market.” Like the Senate bill, this legislation will be folded into a broader financial reform package.

As Reuters reports, the OTC derivatives market is worth $450 trillion, and “has been widely blamed for amplifying last year’s financial crisis.” Lawmakers are caught in a balancing act of trying to maintain the markets role “in helping corporations hedge against operational risks [,]” while also curbing excessive speculation.

Both Frank and Peterson have developed bills to deal with this market as part of their respective committees’ jurisdictions. Aides claim 90 percent of the two bills have been “reconciled” but end user and clearinghouse ownership “issues must still be ironed out.”

The compromise is likely to happen and the House will probably pass a bill this year as major financial market reform is major objective of the administration. Though, as with several other bills, the pace of the Senate will dictate when a bill gets to the president’s desk and how much bi-partisan support will it enjoy.

To read the Senate Agriculture Committee press release click here.
To read the Reuters article on the markets and House action, click here.

Posted: 12/03/09

USDA Alleges PACA Violation

On August 18, 2009, the United States Department of Agriculture (USDA) announced in a news release that the department was filing an administrative order alleging Phillies Tomato & Produce Corp. “committed willful, repeated, and flagrant violations of the Perishable Agricultural Commodities Act" (PACA).

PACA gives the USDA authority to revoke or suspend a trader’s license for violating the act. The act itself deals with business conduct for interstate traders for the produce industry. The act requires traders in fresh or frozen fruits and vegetables to be licensed by the department.

According to the USDA news release, the department alleges the Philadelphia, PA-based company did not promptly make full payment to 26 sellers for agreed prices or outstanding balances. The release alleges the company failed to make $1,241,848.35 in payments for “289 lots of perishable agricultural commodities, which the company purchased, received, and accepted in the course of interstate commerce during the period of May 2007 through October 2007.”

Phillies Tomato & Produce Corp. has the opportunity to request a hearing. A violation of the act could result in the traders involved in the alleged actions being banned from employment by “any PACA licensee for one year and then only with the posting of a USDA-approved surety bond.” Additionally, the company could be “barred” from the produce industry for up to two years.

According to a story by Bob Luder for The Packer, the company is no longer operating. The PACA administrator has already “collected and liquidated Phillies Tomato’s PACA trust account in the amount of $236,078.22.” That, according to court documents filed in the U.S. District Court for the Eastern District of Pennsylvania. Apparently, the funds from the trust were distributed to the 26 creditors on a pro rata basis.

To read the USDA news release on these allegations click here.

To read the Packer story click here.

Posted: 08/24/09

Speculative Position Limits to be Enforced by CFTC

The United States Commodity Futures Trading Commission (CFTC) told two “commodity pool operators” that they may no longer exceed federal agricultural speculative position limits established by 17 C.F.R. § 150.2. That, according to the Delta Farm Press and a CFTC news release from August 19, 2009.

In 2006 the CFTC’s Division of Market Oversight (DMO) granted DB Commodity Services LLC, a commodity pool operator and commodity trading advisor, and another commodity pool operator permission, or “no-action relief,” that allowed the pool operators to exceed the federal limits set by CFTC regulations regarding speculative positions for farm futures. The Division of Market Oversight feels the trading strategies being employed by the companies would not qualify them for a “bona fide” hedge exemption under current regulations. CFTC Chairman Gary Gensler stated, ‘“Position limits promote market integrity by guarding against concentrated positions.”’

According to the Delta Farm Press story, “The CFTC also stated that DMO ‘will work with each of these entities as they transition to positions within current federal speculative limits. The withdrawal of these no-action positions is very specific and limited and does not affect any other no-action or regulatory positions taken by the CFTC or its staff with regard to these entities or other market participants.”’

To read the Delta Farm Press story click here.
To read the CFTC news release click here.

Posted: 08/21/09

Mixed News on Farm Finance

The Delta Farm Press reported today about the new release of the ABA Center for Agricultural & Rural Banking’s Farm Bank Performance Report, detailing recent trends in the rural banking system.

In 2008, the report said, the U.S. banking industry held $123.5 billion in farm loans, an 8 percent increase over the $114.2 billion in 2007. The 2008 figure for farm banks represents more than 50 percent of the total farm credit outstanding in the United States, according to the American Bankers Association’s Center. The total also included $69.1 billion in small farm loans, of which $26 billion was invested in “very small farm loans.” ABA Center officials said they consider a small farm loan as being one for $500,000 or less. A micro-small farm loan is $100,000 or less. The number of small farm loans in 2008 surpassed 1.2 million with the great majority — almost 1 million — under $100,000.

The Wall Street Journal’s discussion of the report pointed out that, while lending might have increased, farm bank earnings fell “10.3% in 2008 as the global recession seeped into the rural economy.” The discussion of farm income at FarmPolicy.com also cites an article in the Minneapolis Star-Tribune discussing a University of Minnesota survey finding that median profits for farms included in the survey fell 15% in 2008, but that certain agricultural sectors, such as dairy, which fell 38%, felt the dropoff much more severely. The Wall Street Journal also explained that “The problems for farm bankers are beginning to multiply this year, however. The incomes of farmers, which soared to record highs in 2007 and 2008, are projected by the U.S. Agriculture Department to sink 20% this year. Some players in the overbuilt corn-to-ethanol fuel industry are falling behind on loan payments.” The Wisconsin Ag Connection had similar news, saying that, according the latest survey of agricultural lenders in the Seventh Federal Reserve District (which includes portions of Wisconsin, Iowa, Illinois, Michigan and Indiana), “there was a quarterly decrease of six percent in the value of good agricultural land for the first three months of this year, which was the largest quarterly decline since 1985. The year-over-year increase in district farmland values also eroded to just two percent in the first quarter of 2009, [and] the growth in farmland cash rental rates moderated in the district so far in 2009, with an increase of seven percent.”

In other farm finance news, an amendment to the 'Helping Families Save Their Homes Act,” signed into law last week, will help agricultural borrowers as well. It will require government agencies to make sure that banks use their TARP funds to help farmers in need of financial assistance. According to a pork industry newsletter, “[i]n March, [Senator] Feingold and New York Senator Kristen Gillibrand led a group of colleagues asking USDA and the Treasury Department to require TARP recipients to implement a foreclosure-mitigation program that includes farm loan restructuring, similar to the one in place for homes. Many farm loans include a home as part of the loan or as security against the loan, so extending this provision to farmers and ranchers would help save farms and homes from foreclosure, Fiengold contends.” Another article on the topic is located at the Wisconsin Ag Connection site.

Posted: 5/28/2009

Suspension of FSA Foreclosures

Secretary of Agriculture Vilsack announced on Wednesday that Farm Service Agency (FSA) would suspend foreclosure actions on farm loans issued through FSA. While this action will undoubtedly benefit farmers in the current economic downturn the major purpose behind the suspension of foreclosures is to provide the federal agency an opportunity to review their loan granting process for discrimination. A press release from Secretary Vilsack stated:

'These are just the first actions in a
continuing effort to ensure that the civil rights of USDA constituents and
employees are respected and protected,' said Vilsack. 'This memorandum reflects
my deep commitment to changing the direction of civil rights and program
delivery in USDA by creating a comprehensive approach to guarantee fair
treatment of all employees and applicants.'

The press release announced that a task force was to be created to review some of the complaints which currently number around 14,000 of which 3,000 still remain to be processed.

Published: 04/24/09

Discharge of Taxes From Sale of Chapter 12 Property

In a recent bankruptcy decision, In re Uhrenholdt, 2009 Bankr. LEXIS 144 (Bankr. D. Neb. 2009); No. BK06-40787, 2009 WL 198966 (Bankr. D. Neb. Jan. 26, 2009), the Chapter 12 debtor had raised corn in 2005 and retained the corn for use as feed for the debtor’s cattle. The debtor stopped raising corn after 2005. Prior to and after the bankruptcy petition was filed in July 2006, the debtor sold the corn to the debtor’s corporation on request from the lender which held a security interest in the corn.

The sales produced self-employment income to the debtor and the debtor’s Chapter 12 plan treated the taxes as a general unsecured claim under 11 U.S.C. Sec. 1222(a)(2)(A). The debtor and IRS agreed that the taxes were post-petition taxes because the federal tax return reporting the taxes was filed after the bankruptcy petition was filed.

The IRS argued that 11 U.S.C. Sec. 1222(a)(2)(A) did not apply because the corn was not an asset used in the farming operation but was farm produce. The court focused on the fact that the debtor no longer raised crops, used the corn to feed cattle in an on-going farm operation, and did not market the corn for public sale. Therefore, the court held that the proceeds of the corn sale to the debtor’s corporation for continued use in the farm operation was eligible for 11 U.S.C. Sec. 1222(a)(2)(A) treatment as an unsecured claim.

For a regularly updated listing of bankruptcy decisions applicable to the agricultural sector, please visit the Bankruptcy Case Law Index published by the National Agricultural Law Center.

(original blog entry submitted by Robert Achenbach, Executive Director, American Agricultural Law Association)

Update to "Statutory Agricultural Lien Rapid Finder Charts" Published Online

The National Agricultural Law Center has posted a comprehensive update to "Statutory Agricultural Lien Rapid Finder Charts," originally authored by Martha Noble and published in 1993. In addition substantively updating the original work, the update can be accessed online rather than only as a print publication as in the past. According to the summary of the updated publication:

In 1993, former Center staff attorney Martha Noble compiled the main provisions of the statutory agricultural liens in all fifty states into the Statutory Agricultural Lien Rapid Finder Charts. Over the years, the charts have consistently been among the Center's most requested documents. However, as the calendar years changed, so too did the statutes themselves. This updated version of the charts is current through 2008.

The summary to the updated online publication states that:

These compilations are only an aid to research on statutory agricultural liens. State courts and federal courts, including bankruptcy courts, have interpreted and continue to interpret these lien statutes. Further, this publication does not include case annotations, which a researcher must consult to thoroughly understand any particular lien statute. As such, these charts are intended for use solely as an educational tool and research aid, and not as a substitute for individual legal advice. For each state, the charts summarize the state's statutorily enacted agricultural liens. They include a brief description of the lien claimant and the attached property, possessory requirements, any filing requirement, the date of attachment and any express priority provisions of the statute.

To ease research for each state's individual compilation, an interactive national map is provided. Simply click on the desired state's image in the map below to review the statutory provisions provided for that state.

New Resource for UCC Forms and Filing Information

The National Agricultural Law Center recently published "Forms and Filing Information: UCC Filings." The publication provides a state-by-state listing of links and information necessary to file a UCC filing statement and to search the filings, along with the necessary forms to do so. In those instances in which online filing is available, the publication provides the appropriate link.

Secured Transactions

Subject Description: Modern agricultural production is intricately linked with availability of credit. Lenders secure loans to agricultural producers with collateral in property such as crops, livestock, and equipment. The mechanism that governs these transactions is primarily contained in Article 9 of the Uniform Commercial Code (UCC) as adopted in each state. This subject area traces developments in this area, specifically including developments involving Article 9 of the Uniform Commercial Code.