Dicamba, Roundup, WOTUS, and ag-gag: although there are important updates, this week’s Harvest topics could be considered some of the Ag Law Blog’s “greatest hits.” In addition to these ongoing issues, a bill that is meant to encourage farmers to participate in carbon markets was recently introduced in the Senate. June has certainly been a busy month.
Decisions on dicamba. If you’ve been following along with our blog posts over the past few weeks, you know that the Ninth Circuit Court of Appeals vacated the registration of several over-the-top dicamba products, and in response, the EPA announced that all such products in farmers’ possession must be used before July 31, 2020 (our last post on the topic is available here). The Ohio Department of Agriculture went a step further, making the final date for dicamba use in the state June 30, 2020, due to the state registrations expiring on that day. Since the Ninth Circuit decision, the companies that produce dicamba products such as Engenia and, FXapan, and XtendiMax have filed numerous motions with the Ninth Circuit. On June 25, the court declined a motion from the BASF Corporation, which makes Engenia, asking the court to pause and withdraw their decision from the beginning of the month. What does this mean? Basically, at this moment, the court’s ruling still stands, and use of certain over-the-top products will have to cease on the dates mentioned above. That’s the latest on this “volatile” issue.
Bayer settles Roundup lawsuits, but this probably isn’t the end. Bayer, the German company that purchased Monsanto and now owns rights to many of the former company’s famous products, has been fighting lawsuits on multiple fronts. Not only is the company involved in the dicamba battle mentioned above, but over the past few years it has had a slew of lawsuits concerning Roundup. On June 24, Bayer, the German company that now owns the rights to Roundup, announced that it would settle around 9,500 lawsuits. The lawsuits were from people who claimed that Roundup’s main ingredient, glyphosate, had caused health problems including non-Hodgkin’s lymphoma. The amount of the settlement will be between 8.8 and 9.6 billion dollars. Some of that money will be saved for future Roundup claims. Although many are involved in this settlement, there are still thousands of claims against Bayer for litigants who did not want to join the settlement.
Updated WOTUS still not perfect. As always, there is an update on the continuing saga of the waters of the United States (WOTUS) rule. If you recall, back in April, the Trump administration’s “final” WOTUS rule was published. Next, of course, came challenges of the rule from both sides, as we discussed in a previous Harvest post. Well, the rule officially took effect (in most places, we’ll get to that) June 22, despite the efforts of a group of attorneys general from Democratically-controlled states attempting to halt the implementation of the rule. The attorneys general asked the U.S. District Court for the Northern District of California a nationwide preliminary injunction, or pause on implementation of the rule until it could be sorted out in the courts. The district court judge denied that injunction on June 19. On the very same day, a federal judge in Colorado granted the state’s request to pause the implementation of the rule within the state’s territory. Remember that the 2015 rule was implemented in some states and not others for similar reasons. The same trend seemingly continues with Trump’s replacement rule. In fact, numerous lawsuits challenging the rule are ongoing across the country. A number of the suits argue that rule does not go far enough to protect waters. For instance, just this week environmental groups asked for an injunction against the rule in the U.S. District Court for the District of Columbia. Environmental organizations have also challenged the rule in Maryland, Massachusetts, and South Carolina district courts. On the other hand, agricultural groups like the New Mexico Cattle Growers Association have filed lawsuits arguing that the rule is too strict.
No more ag-gag in NC? We have mentioned a few times before on the blog that North Carolina’s ag-gag law has been embroiled in a lawsuit for several years (posts are available here). North Carolina’s version of “ag-gag” was somewhat different from other states, because the statute applied to other property owners, not just those involved in agriculture. The basic gist of the law was that an unauthorized person entering into the nonpublic area of a business was liable to the owner or operator if any damages occurred. This included entering recording or surveilling conditions in the nonpublic area, which is a tool the plaintiffs use to further their cause. In a ruling, the U.S. District Court for the Middle District of North Carolina was decided largely in the plaintiffs’ (PETA, Animal Legal Defense Fund, etc.) favor. In order to not get into the nitty gritty details of the 73-page ruling, suffice it to say that the judge found that that law did violate the plaintiffs’ freedom of speech rights under the First Amendment to the U.S. Constitution. Another ag-gag law bites the dust.
Carbon markets for farmers? And, now for something completely different. In the beginning of June, a bipartisan group of four U.S. senators introduced the “Growing Climate Solutions Act.” On June 24, the Senate Committee on Agriculture, Nutrition, and Forestry held its first hearing on the new bill, numbered 3894. The text of SB 3894 is not currently available online, but it would create “a certification program at USDA to help solve technical entry barriers that prevent farmer and forest landowner participation in carbon credit markets.” The barriers “include access to reliable information about markets and access to qualified technical assistance providers and credit protocol verifiers” and “have limited both landowner participation and the adoption of practices that help reduce the costs of developing carbon credits.” You can read the Committee’s full press release about the bill here. It is backed by several notable businesses and groups, including the American Farm Bureau Federation, the National Corn Growers Association, the Environmental Defense Fund, and McDonalds and Microsoft.
There was a great deal of action last Friday in the case that vacated the registrations of XtendiMax, Engenia and FeXapan dicamba-based products. Despite a barrage of court filings on Friday, however, nothing has changed the current legal status of the dicamba products in Ohio, and Ohio growers may use existing stocks of the products now but must end use by June 30, 2020.
Here’s a rundown of the orders that the Ninth Circuit Court of Appeals issued in the case last Friday:
- The court denied the emergency motion that the petitioners (National Family Farm Coalition, Center for Food Safety, Center for Biological Diversity, and Pesticide Action Network North America) filed on June 13. That motion asked the court to enforce its previous mandate to vacate the registrations, to prevent any further use of the products, and to hold the EPA in contempt for issuing the Cancellation Order the agency had made that allowed continued use of existing stocks of the products. The court did not provide its reasoning for denying the motion.
- The court granted amicus curiae (friend of the court) status to CropLife America and American Farm Bureau (representing itself as well as national soybean, cotton, wheat, corn and sorghum association interest.) Those parties filed their amicus curiae briefs in support of the EPA’s Cancellation Order and in opposition to the petitioners' emergency motion.
- The court granted also emergency motions to intervene in the case filed by BASF Corporation, maker of Engenia, and DuPont (Corteva) , maker of FeXapan. The companies argued that they did not know that the scope of the court’s order on Bayer's XtendiMax product registration would also affect their dicamba product registrations and they should now be permitted an opportunity to defend their products.
- BASF filed a motion asking the court to recall the court's mandate that had cancelled the registrations of the products, claiming that the court had not followed appropriate procedural rules. In its brief, BASF also suggested that the company would be filing petitions for rehearing since BASF had not had an opportunity to be heard when the court vacated the registration of its Engenia product.
- The court ordered the original petitioners to file a brief in response to BASF’s motion to recall the mandate by June 23, and for BASF to reply to that brief by June 24.
The companies that make the dicamba products clearly intend to challenge the vacatur of their product registrations, even though the EPA's Cancellation Order allows continued use of existing stocks of the products until July 30, 2020. This dicamba battle is not yet over, and we'll keep you posted on new developments.
Read our previous posts on the court's vacatur in National Family Farm Coalition here, on the EPA's Cancellation Order here, and on the Ohio Department of Agriculture's ruling on use of the products in Ohio here.
The dicamba roller coaster ride continues today, with a statement issued by the Ohio Department of Agriculture clarifying that the use of XtendiMax, Engenia, and FeXapan dicamba-based products in Ohio will end as of June 30, 2020. Even though the US EPA has issued an order allowing continued use of the products until July 31, 2020, use in Ohio must end on June 30 because the Ohio registrations for the three dicamba-based products expire on that day.
As we’ve explained in our previous blog posts here and here, the Ninth Circuit Court of Appeals vacated the registration of the dicamba products on June 3, 2020. In doing so, the court stated that the EPA had failed to perform a proper analysis of the risks and resulting costs of the products. According to the court, EPA had substantially understated the amount of acreage damaged by dicamba and the extent of such damage, as well as complaints made to state agriculture departments. The court determined that EPA had also entirely failed to acknowledge other risks, such as the risk of noncompliance with complex label restrictions, economic risks from anti-competition impacts created by the products, and the social costs to farm communities caused by dicamba versus non-dicamba users. Rather than allowing the EPA to reconsider the registrations, the court vacated the product registrations altogether.
The EPA issued a Cancellation Order for the three products on June 8, stating that distribution or sale by the registrants is prohibited as of June 3, 2020. But the agency also decided to examine the issue on the minds of many farmers: what to do with the products. Applying its “existing stocks” policy, the EPA examined six factors to help it determine how to deal with stocks of the product that are in the hands of dealers, commercial applicators, and farmers. The EPA concluded that those factors weighed heavily in favor of allowing the end users to use the products in their possession, but that use must occur no later than July 31, 2020 and that any use inconsistent with the previous label restrictions is prohibited.
Despite the EPA’s Cancellation Order, however, the Ohio Department of Agriculture is the final arbiter of the registration and use of pesticides and herbicides within Ohio. ODA patiently waited for the EPA to act on the Ninth Circuit’s ruling before issuing its guidance for Ohio users of the dicamba products. In its guidance released today, ODA stated that:
- After careful evaluation of the court’s ruling, US EPA’s Final Cancellation Order, and the Ohio Revised Code and Administrative Code, as of July 1, 2020, these products will no longer be registered or available for use in Ohio unless otherwise ordered by the courts.
- While use of already purchased product is permitted in Ohio until June 30, further distribution or sale of the products is illegal, except for ensuring proper disposal or return to the registrant.
- Application of existing stocks inconsistent with the previously approved labeling accompanying the product is prohibited.
But the roller coaster ride doesn’t necessarily end there. Several dangling issues for dicamba-based product use remain:
- We’re still waiting to see whether the plaintiffs who challenged the registrations (the National Family Farm Coalition, Center for Food Safety, Center for Biological Diversity, and Pesticide Action Network North America) will also challenge the EPA’s Cancellation Order and its decision to allow continued use of the products, and will request immediate discontinuance of such uses.
- Bayer Crop Science, as an intervenor in the Ninth Circuit case, could still appeal the Ninth Circuit’s decision, as could the EPA.
- All of these orders add complexity to the issue of liability for dicamba damage. That issue has already become quite controversial, often pitting farmer against farmer and requiring the applicator or damaged party to prove adherence to or violation of the complicated label restrictions. But the Ninth Circuit’s attention to the risks of adverse impacts from the products raises additional questions about whether an applicator who chooses to use the products is knowingly assuming a higher risk, and whether a liability insurance provider will cover that risk. For this reason, growers may want to have a frank discussion with their liability insurance providers about coverage for dicamba drift.
The dicamba roller coaster ride will surely continue, and we’ll keep you updated on the next development.
Read the ODA’s Official Statement Regarding the Use of Over-the-Top Dicamba Products here.
When we explained in our last blog post the recent Court of Appeals decision that vacated the registration of three dicamba-based products, we mentioned that one possibility for answering the “what happens now” question was for the EPA to issue a cancellation order that would allow end users to use existing stocks of the products. That’s exactly what happened yesterday, when the US EPA made a final order that cancels the registrations of XtendiMax, Engenia, and FeXapan but allows for movement and use of the products. Here’s a summary of the agency’s order.
Authority to issue the cancellation order
After reviewing the background of the dicamba product registrations vacated by the Ninth Circuit Court of Appeals last week for lack of “substantial evidence” supporting the registrations, the EPA stated that it was relying upon the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) to establish provisions for the disposition of existing stocks of registrations that are found to be invalid. “The Administrator may permit the continued sale and use of existing stocks of a pesticide whose registration is suspended or canceled under [sections 3, 4 or 6 of FIFRA] to such extent, under such conditions, and for such uses as the Administrator determines that such sale or use is not inconsistent with the purposes of [FIFRA]” stated the agency.
The EPA noted that FIFRA does not prohibit the use of unregistered pesticides, but only prohibits the sale and distribution of unregistered pesticides. The agency noted that without its action, end users holding stocks of the products aren’t prevented from using the stocks without following the now voided label directions and restrictions. And the agency pointed to a similar action it took after a 2015 court order that vacated the registration of sulfoxaflor and a 2010 court decision that vacated the registration of spirotetramat. In both cases, the EPA utilized a cancellation order to establish terms and conditions for the disposition of existing stocks of the products.
Existing Stocks Determination
Back in 1991, the EPA established an “existing stocks policy” to help the agency assess how to treat existing stocks of cancelled pesticides, both when no significant risk concerns have been identified and when there are significant risk concerns for a cancelled product. The agency noted that it considered the six factors outlined in the policy for considering significant risk concerns associated with a cancelled pesticide and reached the conclusion that “distribution and use in certain narrow circumstances is supported.” The six factors the agency considered in determining what to do with the existing stocks of dicamba products are:
- Quantities of existing stocks at each level of the channels of trade
The agency noted that due to the current timing of the growing season, significant existing stocks are present in the possession of end users and throughout the channels of trade. Stating that it couldn’t determine the exact quantities of existing stocks at each level of the channels of trade, the EPA estimates that “approximately 4 million gallons could be in the channels of trade.”
- Risks resulting from the use of the existing stocks
Again concluding that because the product registrations were vacated and the labels therefore voided, end users were not legally bound to follow label restrictions if using the dicamba products. The agency concluded that such non-label uses would have greater potential for adverse effects than if the agency issued an order allowing and regulating the use of the existing stocks. Such an order is imperative, said the agency, to ensure that any use of the products would be consistent with previously approved labeling and could be enforced in order to prevent unreasonable adverse effects on the environment. Surprisingly, the EPA gave little attention to the volatility concerns raised by the Ninth Circuit in its decision last week, and evidence the court pointed to in that case that suggested that even applications by those who carefully followed the label restrictions were subject to drift and damage.
- The benefits resulting from the use of existing stocks
Capitalizing on the unfortunate timing of the Ninth Circuit’s vacation of the pesticide in regards to immediate needs for the current growing season, the agency concluded that “the benefits resulting from the use of the products are considerable and well established, particularly for this growing season.” The EPA reiterated many of the numerous communications it had received stating how essential the over-the-top products are, especially with the growing season underway. It also concluded that allowing non-over-the-top uses would result in substantially greater benefits to users and society than would disposal of the products.
- The financial expenditures users and others have already spent on existing stocks
Echoing the concerns of many farmers and again pointing to the current growing season, the agency concluded that “the costs to farmers are not limited to their existing stocks of these dicamba products, but include other sunk costs made in expectation of the availability of these products (seed purchase, tilling, planting, etc.) as well as the lost opportunity to switch to a different crop or to another herbicide or weed management method.”
- The risks and costs of disposal or alternative disposition of the stocks
The EPA concluded that disposal of the existing stocks of dicamba products would incur substantial costs for all and for stock already in the hands of end users, “may be neither feasible nor advisable.” Additionally, the agency pointed to disposal or return of opened containers which would have high risks of spillage and increased expenses for proper disposal.
- The practicality of implementing restrictions on distribution, sale, or use of the existing stocks
Another option available to the agency under FIFRA would be to issue individual stop sale, use and removal orders to all end users holding dicamba products, but the EPA concluded that such an action would be unwarranted under the present facts because tracking the existing stocks would be burdensome, inaccurate and impractical and that “hard-pressed farmers who have made large investments in their existing stocks may be uncooperative with a cancellation order that requires disposal.”
After weighing the six factors above, the EPA concluded that the six factors weigh heavily in support of allowing end users to use existing stocks of the dicamba products in their possession. However, the agency imposed a July 31 , 2020 cut-off date for use of existing stocks in order to “further reduce the potential for adverse effects.” Here are the final orders the agency made for distributed, sale and use of the products:
- Distribution or sale by the registrant. Distribution or sale by the registrant of all existing stocks of the products listed below is prohibited effective as of the time of the order on June 3, except for distribution for the purposes of proper disposal.
- Distribution or sale by persons other than the registrant. Distribution or sale of existing stocks of the products listed below that are already in the possession of persons other than the registrant is permitted only for the purposes of proper disposal or to facilitate return to the registrant or a registered establishment under contract with the registrant, unless otherwise allowed below.
- Distribution or sale by commercial applicators. For the purpose of facilitating use no later than July 31, 2020, distribution or sale of existing stocks of products listed below that are in the possession of commercial applicators is permitted.
- Use. Use of existing stocks of products inconsistent in any respect with the previously-approved labeling accompanying the product is prohibited. All use is prohibited after July 31, 2020.
While the manufacturers of XtendiMax, Engenia, and FeXapan are prohibited from selling and distributing their products effective as of June 3, 2020, the EPA’s cancellation order allows others to return, dispose of, or use the products according to the previous label restrictions and no later than July 31, 2020. But a few other factors come into play:
- Some states have already taken actions to restrict the use of the dicamba products within their states, which is within a state’s authority. Ohio has not done so, and instead has stated that it has been awaiting US EPA guidance on the legal status of the products and will communicate options for farmers afterwards. This means that users in Ohio should keep a close eye on the Ohio Department of Agriculture to see if it will go along with the US EPA’s guidance or direct otherwise.
- A cancellation order issued by the EPA is a final agency action that is subject to appeal, so we might see an immediate of the cancellation order and a request to stay the order pending appeal. Such an appeal could challenge whether the EPA has the authority to regulate existing stocks of the products and whether the agency’s analysis sufficiently addressed the risks of adverse impacts from continued use.
As seems often to be the case with dicamba, there’s a mixed sense of drama and dread with what lies ahead. We’ll be sure to keep you posted on the next legal news for dicamba.
Read the US EPA’s cancellation order for XtendiMax, Engenia, and FeXapan here.
Dicamba has had its share of legal challenges, and a decision issued yesterday dealt yet another blow when the Ninth Circuit Court of Appeals vacated the product’s registration with the U.S. EPA. In doing so, the court held that the EPA’s approval of the registration violated the provisions of the Federal Insecticide, Fungicide, and Rodenticide Act (“FIFRA”), which regulates the use of herbicides and other chemicals in the U.S. Here’s a summary of how the court reached its decision and a few thoughts on the uncertainty that follows the opinion.
The challenge: EPA’s approval of three dicamba products
We first have to step back to 2016, when the EPA approved three dicamba-based products-- Monsanto’s XTendiMax, DuPont’s FeXapan, and BASF’s Engenia--as conditional use pesticides for post-emergent applications in 34 states, including Ohio. Although dicamba has been around for years, the approval came after the companies reformulated dicamba to make it less volatile and in anticipation of the development of dicamba tolerant soybean and cotton seeds. The agency conducted a risk assessment and concluded that if used according to the label restrictions, the benefits of the dicamba products outweighed “any remaining minimal risks, if they exist at all.” The EPA also provided that the registrations would automatically expire if there was a determination of an unacceptable level or frequency of off-site dicamba damage.
Before the conditional registrations were set to automatically expire in late 2018, the EPA approved requests by Bayer CropScience (previously Monsanto), Cortevo (previously DuPont) and BASF to conditionally amend the registrations for an additional two years. The approval came despite widespread concerns about dicamba drift and damage during the 2017 growing season. To address those concerns, EPA chose not to conduct a new risk assessment and instead adopted additional label restrictions that had been proposed by Monsanto/Bayer to minimize off-field movement of dicamba. Many states added restrictions for dicamba use that exceeded the label restrictions, including banning any use of the product during certain periods.
Several organizations challenged the EPA’s dicamba registration approvals. The National Family Farm Coalition, Center for Food Safety, Center for Biological Diversity, and Pesticide Action Network North America filed suit against the EPA, claiming that the agency violated both FIFRA and the Endangered Species Act in approving the product registrations. Monsanto requested and was granted permission to intervene in the case.
The Ninth Circuit’s review
To approve the request to amend the dicamba registrations, FIFRA required the EPA to make two conclusions: first, that the applicant had submitted satisfactory data related to the proposed additional use of the pesticide and second, that the approval would not significantly increase the risk of unreasonable adverse effects on the environment. The task before the Ninth Circuit Court of Appeals was to review the EPA’s 2018 decision and determine whether there was substantial evidence to support the EPA's conclusions and amend the registrations.
The conclusion that drew the most attention from the court was the EPA’s determination that amending the dicamba registrations for two years would not cause unreasonable adverse effects on the environment. The court determined that the EPA erred in making this conclusion when it substantially understated several risks of dicamba registration, such as:
- Misjudging by as much as 25% the amount of acreage on which dicamba would be used in 2018.
- Concluding that complaints to state departments of agriculture could have either under-reported or over-reported the actual amount of dicamba damage, when the record clearly showed that complaints understated the amount of damage.
- Failing to quantify the amount of damage caused by dicamba, “or even to admit that there was any damage at all,” despite having information that would enable the EPA to do so.
But that’s not all. The court pointed out that the agency had also “entirely failed to acknowledge other risks, including those it was statutorily required to consider,” such as:
- The risk of substantial non-compliance with label restrictions, which the court noted became “increasingly restrictive and, correspondingly, more difficult to follow” and to which even conscientious applicators could not consistently adhere.
- The risk of economic costs. The court stated that the EPA did not take into account the “virtually certain” economic costs that would result from the anti-competitive effect of continued dicamba registration, citing evidence in the record that growers were compelled to adopt the dicamba products just to avoid the possibility of damage should they use non-dicamba tolerant seed.
- The social costs of dicamba technology to farming communities. The court pointed out that a farmer in Arkansas had been shot and killed over dicamba damage, that dicamba had “pitted neighbor against neighbor,” and that the EPA should have identified the severe strain on social relations in farming communities as a clear social cost of the continued registration of the products.
Given the EPA’s understatement of some risks and failure to recognize other risks, the Court of Appeals concluded that substantial evidence did not support the agency’s decision to grant the conditional registration of the dicamba products. The EPA “failed to perform a proper analysis of the risks and resulting costs of the uses,” determined the court. The court did not address the Endangered Species Act issue.
A critical point in the decision is the court’s determination of the appropriate remedy for the EPA’s unsupported approval of the dicamba products. The EPA and Monsanto had asked the court to utilize its ability to “remand without vacatur,” or to send the matter back to the agency for reconsideration. The remedy of “vacatur,” however, would vacate or void the product registrations. The court explained that determining whether vacatur is appropriate required the court to weigh several criteria, including:
- The seriousness of the agency’s errors against the disruptive consequences of an interim change that may itself be changed,
- The extent to which vacating or leaving the decision in place would risk environmental harm, and
- Whether the agency would likely be able to offer better reasoning on remand, or whether such fundamental flaws in the agency’s decision make it unlikely that the same rule would be adopted on remand.
The court’s weighing of these criteria led to its conclusion that vacating the registrations of the products was the appropriate remedy due to the “fundamental flaws in the EPA’s analysis.” Vacating the registrations was not an action taken lightly by the court, however. The judges acknowledged that the decision could have an adverse impact on growers who have already purchased dicamba products for the current growing season and that growers “have been placed in this situation through no fault of their own.” Clearly, the court places the blame for such consequences upon the EPA, reiterating the “absence of substantial evidence” for the agency’s decision to register the dicamba products.
The court raised the issue we’re all wondering about now: can growers still use the dicamba products they’ve purchased? Unfortunately, we don’t have an immediate answer to the question, because it depends largely upon how the EPA responds to the ruling. We do know that:
- FIFRA § 136a prohibits a person from distributing or selling any pesticide that is not registered.
- FIFRA § 136d allows the EPA to permit continued sale and use of existing stocks of a pesticide whose registration is suspended or canceled. The EPA utilized this authority in 2015 after the Ninth Circuit Court of Appeals vacated the EPA’s registration of sulfoxaflor after determining that the registration was not supported by substantial evidence. In that case, the EPA allowed continued use of the existing stocks of sulfoxaflor held by end-users provided that the users followed label restrictions. Whether the agency would find similarly in regards to existing stocks of dicamba is somewhat unlikely given the court's opinion, but remains to be seen. The EPA’s 2015 sulfoxaflor cancellation order is here.
- While the U.S. EPA registers pesticides for use and sale in the U.S., the product must also be registered within a state in order to be sold and used within the state. The Ohio Department of Agriculture oversees pesticide registrations within Ohio, and also regulates the use of registered pesticides.
- If the EPA appeals the Ninth Circuit’s decision to the U.S. Supreme Court, the agency would likely include a request for a “stay” that would delay enforcement of the court’s Order.
- Bayer strongly disagrees with the decision but has paused its sale, distribution and use of XtendiMax while assessing its next step and awaiting EPA direction. The company states that it will “work quickly to minimize any impact on our customers this season.” Bayer also notes that it is already working to obtain a new registration for XtendiMax for the 2021 season and beyond, and hopes to obtain the registration by this fall. See Bayer’s information here.
- BASF and Corteva have also stated that they are awaiting the EPA’s reaction to the decision, and will “use all legal remedies available to challenge this Order.”
- Syngenta has clarified that its Tavium Plus VaporGrip dicamba-based herbicide is not part of the ruling and .that the company will continue selling that product.
For now, all eyes are on the U.S. EPA’s reaction to the Ninth Circuit’s decision, and we also need to hear from the Ohio Department of Agriculture. Given the current state of uncertainty, it would be wise for growers to wait and see before taking any actions with dicamba products. We’ll keep you posted on any new legal developments. Read the court's decision in National Family Farm Coalition et al v. U.S. EPA here.
Written by Ellen Essman and Peggy Kirk Hall
Many people are still working from home, but that hasn’t stopped legal activity in Washington, D.C. Bills have been proposed, federal rules are being finalized, and new lawsuits are in process. Here’s our gathering of the latest ag law news.
SBA posts Paycheck Protection Program (PPP) loan forgiveness application. We’ve been waiting to hear more about how and to what extent the SBA will forgive loans made under the CARES Act’s PPP that many farm businesses have utilized. The SBA recently posted the forgiveness application and instructions for applicants here. But there are still unanswered questions for agricultural applicants as well as talk in Congress about changing some of the forgiveness provisions, suggesting that loan recipients should sit tight rather than apply now. Watch for our future blog post and a discussion on the forgiveness provisions in our next Farm Office Live webinar.
House passes another COVID-19 relief bill. All predictions are that the bill will go nowhere in the Senate, but that didn’t stop the House from passing a $3 trillion COVID-19 relief package on May 15. The “HEROES Act” includes a number of provisions for agriculture, including an additional $16.5 billion in direct payments to producers of commodities, specialty crops and livestock, as well as funds for local agriculture markets, livestock depopulation losses, meat processing plants, expanded CRP, dairy production, other supply chain disruptions, and biofuel producers (discussed below). Read the bill here.
Proposed bipartisan bill designed to open cash market for cattle. Last week, Republican Senator Chuck Grassley and Democratic Senator Jon Tester introduced a bill that “would require large-scale meatpackers to increase the proportion of negotiable transactions that are cash, or ‘spot,’ to 50 percent of their total cattle purchases.” The senators hope this change would bring up formula prices and allow livestock producers to better negotiate prices and increase their profits. In addition, the sponsors claim ithe bill would provide more certainty to a sector hard hit by coronavirus. Livestock groups aren’t all in agreement about the proposal. You can read the bill here, Senator Grassley’s press release here and Senator Tester’s news release here.
New Senate and House bills want to reform the U.S. food system. Representative Ro Khanna from California has introduced the House companion bill to the Senate's Farm System Reform Act first introduced by Senator Cory Booker in January. The proposal intends to address underlying problems in the food system. The bill places an immediate moratorium on the creation or expansion of large concentrated animal feeding operations and requires such operations to cease by January 1, 2040. The proposal also claims to strengthen the Packers and Stockyards Act and requires country of origin labeling on beef, pork, and dairy products. The bill would also create new protections for livestock growers contracted by large meat companies, provide money for farmers to transition away from operating animal feeding facilities, strengthen the term “Product of the United States” to mean “derived from 1 or more animals exclusively born, raised, and slaughtered” in the U.S., and, similar to the Grassley/Tester bill above, require an increased percentage of meatpacker purchases to be “spot” transactions.
Lawmakers ask Trump to reimburse livestock producers through FEMA. In another move that seeks to help livestock producers affected by the pandemic, a bipartisan group of U.S. Representatives sent a letter to Donald Trump imploring him to issue national guidance to allow expenses of livestock depopulation and disposal to be reimbursed under FEMA's Public Assistance Program Category B. The lawmakers reason that FEMA has "been a valued Federal partner in responding to animal losses due to natural disasters," and that the COVID-19 epidemic should be treated "no differently." You can read the letter here.
More battling over biofuels. Attorneys General from Wyoming, Utah, Louisiana, Oklahoma, Texas, Arkansas and West Virginia have sent a request to EPA Administrator Andrew Wheeler to waive the Renewable Fuel Standard (RFS) because of COVID-19 impacts on the fuel economy. The letter states that reducing the national quantity of renewable fuel required would alleviate the regulatory cost of purchasing tradable credits for refiners, who use the credits to comply with biofuel-blending targets. Meanwhile, 70 mayors from across the U.S. wrote a letter urging the opposite, and criticizing any decisions not to uphold the RFS due to the impact that decision would have on local economies, farmers, workers, and families who depend on the biofuels industry. The House is also weighing in on the issue. In its recently passed HEROES Act, the House proposes a 45 cents per gallon direct payment to biofuel producers for fuels produced between Jan 1 and May 1, 2020 and a similar payment for those forced out of production during that time.
New USDA rule for genetically engineered crops. A final rule concerning genetically engineered organisms is set to be published this week. In the rule, USDA amends biotechnology regulations under the Plant Protection Act. Importantly, the new rule would exempt plants from regulation by the Animal and Plant Health Inspection Service (APHIS) if the plants are genetically engineered but the same outcome could have occurred using conventional breeding. For instance, gene deletions and simple genetic transfers from one compatible plant relative to another would be exempted. If new varieties of plants use a plant-trait mechanism of action combination that has been analyzed by APHIS, such plants would be exempt. You can read a draft of the final rule here.
Trump’s new WOTUS rule attacked from both sides of the spectrum. A few weeks ago, we wrote about the Trump Administration’s new “waters of the United States” or WOTUS rule. Well, it didn’t take too long for those who oppose the rule to make their voices heard. The New Mexico Cattle Growers Association (NMCGA) sued the administration, claiming that the new rule is still too strict and leaves cattle ranchers questioning whether waters on their land will be regulated. In their complaint, NMCGA argues that the new definition violates the Constitution, the Clean Water Act, and Supreme Court precedent. On the other side, the Natural Resources Defense Council (NRDC), along with other conservation groups, sued the administration, but argued that the new rule does not do enough to protect water and defines “WOTUS” too narrowly. Here we go again—will WOTUS ever truly be settled?
The Farm Office is Open! Join us for analysis of these and other legal and economic issues facing farmers in the Farm Office Team’s next session of “Farm Office Live” on Thursday, May 28 at 9:00 a.m. Go to this link to register in advance or to watch past recordings.
Written by Barry Ward, Leader, Production Business Management*
COVID-19 has created an unusual situation that has negatively affected crop prices and lowered certain crop input costs. Many inputs for the 2020 production year were purchased or the prices or costs were locked in prior to the spread of this novel coronavirus. Some costs have been recently affected or may yet be affected. Lower fuel costs may allow for lower costs for some compared to what current budgets indicate.
Production costs for Ohio field crops are forecast to be largely unchanged from last year with lower fertilizer expenses offset by slight increases in some other costs. Variable costs for corn in Ohio for 2020 are projected to range from $359 to $452 per acre depending on land productivity. Variable costs for 2020 Ohio soybeans are projected to range from $201 to $223 per acre. Wheat variable expenses for 2020 are projected to range from $162 to $198 per acre.
Returns will likely be low to negative for many producers depending on price movement throughout the rest of the year. Grain prices used as assumptions in the 2020 crop enterprise budgets are $3.20/bushel for corn, $8.30/bushel for soybeans and $5.10/bushel for wheat. Projected returns above variable costs (contribution margin) range from $109 to $240 per acre for corn and $179 to $337 per acre for soybeans. Projected returns above variable costs for wheat range from $152 to $262 per acre.
"Return to land" is a measure calculated to assist in land rental and purchase decision making. The measure is calculated by starting with total receipts or revenue from the crop and subtracting all expenses except the land expense. Returns to land for Ohio corn (total receipts minus total costs except land cost) are projected to range from -$48 to $72 per acre in 2020 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from $65 to $214 per acre depending on land production capabilities. Returns to land for wheat (not including straw or double-crop returns) are projected to range from $70 per acre to $173 per acre.
Total costs projected for trend line corn production in Ohio are estimated to be $759 per acre. This includes all variable costs as well as fixed costs (or overhead if you prefer) including machinery, labor, management and land costs. Fixed machinery costs of $75 per acre include depreciation, interest, insurance and housing. A land charge of $187 per acre is based on data from the Western Ohio Cropland Values and Cash Rents Survey Summary. Labor and management costs combined are calculated at $67 per acre. Details of budget assumptions and numbers can be found in footnotes included in each budget.
Total costs projected for trend line soybean production in Ohio are estimated to be $517 per acre. (Fixed machinery costs: $59 per acre, land charge: $187 per acre, labor and management costs combined: $46 per acre.)
Total costs projected for trend line wheat production in Ohio are estimated to be $452 per acre. (Fixed machinery costs: $34 per acre, land charge: $187 per acre, labor and management costs combined: $41 per acre.)
Current budget analysis shows favorable returns for soybeans compared to corn but crop price change and harvest yields may change this outcome.
These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2020 have been completed and posted to the Farm Office website here: https://farmoffice.osu.edu/farm-mgt-tools/farm-budgets.
*Readers may have noticed a few blog posts by Barry Ward recently. Barry directs OSU Extension's Production Business Management research and our Income Tax Schools, and is a key member of the Farm Office team. We've asked Barry to join the blog in an effort to expand its breadth and cover all of our Farm Office website topics. In addition to agricultural law coverage, we'll also update readers with our latest information on farm management, tax, marketing and ag policy. Watch for our other new authors, and we hope you enjoy the Farm Office Blog!
The Center for Food Safety (CFC), along with other groups and a number of organic farms, filed a lawsuit early this month claiming that USDA violated the Organic Foods Production Act (OFPA) when it allowed hydroponically-grown crops to bear the “Certified Organic” label. In January 2019, CFC filed a legal petition asking USDA to create regulations which would ban hydroponic operations from using the organic label. USDA denied the petition, and CFC’s current lawsuit also alleges that USDA’s denial violated the Administrative Procedure Act (APA). CFC asks the U.S. District Court for the Northern District of California to vacate USDA’s denial of their petition and to bar the agency from certifying any hydroponic operations as organic. The complaint can be found here.
What do “hydroponic” and “organic” mean anyway?
Many of you are probably familiar with hydroponic and organic growing, but since the terms are very important in this lawsuit, it’s worth reviewing them before we continue.
The USDA, on its National Agricultural Library website, defines “hydroponics” as “growing plants in a nutrient solution root medium.” In other words, hydroponic plants can be grown in mediums such as sand, gravel, and water with additional nutrients. Simply put, hydroponic plants are not grown in the soil.
OFPA (available here) says in order to sell or label an agricultural product as “organically produced,” the product must: 1) have been produced and handled without the use of synthetic chemicals, except as otherwise provided; (2) except as otherwise provided in this chapter and excluding livestock, not be produced on land to which any prohibited substances, including synthetic chemicals, have been applied during the 3 years immediately preceding the harvest of the agricultural products; and (3) be produced and handled in compliance with an organic plan agreed to by the producer and handler of such product and the certifying agent. Thus, for a plant to be “organic,” it must meet these criteria.
CFC’s argument under OFPA
In their lawsuit, CFC is principally concerned with the third part of the organic requirements listed above—that in order to be labeled as organic, an agricultural product must be “produced and handled in compliance with an organic plan.” Organic plans, in turn, must also meet a number of requirements. One of those requirements is that the “organic plan shall contain provisions designed to foster soil fertility, primarily through the management of the organic content of the soil through proper tillage, crop rotation, and manuring.” At its most basic, CFC’s argument is that fostering soil fertility is an integral and required part of the OFPA, and therefore, plants not grown in actual soil cannot meet all the requirements necessary for organic certification. In other words, since hydroponics by definition are not grown in soil, hydroponic farmers can’t foster soil fertility. As a result, CFC maintains that since fostering soil fertility is required in order for plants to be labeled “organic,” hydroponically-grown plants can’t be organic. By allowing hydroponics to be labeled organic, CFC asserts that USDA is in violation of the OFPA.
CFC’s argument under the APA
The plaintiffs also contend that USDA’s denial of their 2019 petition violated the APA. The APA (you can find the relevant chapter here) is the law that federal agencies must follow when writing and adopting regulations. Under the APA, courts have the power to overturn agency actions if they are arbitrary, capricious, an abuse of discretion, or are otherwise unlawful. Additionally, courts can overturn agency actions when they go beyond the authority given to the agency by Congress. Here, CFC argues that USDA’s denial of their petition was arbitrary and capricious and not in accordance with the law. Basically, they are arguing that USDA violated the APA by ignoring the soil fertility language that Congress included in OFPA.
What’s USDA’s take?
USDA’s denial of CFC’s petition gives us a little insight into what the agency’s response to the lawsuit might include. The agency claims that the National Organic Program (NOP) has allowed hydroponic operations to be certified organic in the past. Furthermore, USDA counters that the statutory and regulatory provisions that refer to “soil” do not require every organic plant to be grown in soil. Instead, they say the provisions are simply “applicable to production systems that do use soil.”
The court will certainly have a lot to sift through in this lawsuit. USDA still has to respond to the complaint, and hydroponic operations might throw their support behind the agency’s cause. We’ll be keeping an eye on what happens and will make sure to keep you updated!
Valentine’s Day was indeed a sweet day for Bader Farms, a peach farm in Missouri that claimed that dicamba products by Monsanto/Bayer and BASF drifted onto its property and injured 20,000 of its peach trees over 700 acres. A federal jury agreed and awarded the farm $15 million in compensatory damages. The following day, the jury gave the farm another $250 million in punitive damages against Bayer and BASF, bringing the total award to $265 million.
In 2016, Bader Farms was the first to file a dicamba drift lawsuit against Monsanto. A summary of the lawsuit from our partner, the National Agricultural Law Center, explains that the farm’s claim alleged widespread damage to the peach orchards and a multi-million dollar financial loss. At the center of Bader Farms’ original complaint was Monsanto’s genetically modified Roundup Ready 2 Xtend soybeans and Bollgard II Xtend cotton seeds (“Xtend crops”), dicamba-resistant seeds that Bader Farms alleged were released without an accompanying EPA-approved dicamba herbicide in 2015 and 2016. The farm argued that by selling the Xtend crop seeds without a corresponding herbicide, it was foreseeable to Monsanto that farmers would use old, highly volatile, drift-prone dicamba that had a strong chance of damaging neighboring crops.
Bader Farms later added BASF as a defendant to the case and also added new complaints for dicamba-related damage it suffered during the 2017 growing season. Bader Farms stated that Monsanto and BASF had worked together to manufacture, market, and sell dicamba-based products that they knew would cause harm.
The jury in the federal lawsuit ruled in favor of Bader Farms on all counts. Specifically, the jury concluded that Monsanto was negligent by releasing dicamba-tolerant seeds before releasing the herbicide. The jury also determined that both Monsanto and BASF were negligent because they issued new dicamba products that drifted off-target although the companies claimed that the products were less likely to drift. Important to the punitive damage award, the jury found that Monsanto and BASF had engaged in a “conspiracy to create an ecological disaster to increase profits.”
The Bader Farms case is the first of many dicamba-based cases against Monsanto/Bayer and BASF, combined last year into Multi-District Litigation involving both a Crop Damage Class Action Master Complaint and a Master Antitrust Action Complaint. For an excellent review of the dicamba cases, see the National Agricultural Law Center’s series on “The Deal with Dicamba,” available at https://nationalaglawcenter.org/the-deal-with-dicamba-part-three/.
With 2019’s ups and downs in the weather and the marketplace, it’s likely that many farmers used the Federal Crop Insurance Program to mitigate their losses. Those farmers whose crop insurance claims reach $200,000 or more will be audited by the USDA’s Risk Management Agency.
What’s the purpose of an audit—does it mean you’re in trouble with the government? What can you expect when going through the audit process? How do you prepare for an audit? What kind of records and documentation do you need? All of these questions and more are answered in a new fact sheet we recently published through our partnership with the National Agricultural Law Center. Click here to read the fact sheet to better prepare you for going through an audit.