OCTOBER REPORT

Table of Contents

We are less than a month away from the 2022 midterm elections. Senate races tightened up in September with toss-ups in Arizona, Nevada, Pennsylvania and Ohio. All four races favor a strong Republican outlook. Following recent controversies surrounding Herschel Walker, the races in Georgia lean Democratic. Hope for regime change in the Senate remains strong and Republican in the House look to pick up 12 to 20 seats.

Meanwhile, the threat of a rail strike looms large. The Brotherhood of Maintenance of Way Employes (BMWE), the nation’s third largest rail union, announced Monday that its members voted down the tentative agreement reached on September 10th. A rail strike could result in empty shelves and delayed shipments. Notably, the unions have until after the midterm elections to make a final decision.

Brokering an agreement between unions and railways is not the only issue the Labor Department is focused on. This week the Labor Department released a new proposed rule concerning independent contractors. The proposed rule would overhaul the Trump administration test and replace it with a new one. The blueprint of the test includes an “economic realities” test. The new test calls back to the Obama Administration. This is not the only reminder of the Obama administration; the current White House is just as fond of Executive Orders.

Unfortunately for the current White House, there is no executive order that will lower inflation. U.S. consumer prices rose to a 40-year high in September, resulting in the Federal Reserve to raise interest rates again. Inflationary prices are taking their toll on the price of food products. The price of flour increased 2.0% in September, along 1.2% for baked goods and 1.8% for sugar. One measure the U.S. Department of Agriculture could make to lower the price of sugar is to make long over-due changes to the U.S. sugar program. This week, IBA president Nicholas Pyle sent out an op-ed to 25 different major newspapers, addressing the mismanagement of the sugar program under the Biden administration. His op-ed can be read below:

Biden Administration Sugar Policy Fans Food Inflation

IBA President Nicholas Pyle released an op-ed on October 11, showing the mismanagement of the U.S. sugar policy under the Biden Administration. The op-ed can be read below:

OCTOBER 11, 2022

BIDEN ADMINISTRATION SUGAR POLICY FANS FOOD INFLATION

The 2023 Sugar Marketing Allotment announced in late September by the Commodity Credit Corporation (CCC) allows modest increases in domestic sugar production of approximately 276,000 short tons. This will have no impact on fifty-year-high sugar prices.  The move follows a long period of inaction by the Biden administration to alleviate a price run-up that began late summer 2021when a significant part of the Michigan beet crop was plowed under because yields were too poor to warrant harvesting for processing. On September 30, 2022, the Sosland Baking industry newsletter reported U.S. sugar spot prices above 50 cents a pound and a posted price of 68 cents. World prices for #11 refined sugar are currently around 18 cents a pound, down from 20 cents last month.

Biden Administration's sugar policy limits domestic production through the CCC Allotments. Last June, the United States Trade Representative announced the 2023 WTO Tariff-Rate Quota Allocations for Raw Cane Sugar. The TRQ is a list of forty countries allowed to export “in-quota” allocations of raw cane to the US at a relatively low tariff and subjects all other imports above the allotment threshold to a higher tax.  The failure of the Biden Administration to increase the TRQ Allotments enough to offset shortages forced many buyers to import world sugar from non-TRQ countries, which is subjected to a 15.36 cent/lb. tariff for cane and 16.21 cents for beet-sourced sugar.

In June 2000, the Government Accountability Office estimated the cost to consumers of restrictions on sugar in the US at 1.9 billion dollars based on a U.S. wholesale sugar price of 25 cents. With sugar at double that price now and food inflation approaching 10%, this administration's failure to act is costing American consumers hundreds of millions a month. While President Biden repeatedly tells the American public that his Administration is doing everything possible to alleviate inflation, USDA’s offices of Trade and Foreign Agricultural Affairs, Farm Production and Conservation, and the United States Trade Representative aren’t on the same page.

IBA calls on the Biden Administration to not wait and immediately reallocate TRQ Allotments among the 40 nations approved and redesignate unfilled allocations assigned to 14 countries (Barbados, Congo, Cote d’Ivoire, Gabon, Haiti, Jamaica, Madagascar, Papua New Guinea, Philippines, St. Kitts & Nevis, Taiwan, Thailand, Trinidad & Tobago, and Uruguay) to countries that want to sell sugar to the US. USDA should immediately increase the TRQ by 250,000 tons to stabilize and reduce domestic sugar prices to a level not more than twice the sugar loan rate floor established by Congress (~25 cents), and the USDA should allow US sugar growers and processors to increase their output by at least 10% to meet US demand.

USDA’s command and control of sugar policy restrict who grows what (how much), where, and how much is allowed to be imported. This practice gives the thirteen US processors of raw cane and sugar beets a sweet monopoly.  These thirteen processors take advantage of US consumers.  Since the move away from relatively free sugar markets in the 1981 Farm Bill, US sugar prices typically hovered around seven to ten cents above the world price. In recent years, US sugar prices were double the world price. Today, we are approaching three times the world price! US consumers need the Biden Administration to act immediately on Sugar!

For more about sugar policy in America, please visit www.Sugarrefund.com.

Nicholas Pyle, President
Independent Bakers Association
Washington, DC
202-333-8190
nick@ibabaker.com

DOJ Loses Case Against U.S. Sugar

A U.S. court rejected the Department of Justice (DOJ)’s attempt to prevent U.S. Sugar from acquiring Imperial Sugar. U.S. Sugar said with the court’s approval it plans to move forward as quickly as possible to “consummate the transaction”. Due to the DOJ’s intervention the transaction paused in November.

DOJ filed a civil anti-trust lawsuit to try to block the merger eight months after the companies announced it. DOJ claimed the transaction would leave an overwhelming majority of refined sugar sales across the south-east in the hand of just two producers. Assistant attorney general Jonathan Kanter of the DoJ’s Antitrust Division said at the time: “US Sugar and Imperial Sugar are already multi-billion-dollar corporations and are seeking to further consolidate an already cosy sugar industry. Their merger would eliminate aggressive competition in the supply of refined sugar that leads to lower prices, better quality, and more reliable service.”

After a four-day bench trial earlier this year, US District Judge Maryellen Noreika issues judgement in favor of U.S. Sugar. The court heard from witnesses, including the US Department of Agriculture (USDA)’s chief economist, before issuing its ruling. Afterwards the court rejected DOJ’s claim that the transaction would substantially lessen competition.

Robert Buker, Jr., US Sugar’s president and CEO, said. “The people of US Sugar are pleased that the court’s favorable ruling will allow our acquisition of Imperial Sugar, including the Savannah Refinery, to go forward.” He added: “We look forward to proceeding as planned with this acquisition, which will enable us to increase our domestic sugar production, enhance the local Georgia economy, decrease US reliance on foreign imports of sugar, and benefit farmers, customers and consumers across the country.”

FDA Proposes Updated Version of Healthy

On Wednesday the Food and drug Administration (FDA) proposed new rules dictating when food products can have the word “healthy” on their packaging. The term “healthy” was last defined by the FDA in 1993 and was based on then-current recommendations having to do with issues like fat intake and how much of certain vitamins people should consume. According to FDA the proposed rule would change the definition of “healthy” to reflect “current nutrition science”.

If the proposed rule is adopted, foods labeled a “healthy” would need to have “meaningful” amounts of at least one food group or subgroup recommended by the government’s Dietary Guidelines. The proposed rule uses the guidelines from 2020-2025, but efforts are already underway to form the 2025-2030 Dietary Guidelines. The Dietary Guidelines defines a healthy dietary pattern as one which includes vegetables, fruits, grains, dairy, protein foods and oils. FDA proposes using food groups as the criteria for “healthy,” rather than focusing solely on a limited set of nutrients, so consumers can maintain dietary practices consistent with current federal dietary guidance.

FDA rolled out the proposed rule as part of the White House Conference on Hunger, Nutrition and Health as well as the release of the Biden-Harris Administration National Strategy on Hunger, Nutrition and Health. The rule is one of many changes proposed under the strategy’s pillar to empower all consumers. Additional changes include developing front-of-pack labeling (FOP) systems, facilitating making nutrition information available online, facilitating lowering sodium content in food and addressing marketing of food and beverages not deemed healthy. FDA also developed draft guidance related to Dietary Guidance Statements on food labels.

Interested stakeholders have until December 28, 2022, to submit comments.

White House Releases National Strategy

On September 27th, the White House released the National Strategy on Hunger, Nutrition and Health. The Biden administration released the strategy alongside the Conference on Hunger, Nutrition and Health. The White House’s executive summary of the strategy can be read below:

More than 50 years since the first White House Conference on Food, Nutrition, and Health, the U.S. has yet to end hunger and is facing an urgent, nutrition-related health crisis—the rising prevalence of diet-related diseases such as type 2 diabetes, obesity, hypertension, and certain cancers. The consequences of food insecurity and diet-related diseases are significant, far reaching, and disproportionately impact historically underserved communities. Yet, food insecurity and diet-related diseases are largely preventable, if we prioritize the health of the nation.

The Biden-Harris Administration envisions an America where no one wonders whether they will have enough money to put food on the table, where the healthy food choice is the easier choice, and where everyone has the same opportunity to be physically active. Transformative programs, policies, and system changes are needed within and outside government to achieve this vision. There is no silver bullet to address these complex issues, and there is no overnight fix. Making progress requires collective, sustained action and mobilization across every segment of society. That is why President Biden announced a goal of ending hunger and increasing healthy eating and physical activity by 2030 so fewer Americans experience diet-related diseases— while reducing related health disparities.

To advance the President’s goal—and build on the federal government’s existing work to address hunger and diet-related diseases—this strategy identifies ambitious and achievable actions the Biden-Harris Administration will pursue across five pillars:

Improving food access and affordability, including by advancing economic security; increasing access to free and nourishing school meals; providing Summer Electronic Benefits Transfer (EBT) benefits to more children; and expanding Supplemental Nutrition Assistance Program (SNAP) eligibility to more underserved populations;

Integrating nutrition and health, including by working with Congress to pilot coverage of medically tailored meals in Medicare; testing Medicaid coverage of nutrition education and other nutrition supports using Medicaid section 1115 demonstration projects; and expanding Medicaid and Medicare beneficiaries’ access to nutrition and obesity counseling;

Empowering all consumers to make and have access to healthy choices, including by proposing to develop a front-of-package labeling scheme for food packages; proposing to update the nutrition criteria for the “healthy” claim on food packages; expanding incentives for fruits and vegetables in SNAP; facilitating sodium reduction in the food supply by issuing longer-term, voluntary sodium targets for industry; and assessing additional steps to reduce added sugar consumption, including potential voluntary targets;

Supporting physical activity for all, including by expanding the U.S. Department of Health and Human Services’ Centers for Disease Control and Prevention’s (CDC) State Physical Activity and Nutrition Program to all states and territories; investing in efforts to connect people to parks and other outdoor spaces; and funding regular updates to and promotion of the Physical Activity Guidelines for Americans; and

Enhancing nutrition and food security research, including by bolstering funding to improve metrics, data collection, and research to inform nutrition and food security policy, particularly on issues of equity and access; and implementing a vision for advancing nutrition science.

The federal government cannot end hunger and reduce diet-related diseases alone. The private sector; state, Tribal, local, and territory governments; academia; and nonprofit and community groups must act as well. This strategy details Calls to Action for all these entities to do their part. Taken together, these collective efforts will make a difference and move us closer to achieving the 2030 goal.

To read the full national strategy, click here.

Farm Bill Outlook Still Uncertain

Agriculture Secretary Tom Vilsack was noncommittal about whether President Joe Biden’s calls for increased access to federal nutrition programs will lead to a boost in government funding for anti-hunger programs in the 2023 Farm Bill. “My view is, look, we make the case that when people are fed and fed well at the end of the day, we as a country are stronger,” Vilsack said. “I mean, you're going to have a lot of people make the case that nutrition needs to continue to be a critical part of any farm bill.”

The November midterms are shaping up to be a major headwind for the president’s goals and any future legislation, with Republicans likely to win a majority in the House. Many GOP lawmakers are weary of the current spending on the farm bill nutrition programs, which were expanded in recent years. Vilsack said Congress has a “tough job” before it in putting the farm bill together.

Rail Unions Vote “No” to Deal

Earlier this week, the third-largest rail union said that its members voted against ratifying the tentative agreement struck last month. Should the rail union decide to go on strike the result would be empty shelves and delayed shipments. This would one of the worse times of the year for this to happen as the holidays are only a month away.

There are still several weeks left in a cooling-off period that takes strikes off the table so negotiators can reach a compromise. AFL-CIO Transportation Trades Department President Greg Regan points out more unions voted for ratification than against. That could bode well for union and railroad presidents being able to reach a new compromise.

Any new tentative agreement is unlikely to contain the additional days off that many members want. Last month’s contract contained an additional day off, instead of the five days unions pushed for. Employers may be weary to concede since President Biden’s Presidential Emergency Board (PEB) did not recommend any when it gave its recommendations earlier this year.

Thus far, Congress opted against intervening legislatively. That may change if a strike took place, especially with the timing. There is still time before Congress needs to decide if it wants to weigh in. The Brotherhood of Maintenance of Way Employes (BMWE) extended its cooling off period to November 18th. The International Association of Mechanists and Aerospace Workers (IAM) extended their cooling off period to December 19th. The results of two outstanding ratification votes by October 13th and 14th, and the other four between now and November 17th.

New Independent Contractor Rule Echoes Obama-Era Standard

The Department of Labor released its proposed rule, overhauling its guidelines for distinguishing employees from independent contractors. The change is likely to make it tougher for businesses for to classify workers as independent contractors. The proposed rule broadly parallels the model adopted by the Obama administration that was later changed under the Trump administration. If implemented, the standard would affect workers across industries from health care to truck drivers to writers.

The blueprint includes an “economic realities” test, which allows the Labor Department to consider a wide array of factors when determining employee status, such as employer control of tasks and how much workers invest in their own equipment. The new rule also weighs whether the work being done is “integral” to the employer’s business – casting a skeptical eye on those who give key part of their operation to independent contractors.

The proposed rule asks the Labor Department to analyze the “totality-of-the-circumstances” for a given worker, rather than look for discreet criteria in making determinations regarding employment status. The new framework does not prioritize any factors in that assessment – shifting away from the Trump-era guidelines which emphasize an individual’s degree of control over their work and “opportunity for loss” above others.

The proposed rule does not include an ABC test, a three-prong blueprint that employers must meet. Should they not meet the requirements a worker would be classified as an employee instead of an independent contractor. The Labor Department does not have the authority to implement the ABC test without congressional authorization.

The changes place tighter guiderails on the types of workers employers can treat as contractors. Employers say retooling their business models to meet the new framework could raise their labor costs significantly. At panels the Labor Department held in the spring, Independent Contractors voiced concerns with the changes in classification policy, worried it would make them go from small business owners to employees.

The proposal is subject to a public comment period before it is implemented. The comment period begins on October 13th and ends on November 28th.

IBA Sends Letter Opposing ENABLERS Act

The Independent Bakers Association joined with other trade associations to stand against the Establishing New Authorities for Business Laundering and Enabling Risk to Security (ENABLERS) Act. The ENABLERS Act seeks to dramatically expand the reporting requirements put in place by the Corporate Transparency Act (CTA). The letter can be read blow:

September 29, 2022

The Honorable Charles Schumer
Senate Majority Leader
United States Senate
Washington, DC 20510

The Honorable Mitch McConnell
Senate Minority Leader
United States Senate
Washington, DC 20510

Dear Leader Schumer and Leader McConnell:
The undersigned organizations represent millions of Main Street businesses and strongly oppose the Establishing New Authorities for Business Laundering and Enabling Risks to Security (ENABLERS) Act, which passed the House as part of this year’s National Defense
Authorization Act (NDAA).

Under the guise of combatting illicit activities, the ENABLERS Act would require a broad pool of covered businesses, foundations, and charities to collect and report beneficial ownership information, report any suspicious transactions, and establish and enforce anti-money laundering policies.

This legislation would dramatically expand the recently-enacted Corporate Transparency Act’s (CTA) reporting requirements, despite the fact that those requirements have yet to be put in place and are unlikely to result in any meaningful law enforcement successes.

While the bill’s stated goal is to increase reporting by “professional service providers who serve as key gatekeepers to the U.S. financial system,” its broad language would cover the owners, board members, and senior executives of most businesses and charities. Anyone engaged in an entity’s formation, acquisition, or disposal would be covered, as would owners and employees engaged in nearly every financial activity of the business, including money management, payment processing, wire transfers, or buying and selling currencies.

These covered individuals would be subject to audits conducted by the Treasury Department initially, while the Act requires Treasury to recommend additional enforcement tools after a year. By way of comparison, the related CTA imposes fines of up to $10,000, and jail time of up to two years for covered business owners and employees who fail to make the appropriate reports.

The irony is that neither the ENABLERS Act nor the Corporation Transparency Act are likely to improve our law enforcement efforts as, at their heart, they both rely on criminals to self-report their crimes. That is obviously unlikely. Instead, the ENABLERS Act places a disproportionate burden on millions of law-abiding businesses in America.

Finally, the Act’s proponents claim the information collected by Treasury will remain secure, private, and used solely for law-enforcement purposes, but several high-profile leaks and breaches in recent years suggest otherwise. Meanwhile, supporters already are calling for Congress to make Treasury’s database public, in order to make the private information of business owners and other covered individuals more easily-accessible for political and other purposes.

The ENABLERS Act and related Corporate Transparency Act are unlikely to assist law
enforcement agencies in cracking down on money laundering and illicit drug trades, but they are guaranteed to subject millions of law-abiding businesses, non-profits, and other entities to costly and time-consuming reporting, audits, fines, and possible jail terms.

We therefore respectfully ask that you reject this poorly-crafted provision and make certain it is excluded from this year’s NDAA.

Sincerely,

Independent Bakers Association

Senate Narrowly Avoids Shutdown

The House passed a short-term government funding patch on September 30th with a 230-201 vote. The House vote came after the September 29th Senate vote where the bill passed with a 72-25 vote. The bill will keep the government funded until after the November midterms, with renegotiation happening prior to the December 16th deadline. The stopgap gives negotiators time to hammer out a full-year funding agreement.

The stopgap includes $2.5 billion to aid communities devastated by natural disasters, $1 billion in funding a low-income home heating program and $20 million in emergency to address the water crisis in Jackson, Mississippi. The bill also includes $12 billion in aid for Ukraine. Along with funding, the bill allows for the reauthorization of Food and Drug Administration (FDA) user fees for another five years. The bill Major bill Congress expects to pass before the midterms, potentially giving lawmakers time to go home and campaign.

Call for Member Profiles

The weather is changing in Washington and so is the IBA website! While the website lists our IBA membership, we want to promote our members and allow people who visit the site to learn more about them. We also aim to have them visit member sites directly from ours. To accomplish this, we are expanding our membership page to include member profiles.

We ask members send in:

A brief paragraph describing the bakery or allied trade

A live link to the member’s website

A preferred image of the member’s logo

Please send the above information to Megan Fitzgerald at megan@ibabaker.com. Please reach out to Megan with any questions or concerns you may have at megan@ibabaker.com or 202-333-8190.

IBA Annual Fall Meeting Report

The Independent Bakers Association (IBA)’s Annual Fall Meeting begins at 7:45 am on September 19, 2022. IBA President Nicholas Pyle greets the members and guests in attendance. Members and guests go around the room and introduce themselves. IBA Secretary Anthony Turano, Executive at Turano Baking Company, reads the meeting minutes from the IBA Annual Summer Conference. Nicholas Pyle moves to accept the minutes as they are, Ron Cardey, Senior Vice President of Kwik Lok, seconds the motion. The minutes are accepted as they are.

Nicholas Pyle reminds members that they previously voted to hold a virtual member meeting in the spring, he asks if they would still like to hold it virtually or meet on March 28th on Amelia Island, FL. Members vote for meeting to remain virtual. Nicholas Pyle moves the meeting on to the Washington Report. He asks Glenn Frost of Frost Law to explain Employee Retention Credit. Employers with 500 employees or less, who meet the qualification, can earn up to $26,000.00 per employee. Nicholas Pyle shifts to Childhood Nutrition Reauthorization. Traditionally, Childhood Nutrition gets reauthorized on the same schedule as the Farm Bill, however, the government still uses the 2010 version of Childhood Nutrition. There is a new version pending that takes the worst five bills from mark up and combines them. During mark-up, Representative Bob Good (R-VA) read a proposed amendment on reimbursement for schools that purchase granola bars but withdrew the proposal from consideration when it became clear it would not pass. Nicholas Pyle says Senate action is unlikely until after the Congressional midterms.

Congress is conducting field hearings for the upcoming Farm Bill. Nicholas Pyle predicts Representative G.T. Thompson will head the creation of the new Farm Bill after the Congressional midterms. Nicholas Pyle gives an update on sugar. Sugar refiners do not have refining capacity until Spring 2024. The beet crop was mulled under. The current spot price of sugar is $0.70, four times higher than the world price. Confections say they pay high tariffs to have sugar imported. Steven Effron, President and CEO of EFCO, says there is additional pressure on sugar as corn refiners told many buyers they are allocating corn syrup. The topic then changes to Land Conservation. Nicholas Pyle says the government is paying people not to grow on the land, but there is land that would be good for growing wheat. Robin Alton, President and CEO of Pan-O-Gold, says the land would just be a drop in the bucket. Food becoming fuel is a bigger issue. Glenn Campbell, President of Campbell Systems, asks if there is an update on 15% ethanol fuel standards. Nicholas Pyle says people pushed for change under Trump but does not see change coming under the Biden administration.

The White House announced it will hold its Conference on Hunger, Nutrition and Health on September 28th. IBA hopes to see worker wellness programs come out of it but have concerns that the Conference is activist led. Senator Cory Booker spoke out, along with activist groups, encouraging the administration to use front-of-pack-labeling (FOP). Nicholas Pyle then moves on to employment concerns. He begins by summarizing the recent stand-off between rail union and freight companies. Amid fears of a union strike, the parties were able to come to a tentative agreement. Union members agreed not to go on strike while votes are tallied to decide if the union will finalize the agreement. A rail strike would cost the economy $2 billion a day. Nicholas Pyle says the National Labor Relations Board is out of control. There is something new every day that harms employers.

Nicholas Pyle gives the midterm update. During the IBA Summer Meeting, Republicans looked at a 70 seat pick up, but with the leaking of the Dobbs decision the number reduced to 30. Republicans are running hard on inflation, energy prices and foreign affairs. Nicholas Pyle believes Republicans will pick up 25 seats in the House and one in the Senate. The races to watch are Arizona, Florida, Georgia, Nevada, New Hampshire, North Carolina, Pennsylvania, Ohio and Wisconsin.

Meeting shifts to Bakers Round the Room. Jordon Hale says he is facing the same problems everyone in the industry faces. Lisa Turano, VP of Legal for Turano Baking Company thinks fewer people are looking for jobs and more are looking for a hybrid option. Nicholas Pyle suggests utilized the previously incarcerated as they are an under-served part of the workforce. Paul Miller, Managing Director at Kincannon and Reed, is on the board for Greyston Baking and they practice open hiring. Potential employees must be able to legally work in the U.S., lift 50 lbs and stand on their feet for 10 hours. Robin Alton says there are labor issues, and it is hard to find skilled maintenance. Lisa Turano asks what the incentives are: better benefits, more time off, more pay? Nicholas Pyle says Aunt Millie’s went to a 12-hour workday which gives employees four days off a week. Robin Alton points out that Aunt Millie’s is non-union, so it isn’t a problem. Ralf Ulmer of PC Data says it is bad everywhere, no matter where you are you cannot hire people.

Nicholas Pyle asks Lance Chaney of Braun Brush how to get sesame seeds out of a conveyor belt. Lance Chaney says he would need to see the machine to give the best recommendation. Lisa Turano asks if blowing them out would make it worse. Lance Chaney says you need to able to control where the seeds go. While it is difficult, Lance Chaney is happy to have the challenge. The topic moves back to labor. There is a prevalent no-call-no-show attitude that is an ongoing issue. It exacerbates other issues the industry faces. Many drivers are going to work for Walmart instead of bakeries. Bakers spend a significant amount of time managing drivers and deliveries than they did before.

Jordon Hale calls the meeting to order, and the meeting ends at 9:30 am.

Washington Report: Text