FarmPolicy

February 20, 2020

Farm Bill Issues

Categories: Ethanol /Farm Bill

Philip Brasher reported in yesterday’s Des Moines Register that, “President Bush has a goal of restoring and improving 3 million acres of wetlands by early 2009, a goal that will benefit wildlife as well as enhance water quality.

“The key to doing that is a U.S. Agriculture Department program that buys easements on low-lying farmland and then helps pay all or part of turning the acreage back into wetlands. The wetlands provide valuable habitat for birds and other wildlife, control flooding and cleanse contaminants from groundwater.”

However, the article noted that, “The USDA had overhauled the way it appraises property for the Wetlands Reserve Program after an inspector general’s report accused the department of overpaying landowners by $159 million over a five-year period.

“In calculating what it would pay for easements, the USDA had failed to take into account that the restored wetlands would be quite valuable to the landowner for hunting.”

Mr. Brasher noted that under the new calculation methods, “In Bremer County, Ia., the offers the USDA made to landowners dropped an average of $400 an acre from 2005 to 2006.”

After explaining that some groups have asked the administration to change the new appraisal method, the article concluded by stating that, “The USDA plans to ask outside consultants to review the program this year to see what impact the new appraisal method has had.

“All this has put USDA officials in a predicament: On the one hand, they’ve got to keep the politically powerful wildlife and gun lobbies happy and increase wetlands restoration.

“On the other, they’ve got to ensure that well-heeled hunters and landowners aren’t using another farm program to rip off taxpayers.”

In a related article regarding wetlands, Jon Knutson reported at the In-Forum (North Dakota) webpage on Friday that, “A new federal program designed to convert cropland into duck nesting habitat is drawing little interest, at least in part because of rising crop prices.”

The article indicated that, “The U.S. Department of Agriculture launched its CP37 initiative last year.

“The program will pay farmers in five upper Midwestern states to convert up to 100,000 acres of cropland into duck nesting habitat.”

More specifically, the article explained that, “Strong demand for ethanol has pushed up corn prices 75 percent or more in the past year.

“Prices for crops such as wheat and soybeans have risen 30 percent or more.

“Farmers who enroll land in the program typically will receive $30 to $40 per acre per year in federal payments.

“Higher crop prices – and the higher profits they promise – make those rates less attractive.”

With respect to higher crop prices, Bloomberg writer Jeff Wilson reported yesterday that, “Farmland is rising faster in price than apartments in Manhattan and London for the first time in 30 years.

“Demand for corn used in ethanol increased the value of cropland from 16 percent in Indiana to 35 percent in Idaho in 2006, government figures show. The price of a Soho loft appreciated only 12 percent, while a pied-a-terre in Islington near London’s financial district gained 11 percent, according to Realtors.

“Farmland returns ‘will take a quantum leap over the next 18 months’ after corn prices surged to a 10-year high in February, said Murray Wise, chairman and chief executive of Westchester Group Inc. in Champaign, who oversees $460 million of land investments.”

In addition to impacting land values, higher market prices are also playing a role in production allocation decisions by producers. A Dow Jones news article posted on Friday at the DTN Ethanol Center webpage, reported that, “A planting intentions survey conducted by Doane Advisory Services shows farmers intend to plant more acres to corn and fewer to soybeans in 2007.

“According to survey results, farmers intend to plant 14.7% more corn in 2007 than was seeded the previous year, but soybean planted area will decline 12.5% in 2007, Doane said.”

As ethanol use continues to impact market prices, variables associated with the profitability of ethanol production, such as federal legislation and technological changes also warrant closer inspection.

Generally, the U.S. imposes an import tariff of $0.54 on each gallon of imported ethanol. This tariff is set to expire in 2009. A Dow Jones article posted at the DTN Ethanol Center reported on Friday that, “[Wally Tyner, agricultural economics professor at Purdue University in Indiana] said ‘those who felt the duty was implemented to protect the domestic industry want it continued.’ But others who support renewable fuels and don’t care whether they originate in the U.S., Brazil or elsewhere want the tax removed. U.S. East and West Coast ethanol users oppose the duty, he said, since they pay up for imports, while Central U.S. producers want to keep it. Tyner says Congress might extend the tariff in 2009, but with some alterations – maybe lowering it to 51 cents.

“Nicholas Burns, U.S. Undersecretary of State for Political Affairs, visited Brasilia, Brazil this month to discuss formalizing ethanol standards with government ministers there. Brazilian millers like the idea of an ethanol alliance, but remain anxious to see the U.S. duty removed.”

Another important variable in determining the viability of long-term corn-based ethanol use is technological changes associated with cellulosic ethanol production, a process whereby ethanol can be produced from alternative feed stocks such as wood or various kinds of perennial grasses. A variety of technological and market factors are currently limiting ethanol production derived from these sources, including a limited supply of feed stock, lack of infrastructure for commodity transport and storage, and prohibitively high costs of cellulosic ethanol production.

A news release issued on Friday from Texas A&M University noted that federal legislative developments associated with the 2007 Farm Bill could impact the types of commodities that could be used to make ethanol.

The news release stated that, “Farmers and ranchers could soon be looking harder at forage production as biomass crops become more lucrative and sought after by new biofuel plants popping up across the U.S.

“What U.S. Rep. Collin Peterson, D-Minn., doesn’t want to see happen are plants ready to go on line with no product to be found.

“‘If we don’t get feed stocks started now, these plants are going to be built and people are going to be looking for material with no (place) to go,’ said Peterson, chairman of the House Agriculture Committee at the 2007 Ag Forum Friday in Austin.

“As work continues on a new farm bill that looks to weigh heavily on energy and conservation, some of the most traditional practices on the nation’s farms could be changing, he said.

“‘I tell my people at home instead of growing sugarbeets, you might be growing switchgrass,’ Peterson said. ‘This (renewable energy) is the most exciting thing that has ever happened in my lifetime in agriculture.’”

William Pack, writing on Friday at the San Antonia Express News (Texas) webpage, provided this analysis of what Chairman Peterson’s comments on ethanol and the Farm Bill; “Demand for ethanol, particularly cellulosic ethanol that comes from woody plants, is revitalizing agriculture and should receive a funding boost in the new farm bill, the chairman of the Agriculture Committee in the U.S. House said Friday.”

The article stated that, “The House and Senate agriculture committees are working on a farm bill — establishing price supports for a variety of crops and financing the food stamp program — to replace the 2002 bill that expires this year. That bill created an energy entitlement for the first time, and officials believe funding for it will grow in the new bill, which may not be completed until late summer.”

According to the article, Chairman Peterson also addressed budgetary issues, “Farmers are worried that budgetary concerns and high crop prices, caused in large part by the demand for corn-based ethanol, could result in lower price supports in the new bill. Because higher crop prices have resulted in $60 billion in savings in price support programs, Peterson did not believe money would be taken out of the commodities programs for energy or other initiatives this time around.”

In additional news coverage of cellulosic ethanol production, Jerry Perkins reported in yesterday’s Des Moines Register that, “For five years or more, proponents have said the promise of making ethanol from biomass crops such as switchgrass and hybrid trees was just around the corner.

“That corner has yet to be reached, but last week it seemed a little bit closer when cellulosic ethanol producers and allied businesses spoke to the National Ethanol Conference.

“Robert Dinneen, president of the Renewable Fuels Association, host of the conference, said cellulosic ethanol will revolutionize the industry.

“‘Five years from now, the ethanol industry will be unrecognizable from what it is today, because of cellulosic ethanol,’ Dinneen said.”

The Register article also indicated that, “Getting farmers to grow new crops, developing harvesting equipment and delivering bulky biomass crops to the plant all must be dealt with before cellulosic production can become a commercial reality, [Anna Rath, director of business development at Ceres, a developer of energy crops for cellulosic production,] said.”

Dan Chapman
, writing last week in the Atlanta Journal-Constitution provided an interesting look at renewable energy production and the feed stock used to generate fuel.

Mr. Chapman reported that, “The renewable energy revolution rolls into Plains [Georgia] today with the celebration of yet another alternative-fuel factory intended to help America kick its oil addiction, clean its air and boost rural Georgia’s economy.

“Alterra Bioenergy Corp.’s selection of Plains — the hometown of former President Jimmy Carter — for its 30-million-gallon biodiesel plant pushes Georgia to the forefront of the Southeast’s still-young renewable energy industry.”

The article noted that, “There’s only one problem with this energy-from-nature idyll. Plains rests in the heart of peanut country, holds a peanut festival each September and takes pride in its 13-foot-tall ‘Smiling Peanut’ statue, but Alterra won’t be using the goober to make the alternative fuel — at least in the short run.

“Instead, the company will use soybean oil from food-processing conglomerates in Valdosta and Gainesville to produce its biodiesel. Georgia peanut growers, who earned $368 million in 2005 for their crop, will be out of luck.

“‘Peanut oil is very expensive compared to [soybean oil], which is immediately and readily available,’ said [Alterra Bioenergy Corp.’s Chief Executive A. Wayne Johnson], a former Visa executive turned entrepreneur who hopes to eventually be able to use peanut oil when price allows. ‘But we concluded that central and South Georgia are ideal locations because of rail access and the utilization of fuels in these areas. And Plains just happens to be in the epicenter of oilseed production in the United States.’”

Mr. Chapman also noted that, “It didn’t take rising gas prices — Monday’s average for regular gas was $2.10 a gallon in Atlanta — or President Bush’s mention of biodiesel and ethanol in last month’s State of the Union speech for alternative-fuel production to explode. Nationwide, 105 biodiesel plants are running, according to the National Biodiesel Board, with another 77 being built and eight others expanding. Roughly 225 million gallons of biodiesel were blended in 2006, triple the previous year’s production.”

***

Beyond the issue of renewable energy, which has emerged as one of the most significant variables in the 2007 Farm Bill debate, broader editorial opinion on farm policy continues to be published.

An opinion piece by Philip Hayes, which was published at the High Plains Journal (Kansas) webpage last week, noted that, “Most big-city reporters don’t know the difference between sweet corn and corn sweetener. Yet, somehow they all think they’re experts when it comes to farm policy.”

Mr. Hayes went on to suggest that farmers, “Write a letter to Congress. Pick up the phone and call your Senator. Contact your local paper and author a positive story describing what farm policy means to your community, then send that article to Capitol Hill.”

The editorial indicated that, “The media coverage from Metropolis won’t be pretty, but you can take comfort in one thing: Lawmakers, not newspapers, write farm bills.”

A separate editorial, posted yesterday at the In-Forum (North Dakota) webpage, had a similar theme; “To hear critics of farm programs tell it, a huge majority of farm bill expenditures is being sucked up by big farmers who don’t need federal crop supports. From the editorial pages of urban newspapers in the East to ideologically driven politicians in Congress, farm legislation has become a routine whipping boy.”

The item stated that, “Recent studies by USDA and agencies such as the North Dakota Agriculture Statistics Service and the North Dakota Farm Service Agency reveal that the 2002 Farm Bill has been both a bargain for the U.S. Treasury and an effective economic safety net for farmers. When debate begins this year over a new farm bill, the efficacy of the major provisions of the 2002 bill must be recognized.”

***

Lawmakers and other stakeholders continued to hold regional meetings across the country last week on the future of U.S. farm policy. Here is a sampling of some of the coverage of these forums.

* Patrick Courreges. “Ethanol, cotton subsidies among Farm Bill topics at forum.” The Advocate (Louisiana). 2.23.2007- “Ethanol and concerns about federal aid for agriculture dominated Thursday’s farm forum hosted by two congressman representing the breadth of Louisiana’s coastal and near-coastal parishes from Mississippi to Texas.

“U.S. Rep. Charles Boustany, R-Lafayette, who began the idea of the Farm Day 2007 forum, and U.S. Rep. Charlie Melancon, D-Napoleonville, spent the day speaking and listening to invited speakers and farmers about concerns with the new federal Farm Bill proposal and opportunities offered by the booming alternative fuel market.”

“Both Boustany and Melancon said no matter what the administration puts forward, Congress will have the final say on how the bill is written.”

* William Pack. “Farm bill season is here.” San Antonia Express (Texas). 2.24.2007- “Rep. Henry Cuellar, D-Laredo, another committee member, said many farmers who testified at field hearings felt the 2002 bill worked well. The congressman said that bill could become the ‘fallback if we can’t reach a compromise.’”

“The administration already has submitted a proposal for a new bill that it says is fairer, provides new dollars for critical issues, is sensitive to world trade demands and costs about $10 billion less than the current bill.”

* Harold Reutter. “Smith says energy independence, farm bill issues important to district.” Grand Island Independent (Nebraska). 2.24.2007- “Smith said along with its numerous farmers and ranchers, the 3rd District also has large food processing companies such as Swift. He said his goal for the farm bill is to provide a ‘safety net’ so the country will have a good, sustainable domestic food supply.

“Smith said he does not want America to become dependent on foreign food the way the country is dependent on foreign oil.

“In talking about energy, Smith extolled the possibilities of ethanol, wind power and solar energy.”

* Ben Penserga. “Gilchrest to visit farmers for bill input.” The Daily Times (Maryland) 2.25.2007- “The U.S. Department of Agriculture’s 2007 Farm Bill proposals would spend about $10 billion less than the 2002 farm bill spent over the past five years, which is in concert with President Bush’s plan to eliminate the deficit in five years. Despite the cuts, these proposals would provide about $5 billion more than the projected spending if the 2002 farm bill were extended.

“During Gilchrest’s visits, he hopes to learn first hand what concerns farmers may have with the new proposals.

“‘We want to talk to those people directly affected by the Farm Bill and have their views on how it can be improved to help protect the family farm and keep agriculture viable here in the First District,’ he said.”

* Loren Genson. “Farm hands.” Chillicothe Gazette (Ohio). 2.24.2007- “‘Less than 1 percent of our annual budget is supporting agriculture,’ U.S. Rep. Zack Space, D-Dover, said Friday during a visit with Ross County farmers. ‘And the benefits are great – we get an abundant and safe source of food. I’m not sure a lot of people in the general public appreciate it.’”

“Another issue is the use of the Conservation Reserve Program, which offers farmers money not to farm on their land for a set number of years. The program is used widely in this area and, although it helped some farmers economically, it may have made it more difficult for younger farmers to buy land.”

-Keith Good

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