January 22, 2020

Climate Change Issues; Farm Bill; Biofuels; Land Values; Food Safety, Trade; and CFTC Issues

Climate Change Issues

Ben Geman reported yesterday at The Hill Online that, “Senate Democrats will face a problem when they return in January every bit as tough as crafting the healthcare bill: Assembling a climate and energy package that can be shoehorned into the election-year calendar.

“Imposing limits on greenhouse gases is a White House and Democratic priority, but it’s stuck in line behind healthcare, Wall Street reform and jobs legislation.

“It’s also become increasingly apparent since the Copenhagen climate summit that the Senate will go forward in a dramatically different direction than the House, which approved its own climate bill last summer.”

Mr. Geman explained that, “Some Democratic centrists including Sens. Blanche Lincoln (Ark.) [related article] and Byron Dorgan (N.D.), who are both up for reelection next year, want the Senate to take up a broad energy measure that the Senate Energy and Natural Resources Committee approved in June as a standalone bill, rather than grafting it to a cap-and-trade plan.

“That’s led to speculation that Democrats might seek to move an energy bill but put off the fight over climate change.

The problem with that logic is that dozens of Democrats want to move a climate change bill, including centrists such as Sen. Arlen Specter (Pa.), who faces a tough primary fight and then a difficult general election battle.”

With respect to the executive branch, yesterday’s Hill article noted that, “White House officials also are calling for a combined energy and climate package, including an economy-wide cap-and-trade plan.

“White House climate czar Carol Browner in November warned against ‘slicing and dicing,’ and a White House aide said Monday that a combined energy policy and cap-and-trade package remains what the White House wants from Congress in 2010.”

The article indicated that, “Sen. Mary Landrieu (D-La.) said she has been discussing the shape of an energy and climate package with lawmakers including Sens. Bob Corker (R-Tenn.) and [Lindsey Graham (R-S.C.)].

“‘It is not off the radar screen,’ Landrieu said Wednesday. ‘There have been quite a few informal meetings that have been going on through the fog of this healthcare bill.’

“[Senate Majority Leader Harry Reid (D-Nev.)] hopes to bring legislation to the floor in the spring, but that will be difficult given the Senate’s schedule.

“A former official in the Clinton White House familiar with the climate change efforts said key negotiations need to start next month on the difficult task of assembling a compromise bill.”

The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “The Senate climate change bill sponsored by Sens. John Kerry (D-Mass.) and Barbara Boxer (D-Calif.) would lead to a net increase in federal revenues of about $21 billion from 2010 to 2019, according to an estimate by the Congressional Budget Office. The report found the bill would generate about $854 billion in federal revenue and would require about $833 billion in direct federal spending.

“Both the revenue and the costs come primarily from implementing a cap-and-trade system for greenhouse gases designed to reduce emissions by 20 percent from 2005 levels by 2020, and 80 percent by 2050.

“CBO is a nonpartisan operation, but its findings are not likely to be embraced by those who oppose climate change legislation in general and cap-and-trade in particular.”

And from an international perspective, Washington Post writer Juliet Eilperin reported on Monday at the Post Carbon Blog that, “Brazil will still enshrine its stringent 2020 greenhouse gas emission goals in law despite the failure of this month’s international climate talks to produce a binding treaty, its environment minister announced Monday.

“‘We will fully comply with the targets,’ said Brazil’s environment minister Carlos Minc, after meeting with President Luiz Inacio Lula da Silva. ‘It doesn’t matter that Copenhagen didn’t go as well as we had hoped.’

“The announcement is significant because Brazil–which ranks as one of the world’s biggest emitters–had pledged just before the climate talks to reduce its emissions by between 35 and 39 percent by 2020, which amounts to a 20 percent cut from 2005 levels.”

Farm Bill

Yesterday, the U.S. Department of Agriculture’s Economic Research Service (ERS) issued a report titled, “Factors Influencing ACRE Program Enrollment.”

An ERS overview of the new paper stated that: “Authorized by the 2008 Farm Act, the Average Crop Revenue Election (ACRE) program is the first revenue-based, income-support program that calculates payments using recent market prices and a producer’s actual plantings. The payments are triggered when a farm’s revenue and State revenue (price multiplied by yield per planted acre) fall below a calculated guarantee for a crop. By contrast, other income-support programs are based on legislated rates and support levels, computed using a farm’s base acres and payment yields. Had the ACRE program been available during crop years 1996-2008, this report shows that farmers would have benefited more from participating in 2002 Farm Act programs than in the hypothetical ACRE program. The report further suggests that, for 2009-12, producers of corn, soybeans, wheat, and rice are likely to benefit more from the ACRE program than from the price-based, income-support programs. Initial enrollment data suggest that factors aside from expected market prices and yields entered into the enrollment decision such as producer risk preferences and initial learning and negotiation costs. Data indicate that about 8 percent of farms with almost 13 percent of eligible base acres elected to participate in ACRE, which is less than might be expected given price and yield-based analysis alone.”


Russell Gold reported yesterday at the Environmental Capital Blog (The Wall Street Journal) that, “Biofuels investing is not for the faint of heart.

“Earlier this week, Codexis Inc. filed for a $100 million initial public offering on Nasdaq. The short press release is here and we’ve uploaded the entire 841-page file for your reading pleasure here.

“Codexis, as you may recall, is a San Francisco-based company developing the microbes to chew up plants and turn them into sugars, which are then turned into ethanol and diesel. Shell owns a 20% stake in the company and is pumping about $15 million a quarter into research and development. It filed for an IPO before, but then pulled back in September 2008 citing ‘current public market conditions.’”

Yesterday’s update added that, “Will Codexis timing be any better this time around? There are still plenty of potholes.

“The beauty of an IPO filing is that the company must file all sorts of risk factors laying out exactly what can go wrong. And in the biofuels business, that’s quite a lengthy list. Codexis (and its lawyers) cite: its sugar daddy Shell could decide it wants to stop bankrolling R&D efforts; ‘the development of technology for converting sugar derived from non-food renewable biomass sources into a commercially viable biofuel is still in its early stages, and we do not know whether this can be done commercially or at all’; ‘there are no commercial scale cellulosic biofuel production plants in operation. There can be no assurance that anyone will be able or willing to develop and operate biofuel production plants at commercial scale or that any biofuel facilities can be profitable’; new infrastructure is needed, such as rail lines; tax credits and other government subsidies could disappear; falling oil prices will pole axe revenue; fears of genetic engineering could pinch the company; and there might not be enough feedstock to turn into biofuels.”

Meanwhile, Ken Anderson reported yesterday at Brownfield that, “Agriculture Secretary Tom Vilsack says he’s confident Congress will act early in the new year to extend the tax incentive for soy biodiesel.

“‘We’re obviously encouraged by comments from congressional leaders that it’s their intention to take this matter—the tax extenders—up by the end of next month,’ Vilsack says, ‘which will hopefully be in time that there isn’t any significant disruption in the market.’

“Some industry analysts predict many biodiesel plants will be forced to shut down when that tax incentive expires on December 31.”

The Brownfield article noted that, “At a news conference in Des Moines Monday, Vilsack also talked about a new Obama administration report on biofuels to be released in January. He says it’s a collaboration between USDA, EPA and Energy.

“‘Within the Obama administration, the president tasked myself, (Energy) Secretary (Stephen) Chu and (EPA) administrator (Lisa) Jackson to put together a task force report on biofuels generally, which we will probably be issuing next month,’ he says, ‘(outlining) ways in which we can be an even better partner with the industry than we’ve been.’”

In other developments regarding biofuels, a Growth Energy news release from yesterday stated that, “Growth Energy and the Renewable Fuels Association issued the following joint statement today in response to questions from the press concerning an effort by the ethanol groups to block flawed regulation, proposed by the California Air Resources Board (CARB), which would unfairly and illegally block low-carbon ethanol from the California transportation fuels market.

“‘The litigation filed in U.S. District Court should help fix a serious mistake with California’s Low Carbon Fuel Standard. The LCFS regulation would not only undermine the intent of Congress to ensure that Californians be able to obtain ethanol from domestic sources, but also cripple the nation’s effort to move to more diversified sources of U.S.-produced ethanol, including ethanol from feedstocks other than corn.

“‘Were California to succeed in discriminating against corn-based ethanol as the LCFS is currently structured to do, it would empower other states to defy the intent of Congress and establish a patchwork of fuel regulations that would greatly complicate the nation’s fuel infrastructure and potentially limit the trade of fuel and fuel components between states.’”

Land Values

Yesterday, the Federal Reserve Bank of Kansas City issued an update to its Main Street Economist series titled, “Will High Land Values Hold?”

A brief summary of the report provided by the Kansas City Fed noted that, “Farmland values have skyrocketed in recent years, but the recent recession cut farm incomes and cooled residential and recreational demand for farmland. In the latest issue of ‘The Main Street Economist,’ Jason Henderson and Maria Akers explore the sharp-run-up and sudden cooling, as well as the key effects of residential and recreational demand on values. The article also describes how two factors – profitability from crop production and changes in capitalization rates – could influence future values.”

Food Safety

Lyndsey Layton reported in today’s Washington Post that, “Twenty-one people in 16 states have been infected in recent days with a potentially lethal strain of E. coli bacteria, after consuming beef in restaurants supplied by the same Oklahoma meat company, federal officials said.

“The outbreak spurred the company, National Steak and Poultry, to voluntarily recall 248,000 pounds of beef Dec. 24. The products, which range from steaks to sirloin tips, were packaged in October and shipped to restaurants, hotels and institutions nationwide, according to the company.

“The U.S. Department of Agriculture’s Food Safety and Inspection Service has only a partial list of restaurants that received the potentially tainted beef, including two chains, Moe’s and Carino’s Italian Grill, primarily in the West and Midwest.”


Reuters news reported yesterday that, “Taiwan’s parliament agreed to amend a food safety law to ban certain U.S. beef imports on Tuesday amid widespread fears over mad cow disease on the island, potentially straining ties with the United States.

“Legislators will vote on the issue early next year, Wang Jin-pyng, president of the island’s legislature said, after the ruling Kuomintang and opposition Democratic Progressive Party came to an in-principle agreement to reinstate the ban.

“Under the deal, minced beef, cow offal and beef from cattle above 30 months old will not be allowed for import into Taiwan, the government-backed Central News Agency reported.”

An official joint statement on this development from Deputy United States Trade Representative Demetrios Marantis and Undersecretary for Farm and Foreign Agricultural Services Jim Miller is available here.

CFTC Issues

Sarah N. Lynch reported today at The Wall Street Journal Online that, “Jeffrey Harris, the chief economist at the U.S. Commodity Futures Trading Commission who last year said he could find no direct link between speculation and high energy prices, is leaving the agency and returning to academia.

“Mr. Harris’s departure comes at a critical time for the CFTC, which plans to unveil a major proposal to impose new trading limits on crude oil and other energy futures products.

“CFTC Chairman Gary Gensler is the driving force behind the proposal, saying it is the CFTC’s duty to protect the American public from excessive speculation. He is pushing for the consideration of new limits, even though the agency’s economic team never reportedly found evidence of a causal link between excessive speculation and last year’s record crude-oil prices.”

Ms. Lynch noted that, “Efforts to impose limits on energy commodities is a reversal from the CFTC’s position last year when it was being led by Republican Acting Chairman Walter Lukken. At that time, critics blamed speculators for the high prices and lashed out at the agency for doing little to stop it.

“As the CFTC’s chief economist, Mr. Harris played an important role in analyzing market data surrounding the speculation debate. He testified several times before Congress on the issue and was chairman of the inter-agency task force that produced a controversial 2008 report on crude oil.

“The report raised the ire of some lawmakers because it concluded that there was no evidence speculators had been systematically driving price changes in the crude-oil market.”

Keith Good

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