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Farm Bill; Biofuels; Climate Change- Political Notes; CFTC Issues; and Weather Impacts

Farm Bill

Reuters news reported yesterday (article posted at DTN, link requires subscription) that, “The U.S. Agriculture Department unveiled tighter eligibility rules for farm subsidies on Wednesday but a small-farm group said they do not live up to President Barack Obama’s call for reform.

“The rules, to take effect on Thursday, bar subsidies to the wealthiest Americans, as required by the 2008 farm law. There is no limit on how much money a producer can collect.”

The Reuters article explained that, “After nearly a year of review, USDA settled on a modestly stricter definition of who is a farmer. Producers must be able to document a regular, separate and identifiable contribution of labor, management or both to qualify for subsidies if they do not provide capital, land or equipment.

Until now, there was no requirement to prove individual contribution of labor or management.

Reformers want USDA to set a minimum number of hours of labor or management. Otherwise, they say, money goes to people, such as passive investors, with few ties to the land.”

Yesterday’s article added that, “On its Web site, the White House says ‘farm programs should target family farmers’ and there should be a cap on crop subsidies. The National Sustainable Agriculture Coalition says that while a candidate, Obama said in 2008 payments should go only to active farmers and landlords who rent to them.

‘”The best chance for reform in a generation has been punted away,’ said Ferd Hoefner of the coalition. He said USDA could write a strong definition if it wanted. Instead, he said, ‘the big loopholes have been left intact.’

“USDA said its changes were sufficient. ‘However, we are currently exploring whether the current definition could be amended in a manner that would be fair, equitable and enhance program integrity,’ it said.”

Philip Brasher reported yesterday at the Green Fields Blog (The Des Moines Register) that, “Advocates for small-scale farmers are accusing President Barack Obama of reneging on a pledge to tighten restrictions on who gets federal farm subsidies.

At issue is what it means to be ‘actively engaged’ in farming, a requirement for receiving crop subsidies. In revising rules for subsidies, the U.S. Agriculture Department has failed to add the kind of measurable standards that critics of the rules wanted.

“The USDA largely left intact rules proposed in December 2008 in the final days of the Bush administration.”

Mr. Brasher noted that, “The USDA is publishing minor revisions in the rules in Thursday’s Federal Register along with responses to the more than 5,000 comments that the department received. Three-fourths of the comments wanted the rules tightened, the department acknowledged.

“The USDA said it is still ‘exploring’ the definition of what it means to be an active farmer to see if the rules could be changed in a way that would be ‘fair, equitable and enhance program integrity.’

“Critics of the rules say they are so lax people can qualify for subsidies by doing little more than participating in an occasional conference call with farm managers.”


Dow Jones writer Isabel Ordonez reported yesterday that, “The U.S. government needs to rethink promoting ethanol as a way to enhance energy security as production of the fuel is costly for taxpayers and poses economic and environmental risks, according to a study released Wednesday.

The report by the Rice University’s Baker Institute for Public Policy notes that in 2008 the U.S. government spent $4 billion in biofuel subsidies to replace 2% of the U.S. gasoline supply. The average cost to the taxpayer of those substituted barrels of gasoline was roughly $82 a barrel, or $1.95 per gallon on top of the retail gasoline price, according to the study.

“‘We need to set realistic targets for ethanol in the United States instead of just throwing taxpayer money out the window,’ said Amy Myers Jaffe, a senior fellow in energy studies at the Baker Institute and one of the report’s authors.”

Yesterday’s article indicated that, “Increases in corn-based ethanol production in the Midwest could increase environmental problems, such as damaging ecosystems and fisheries along the Mississippi River and in the Gulf of Mexico, according to the report. The report also challenges the idea that ethanol use lowers greenhouse-gas emissions and said that there is ‘no scientific consensus on the climate-friendly nature of U.S.-produced corn-based ethanol, and it should not be credited with reducing [greenhouse gases] when compared to the burning of traditional gasoline,’ according to the report.

“Matt Hartwig, a spokesman for the Renewable Fuel Association, a trade group for the ethanol industry, questioned the study, saying it’s biased in favor of the oil industry as it was funded by Chevron. Hartwing said the report fails to show that the oil industry has also benefited from tax credits for several years and it doesn’t talk about the environmental risk of fossil-fuels.

“‘To single out ethanol as the main beneficiary of tax credits that the entire energy industry enjoys is misleading,’ Hartwing said.”

Meanwhile, an update posted yesterday at the Sugar Cane Blog stated that, “Senator Charles Grassley (R-IA) says the U.S. Senate may take some time to approve the tax extenders bill, which among other things would renew the $1.00 per gallon biodiesel tax credit that expired on December 31, 2009. During his weekly call with reporters (audio available here [MP3]), Grassley said ‘there’s a real intention of getting the extensions, as well as the estate tax, done in the early months.’ However the Senator warned it may be March before the Senate acts, which is certain not to please the biodiesel plants idled by loss of tax credit.”

And Dow Jones news reported yesterday (article posted at DTN, link requires subscription) that, “A turf war is brewing between big U.S. gasoline producers and local fuel distributors over who has the right to blend ethanol into fuel and capture federal government incentives.

“For decades, fuel distributors have either blended in their own ethanol – -a practice known as splash blending — or bought pre-blended fuel from refiners. The distributors, known as ‘jobbers,’ are keen to retain the right to blend their own fuels, as it allows them to take advantage of fluctuating ethanol prices and garner tax breaks and other government incentives.”

Yesterday’s article noted that, “However, people familiar with the matter say big refiners such as Exxon Mobil Corp., BP PLC and Valero Energy Corp. over the past two years have warned distributors they won’t provide unblended fuels anymore in some areas because they have to shell out millions of dollars to meet stricter government biofuel mandates from which the jobbers are exempt.

The dispute underscores the difficulties of introducing ever greater amounts of biofuel into a market in which gasoline demand has dropped sharply. The federal government has required increasing amounts of ethanol in the fuel mix as part of a strategy to curb dependence on foreign oil and cut greenhouse-gas emissions.”

Climate Change- Political Notes

Washington Post writer Juliet Eilperin reported yesterday at the Post Carbon Blog that, “What does Sen. Byron Dorgan’s (D-N.D.) retirement mean for the prospects of passing a climate bill this year?

Ms. Eilperin noted that, “Post Carbon asked the senator, who has consistently backed energy legislation but opposed a national cap on greenhouse gases, whether his decision to leave the Senate would change his position on a cap-and-trade bill. His answer? ‘It doesn’t make any difference.’

“But he did say in an interview Wednesday that he would devote ‘all of my energy in the coming year’ to getting the bipartisan energy bill passed out of the Senate Energy and Natural Resources Committee signed into law.”

The Post update added that, “‘In my judgment, that’s an energy bill,’ he said, noting it has a national renewable energy standard and measures to expand wind and solar energy, among other items.

Dorgan predicted that if the Senate decides it lacks the vote for a cap-and-trade bill, it will focus on energy legislation instead. ‘It becomes its own vehicle for doing energy policy that contributes to addressing climate change,’ he said.”

Victoria McGrane and Manu Raju reported yesterday at Politico.com that, “Dorgan is also the second most senior Democrat on the Energy and Natural Resources Committee, and Sen. Ron Wyden (D-Ore.) would be poised to move up a notch on that panel.”

And Ben Geman reported yesterday at The Hill’s Energy and Environment Blog that, “Dorgan wants stronger regulation by the Commodity Futures Trading Commission and other agencies. But while many lawmakers are calling for new position limits and other market controls, here’s something less common about Dorgan: His concern about market abuses has led him to oppose Democratic plans to create a ‘cap-and-trade’ system to cut greenhouse gas emissions.

He fears that a large carbon emissions trading market would be open to manipulation, and favors other methods for curbing greenhouse gases.”

Alexander Bolton reported yesterday at The Hill Online that, “Dorgan’s retirement also opens up a leadership slot. He is the chairman of the Democratic Policy Committee, a post that traditionally has served as a steppingstone to the top ranks of the Senate Democratic leadership.

“Former Majority Leaders Robert Byrd (D-W.Va.) and Tom Daschle (D-S.D.) served as chairmen of the committee. Reid co-chaired the panel with Daschle from 1996 to 1999.

“[Sen. Charles Schumer (D-N.Y.)] and Sens. Patty Murray (D-Wash.), Debbie Stabenow (D-Mich.) and Sheldon Whitehouse (D-R.I.) are all potential candidates for the Policy Committee.”

More broadly, Jonathan Martin and Alex Isenstadt reported yesterday at Politico.com that, “The recent retirements of two veteran Democratic senators and the decision by two Democratic gubernatorial candidates to drop their bids could prompt more in the party to head for the exits and further frighten already skittish donors and activists. But it doesn’t yet appear that the party’s congressional majorities are threatened.

“Republicans are poised to make major gains in the House and the Senate, but the number of seats necessary to reclaim the majority makes it unlikely that they could knock the Democrats out of power in either chamber.”

Jeff Zeleny and Adam Nagourney reported in today’s New York Times that, “The sudden decision by two senior Democratic senators to retire shook the party’s leaders on Wednesday and signaled that President Obama is facing a perilous political environment that could hold major implications for this year’s midterm elections and his own agenda.

“The rapidly shifting climate, less than a year after Mr. Obama took office on the strength of a historic Democratic sweep, was brought into focus by the announcements that Senators Christopher J. Dodd of Connecticut and Byron L. Dorgan of North Dakota would retire rather than wage uphill fights for re-election.

With the chances growing that the election in November would end the 60-vote majority Democrats enjoy in the Senate — the practical threshold for being able to overcome united Republican opposition — the president and his party face additional urgency to make progress on his agenda this year.”

CFTC Issues

Yesterday’s Commodity News For Tomorrow, a complimentary daily commodities newsletter provided by the CME Group in partnership with Dow Jones & Company, reported that, “As the U.S. Senate gears up to tackle the financial regulatory overhaul, U.S. Commodity Futures Trading Commission Chairman Gary Gensler on Wednesday again called for bringing transparency to the opaque over-the-counter derivatives market.

“Speaking before the Council on Foreign Relations in New York [transcript], Gensler said he hopes lawmakers will take steps to enact strong new regulations even though the financial crisis is no longer at its peak.”

Meanwhile, Reuters writer Christopher Doering reported earlier this week that, “Market manipulation did not cause cotton futures prices to artificially spike in 2008, the Commodity Futures Trading Commission said on Tuesday, after a lengthy investigation spanning nearly 20 months.

“Evidence found a host of factors may have contributed to the wild movement in cotton contracts traded on the IntercontinentalExchange’s Futures U.S. (ICE.N), formerly the New York Board of Trade, during the week of March 3, 2008, the CFTC said.

“The CFTC conducted the probe at the behest of farmers, investors and other market participants who expressed concern about the price spike, which pushed two leading U.S. cotton merchants out of business.”

And Reuters writer Rene Pastor reported yesterday that, “New rules to limit the size of positions in commodity futures are a long way from a done deal, although the Commodity Futures Trading Commission could issue a proposal soon, a CFTC commissioner said on Wednesday.

“‘It’s a process. People get frustrated because things don’t happen overnight. I would expect that we would get the proposed regulation out, but we would not see the final regulation for some time,’ CFTC Commissioner Michael Dunn, told Reuters on the sidelines of the annual Beltwide Cotton Conference.

The CFTC is soon expected to release its proposal for limiting the role of big traders in energy and metal markets, which could be a major crackdown on commodity markets and a key part of the Obama administration’s effort to stabilize financial markets.”

Weather Impacts

Bloomberg writers Rudy Ruitenberg and Elizabeth Campbell reported yesterday that, “Florida’s orange crop, the world’s second largest, likely escaped major damage as temperatures fell to record lows, according to AccuWeather Inc. More frigid weather is forecast in the next five days.

“The overnight cold harmed less than 1 percent of the crop, said Dale Mohler, an AccuWeather senior meteorologist. Lower temperatures are forecast for the early hours of Jan. 10 and Jan. 11, and may damage as much as 5 percent of the fruit, he said. Oranges can’t tolerate temperatures below 28 degrees Fahrenheit (minus 2.2 degrees Celsius) for more than a few hours.

“‘We’re dodging the bullet on this one, this morning,’ Mohler said. He said frost-prevention measures limited losses.”

Damien Cave
reported in today’s New York Times from Dover, Florida that, “Tuesday brought the fourth consecutive night of freezing temperatures and all-night watering to the nation’s winter strawberry capital, and with another cold front on its way, nearly everyone here expects the frenzy and fatigue to continue.”

The Times article explained that, “The good news is that the current freeze, so far, has not been nearly as damaging as the bitter cold snaps of 1835, 1962 or 1989, each of which destroyed dozens of businesses and altered breakfast menus nationwide. The bad news is that its unusual length has already begun to test the patience of nearly everyone who touches a strawberry or wants to.

Prices for the red wonders of winter — with Florida names like Radiance — have increased by $2 a pound since Christmas, and supplies will be limited for weeks, even if temperatures rise. Growers said Wednesday that supermarket chains were already pressuring them to produce what they planned to advertise in fliers.”

Keith Good