FarmPolicy

February 21, 2019

Crop Insurance; Biofuels; CRP; Food Security; Climate Issues; and Animal Agriculture

Crop Insurance

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Potential cuts to the crop insurance industry would be about 20 percent less than originally proposed, but agent commissions would be capped under a new draft of the standard reinsurance agreement between USDA and the crop insurance industry, USDA officials said Wednesday.” [Note: For more background on the standard reinsurance agreement, click here and here.]

“Though USDA had originally declined to detail the savings in the first proposal, the White House’s proposed budget detailed $8 billion in crop insurance savings over 10 years. Officials said Thursday the actual projection was closer to $8.4 billion. The proposed changes would still cut costs for crop insurance by about $6.7 billion over 10 years, based on percentages and numbers offered by USDA officials.

“‘I think the companies overall would be satisfied with the direction of the movement,’ said Bill Murphy, administrator of USDA’s Risk Management Agency.”

Yesterday’s article noted that, “Murphy, [Michael Scuse, USDA’s deputy undersecretary for Farm and Foreign Agricultural Services] and other USDA officials briefed reporters Wednesday just before Murphy prepared to offer the second draft to a crop insurance industry meeting being held this week in San Diego. Snow days in Washington last week slowed work on the proposal, but Murphy said he is still able to detail the changes to crop insurance executives and agents who are attending the convention.

“USDA officials have already met with most insurance companies to explain some of the proposals, Murphy said. The responses were a mix of positive and negative, depending on the specific issue, he said.”

Mr. Clayton pointed out that, “One key proposal by USDA would cap agent commissions. One of the problems with some companies or lucrative policies in corn and soybean country is companies are actually paying more in agent commissions than the companies receive in A&O reimbursement for those policies. So USDA proposes a ‘soft cap’ on agent commissions at 80 percent of the A&O reimbursement.

“To offset the cap in commissions, USDA would allow companies to offer profit-sharing incentives to agents as well.”

Biofuels

An article posted earlier this week at ICIS.com reported that, “In a keynote speech to open the [Renewable Fuels Association’s] National Ethanol Conference in Orlando, [RFA president and chief executive Bob Dinneen] called for greater effort by the industry to ‘tear down the blend wall’ that has generally held the ethanol content in US gasoline at the 10% level, known as E10.

“US ethanol production has grown to the point that the E10 market is nearing saturation. But the use of higher blends for ordinary cars has been held back by concerns over possible engine damage and the potential voiding of the manufacturers’ warranty coverage.

Dinneen called on the government to accelerate its testing of E15 and E20 blends, adding that the RFA’s goal is to win endorsement of higher blends for all vehicles – not just those manufactured in 2001 and later, as has been suggested by the EPA.”

In December, EPA indicated that a decision regarding E15 would be made sometime in mid-2010.

However, DTN writer Todd Neeley reported yesterday (link requires subscription) that, “If U.S. convenience stores have it their way they will not be pumping E15 anytime soon — or at least until they get answers to several pressing questions.”

Mr. Neeley indicated that, “But gas station owners are worried about liability issues that could come from selling E15, said John Eichberger, vice president of government relations for the National Association of Convenience Stores. The fuel distributors Eichberger represents also are concerned they will be unable to handle higher ethanol blends for a number of reasons.

“‘Right now no retailer can sell ethanol blends above E10,’ he said, because their pumps are not certified to handle higher blends. Eichberger said gas stations are already ‘breaking the law’ in selling E85 using pumps that are not certified to dispense the fuel.

In a phone interview Wednesday, Brian Jennings, executive vice president of the American Coalition for Ethanol, said he thought Eighberger’s comments about pump blends were ‘over the top.’ Jennings said no one is breaking the law, but that each piece of an E85 pump has not received certification from Underwriters Laboratory, which is typically used to set national or state standards for certain industry equipment.”

Yesterday’s DTN article added that, “Still, Eichberger said in his presentation there were other reasons for concern, especially if station clerks are required to police the type of fuel motorists are buying at the pump. EPA said late last year the agency may allow the use of E15 for vehicles built in 2001 and newer. So if a consumer pumps E15 in a vehicle that is not allowed to use the blend, he said, the station will be legally liable for any damage to a vehicle.”

Meanwhile, Cindy Zimmerman reported yesterday at the DomesticFuel Blog that, “The new rule for the expanded Renewable Fuel Standard, fresh out of the box just two weeks ago, was the main topic of discussion at the Renewable Fuels Association’s 15th National Ethanol Conference in Orlando. Sarah Dunham, Transportation and Regional Programs Division Director with the U.S. Environmental Protection Agency, boiled down the guts of the new RFS2 in a 45 minute presentation that highlighted changes made in lifecycle analysis determinations from the rule as originally proposed.

“‘I can safely say that this is the area we got more comment than any other area in the rule,’ Dunham said, calling it very constructive and helpful to get real data and science to apply to the rule. This led to ‘significant’ decreases in estimates of international indirect land use change related to biofuels production, ‘more than 50-60-70 percent in some cases,’ she added. Using corn ethanol as an example, she noted that the final rule factored in both increasing yields and the value of co-products, which had not been in the original model.

“Dunham also talked about how EPA addressed ‘uncertainty’ in their analysis. ‘There is inherent uncertainty in these assessments,’ she said. ‘And we thought it was important to try to formally recognize that uncertainty’ and incorporate it into the analysis. The assessments will be updated over the next two years as more information becomes known.”

An audio replay of Dunham’s presentation is available at the DomesticFuel link.

And a news release issued yesterday by the American Soybean Association (ASA) stated that, “[ASA] is calling for the Senate to reinsert a retroactive extension of the biodiesel tax incentive in the first Jobs Bill it passes to save the jobs of 23,000 people working in the biodiesel industry. The biodiesel tax incentive had been included in a version of the Senate Jobs Bill unveiled last week by Senators Max Baucus (D-MT) and Chuck Grassley (R-IA), but Senate Majority Leader Harry Reid (D-NV) later stripped the biodiesel and other tax provisions out of the bill. Production of biodiesel, a homegrown renewable fuel, also supports higher prices paid to farmers for their soybeans, which contributes additional employment opportunities in both urban and rural communities.”

With respect to the jobs bill, Jay Heflin reported yesterday at The Hill Online that, “Senate Majority Leader Harry Reid (D-Nev.) lacks the votes to begin debating his targeted jobs bill, according to sources monitoring the legislation.

“Reid needs 60 votes to open debate on the $15 billion jobs bill. The vote is scheduled for Monday, when lawmakers return from the Presidents Day recess.

“‘I understand Reid does not have the votes for cloture on Monday on his jobs bill,’ one source said.”

Yesterday’s article added that, “‘The biodiesel tax credit in the [Baucus-Grassley] jobs bill is the only option being considered that will guarantee that workers can be put back to work the day after it is signed into law,’ said Dan Farney, an Illinois Soybean Association farmer, in prepared remarks. ‘Illinois biodiesel plants are laying off more green-collar employees every day that the tax credit is allowed to go unsigned. This just adds to our nation’s and state’s unemployment problems.’

“[Sen. Chuck] Grassley’s state has been negatively affected by the tax credit’s expiration. On Tuesday the Iowa Republican condemned Reid for striking extenders from his jobs bill for political gain.

“‘The industry is hemorrhaging jobs and we can do something to stop it,’ Grassley told reporters. ‘Yet Sen. Reid decided that it was more important to play political games than actually saving and creating jobs in the private sector.’”

Conservation Reserve Program (CRP)

Thom Gabrukiewicz reported yesterday at the Argus Leader Online (South Dakota) that, “South Dakota has more than 1 million acres enrolled in CRP, but that number continues to decline.

“‘I see this from a different vantage point, other than going out and getting a limit,’ said U.S. Department of Agriculture Secretary Tom Vilsack, who came Tuesday to Brent and Lisa Rossow’s Horse Barn & Hunt Club near Lakefield, Minn., as part of an informal conservation forum presented by Pheasants Forever.

“The evening included comments from Rep. Tim Walz, DFL-Minn., and Rep. Collin Peterson, D-Minn., chairman of the House Agriculture Committee.”

The article added that, “‘I see it as an economic driver,’ Vilsack said. ‘There’s $180 billion spent hunting and fishing – and most of that is spent in rural communities that need those dollars.’

Pheasant hunting brought in $219 million in tourism to South Dakota both in 2007 and 2008.

But as more acres are taken out of CRP – farmers are tempted to put lands around wetlands and unbroken prairie back into production as rent and commodity prices outstrip what they can get from the program – sportsmen worry about the future of the pheasant in the Upper Midwest.”

Yesterday’s article pointed out that, “Farmers and ranchers nationally get an average of $51 an acre for enrolling in CRP.

“‘We can’t continue to ask farmers and ranchers to take a $30 hit per acre for conservation,’ [Matt Holland, senior field coordinator with Pheasants Forever] said. ‘Payments have to be competitive.’”

Food Security

Tom Daschle indicated in an opinion item published earlier this week at Politico that, “Late last month, leaders from around the world convened in Davos, Switzerland, for the World Economic Forum’s annual conference of international leaders to address shared global challenges. While efforts to restore stability and prosperity to our financial system rightfully framed the conference agenda, I was most encouraged by the forum’s consideration of a topic even more fundamental to the survival of people around the globe but one that has received far less attention in the press and among policymakers: In order to feed a global population boom of 9 billion people by 2050, we will need to more than double our current levels of food production and develop a set of innovative strategies to combat a host of global-hunger-related and nutritional issues.”

The former Senate majority leader added that, “Great challenges demand even better solutions, and better solutions can come only from the collaboration and competition of those willing to advance new ideas and technologies. Recently, I agreed to chair the new DuPont Advisory Committee on Agricultural Innovation and Productivity for the 21st Century, which seeks to do just that, by exploring how agricultural innovation can help us meet the food, feed, fiber and fuel demands of the coming decades. Innovation will lie at the heart of the agricultural revolution necessary to accomplish our goal of feeding the world by 2050 without increasing pressure on our world’s already strained and limited resources. In fact, innovation in agriculture won’t just provide more; it can also provide ‘better’ — growing crops with nutritional benefits and developing seed that increases yield worldwide.”

Mr. Daschle pointed out that, “First, we must support scientific and technological innovation in agriculture. In the past 25 years alone, farmers in the United States have boosted corn production by more than 40 percent. And products in the ag pipeline offer the promise of nutritional outputs that will improve products and boost yields. In order to realize these new technologies, we must foster innovation by incentivizing and encouraging investment in biotech and broader agricultural research and development.”

And Philip Brasher reported yesterday at The Des Moines Register Online that, “Pioneer Hi-Bred is joining with the Bill and Melinda Gates Foundation to help scientists in Africa develop genetically engineered corn varieties that would allow poor farmers increase their yields with less fertilizer.

“The aim of the project is to increase corn yields by 50 percent over the average now reached by African varieties, said Paul Schickler, president of Pioneer, a Johnston-based unit of DuPont.

“The project represents the latest effort by U.S. seed giants to promote their products as being potentially beneficial to small-scale farmers in Africa, a continent with chronic food shortages but where countries have been reluctant to permit genetically modified crops.”

Climate Issues

John M. Broder reported in today’s New York Times that, “The early optimism of environmental advocates that the policies of former President George W. Bush would be quickly swept away and replaced by a bright green future under Mr. Obama is for many environmentalists giving way to resignation, and in some cases, anger.

“Mr. Obama moved quickly in his first months in office, producing a landmark deal on automobile emissions, an Environmental Protection Agency finding that greenhouse gases endanger public health and welfare, a virtual moratorium on oil drilling on public lands and House passage of a cap-and-trade bill.

Since then, in part because of the intense focus on the health care debate last year, action on environmental issues has slowed. The Senate has not yet begun debate on a comprehensive global warming bill, the Interior Department is writing new rules to open some public lands and waters to oil drilling and the E.P.A. is moving cautiously to apply the endangerment finding.”

Mr. Broder added that, “Environmental advocates largely remained silent late last year as Mr. Obama all but abandoned his quest for sweeping climate change legislation and began to reach out to Republicans to enact less ambitious clean energy measures.

But the grumbling of the greens has grown louder in recent weeks as Mr. Obama has embraced nuclear power, offshore oil drilling and ‘clean coal’ as keystones of his energy policy. And some environmentalists have expressed concern that the president may be sacrificing too much to placate Republicans and the well-financed energy lobbies.”

Meanwhile, Washington Post writer Juliet Eilperin reported yesterday at the Post Carbon Blog that, “Most people think of Sen. John McCain (R-Ariz.) as one of the biggest proponents of curbing greenhouse gas emissions to combat climate change.

“Maybe, maybe not.

“In an interview with conservative radio talk show host Barry Young on Tuesday, McCain claimed he never supported capping greenhouse gas emissions at a certain level.”

Ms. Eilperin added that, “McCain has yet to decide whether to support climate legislation this year, including an effort being led by his two closest friends in the Senate, Lieberman and Lindsey Graham (R-S.C.). [McCain spokeswoman Brooke Buchanan] said McCain is waiting to see how much support the bill will provide for the nuclear industry, along with provisions aimed at reprocessing and storing spent nuclear fuel.

“‘It comes down to this nuclear issue,’ she said. ‘He does not believe we can have a viable climate legislation without this nuclear component.’”

And more specifically with respect to agriculture, Agri-Pulse Senior Editor Stewart Doan filed an audio report yesterday that featured perspective on cap and trade issues from American Farm Bureau President Bob Stallman. To listen to this audio report, just click here (MP3- 1:30).

Animal Agriculture

Chris Clayton noted earlier this week at the DTN Ag Policy Blog that, “The Humane Society of the United States now has someone dedicated to watching it. The Center for Consumer Freedom has created www.humanewatch.org to keep tabs on what’s happening with the Humane Society and how HSUS is spending its money.

“As the CCF’s news release states: The Humane Society of the United States has become the animal rights industry’s most powerful player, but it has avoided serious public scrutiny for years. HSUS raises nearly $100 million annually from Americans who largely believe their donations filter down to local pet shelters and improve the lives of dogs and cats. But in 2008, less than one-half of one percent of HSUS’s budget consisted of grants to actual hands-on ‘humane societies’ that deal with the thankless task of sheltering unwanted pets.”

The new webpage was also a topic that was discussed in some detail on Monday’s AgriTalk Radio Program with Mike Adams.

Keith Good

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