FarmPolicy

September 23, 2019

Biofuels; EPA Issues; Climate Change; Food Security; Trade; and CFTC Issues

Biofuels

A news release issued yesterday by the Renewable Fuels Association (RFA) stated that, “[RFA] today praised the bipartisan Renewable Fuels Reinvestment Act (RFRA) introduced by Representatives Earl Pomeroy (D-ND) and John Shimkus (R-IL). The bill, HR 4940, would extend the $0.45 Volumetric Ethanol Excise Tax Credit (VEETC), commonly called the blenders’ credit, and the secondary tariff on imported ethanol until December 31, 2015. It would also extend the Small Producers Tax Credit and the Cellulosic Ethanol Production Tax Credit to January 1, 2016.

“‘Allowing the tax incentives for ethanol to expire is simply not an option,’ said Renewable Fuels Association President Bob Dinneen. ‘Failure to extend these incentives would force 112,000 Americans out of their jobs and shutter nearly 2 out of every 5 ethanol plants operating today. Long term extensions of these important incentives are good policy that encourages investment in current and next generation ethanol technologies.’”

Yesterday, Chuck Zimmerman interviewed Bob Dinneen, who participated in a press conference where the bill was introduced. To listen to this brief interview, just click here.

A news release issued yesterday by Growth Energy indicated that, “‘Extension of these measures is a surefire way to create jobs, improve our nation’s environment and strengthen our national security. If we let the tariff expire, it would drain both hundreds of thousands of jobs and billions of dollars right out of our economy,’ Tom Buis, CEO of Growth Energy, said.

“Buis cited a University of Missouri study which found that allowing the tariff to lapse would force job losses of 39,506 in the first year, 115,624 in the second year, and 161,384 in the third year – with job losses continuing year-to-year and never regaining. The decline in economic activity was calculated at $9.2 billion in the first year, $26.4 billion in the second year, and $36,651 in the third year.”

And a news item from the National Corn Growers (NCGA) yesterday stated in part that, “‘NCGA applauds the work Congressmen Pomeroy and Shimkus have done to introduce The Renewable Fuels Reinvestment Act,’ said NCGA President Darrin Ihnen, a grower from Hurley, S.D. ‘The extension of VEETC would contribute to energy independence, create and secure thousands of jobs in rural America and allow for a stronger agriculture sector. This issue is a top priority for our organization and recently our members have sent hundreds of letters and made countless phone calls to Capitol Hill urging Members of Congress to support a multi-year extension of VEETC.’”

However, The Brazilian Sugarcane Industry Association (UNICA) issued a news item yesterday which stated that, “Unfortunately, the world’s #1 ethanol producers –– American producers who comprise what is according to President Obama’s Biofuels Working Group a ‘well established’ and ‘mature’ industry –– appear determined to avoid healthy market-based competition. They continue to ask for government bailouts, this time to the tune of $7 billion a year on top of the consumption mandate in the federal Renewable Fuel Standard.

Expert after expert – including the U.S. Government Accountability Office – agrees that government subsidies and trade-distorting import taxes are no longer needed when consumers are required to use ethanol.”

The UNICA news release added that, “Consumers win when businesses have to compete in an open market, because competition produces higher quality products at lower costs. The same principle holds true for the renewable fuels market. Competition will create a race to the future and generate better options for American consumers.

After 30 years of subsidies and import taxes, American consumers deserve clean fuels at a market-based price. Brazilian sugarcane ethanol producers are ready to compete. What about American corn ethanol producers?

Meanwhile, the “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “House Ways and Means Committee Chairman Sandy Levin, D-Mich., says it is likely the House and Senate will need to convene a conference committee to work out differences in the legislation extending expired and expiring tax cuts, and that it could be a long time before negotiators would be able to reach a compromise upon which both chambers –– and both parties –– could agree.

“The House passed a $31-billion version of the legislation last December, but the Senate approved a different version earlier this month. Unless negotiators representing the Ways and Means and the Senate Finance committees can agree on a compromise in behind-the-scenes talks, it will be necessary to hold a formal conference to deal with differences in the two versions.

Included in the legislation bill is a provision that would revive the $1-a-gallon biodiesel tax credit that expired at the end of 2009, a step industry spokesman say has virtually shut down U.S. biodiesel production.”

EPA Issues

The American Farm Bureau Federation (AFBF) indicated yesterday that, “[AFBF] has filed an action against the U.S. Army Corps of Engineers for what the organization calls another example of regulatory overreach. The suit, filed by AFBF and the U.S. Sugar Corporation in the U.S. District Court in Washington, D.C., takes the Corps to task for non-compliance with its own rules regarding prior converted croplands.

The suit argues that recent action by the Corps goes against the 1993 rule that excluded prior converted croplands from regulation under the Clean Water Act (CWA). The Corps’ actions would subject croplands to federal control if farmers take their prior converted cropland out of crop production and change its use. There are currently more than 53 million acres of prior converted cropland in the U.S.

“‘These lands are out of the realm of Clean Water Act jurisdiction, meaning the Corps can’t regulate them as waters of the U.S.,’ said AFBF President Bob Stallman. ‘This is important because the value of prior converted croplands is significantly higher than land encumbered by costly federal wetlands regulations.’”

In other EPA developments, a news release issued yesterday by the American Soybean Association stated that, “Farmer leaders of the American Soybean Association (ASA), the National Corn Growers Association (NCGA), the National Association of Wheat Growers (NAWG), the National Sorghum Producers (NSP), USA Rice Federation, and National Cotton Council met with Environmental Protection Agency (EPA) Administrator Lisa Jackson and U.S. Department of Agriculture (USDA) Secretary Tom Vilsack at EPA’s headquarters in Washington, D.C., to discuss recent court and EPA actions that cause ASA and soybean farmers concern.

“‘ASA is concerned by recent court and EPA actions that could negatively affect U.S. farmers’ competitiveness, hinder their ability to produce safe and abundant food, add needless regulation, and expose farmers to increased liability,’ said ASA Chairman Johnny Dodson, a soybean producer from Halls, Tenn.

“The meeting was a result of discussions by ASA, NCGA, NAWG and NSP farmer-leaders with Secretary Vilsack at Commodity Classic earlier this month in Anaheim. In response to that discussion, Secretary Vilsack offered to put together a meeting of commodity group leaders with EPA Administrator Jackson and himself to further explore the concerns being expressed. Leaders representing the nation’s cotton and rice farmers also participated in today’s meeting to collectively express concerns on issues that would impact more than 90 percent of the crop planted area in the United States.”

The ASA release added that, “Among the topics discussed at today’s meeting was the Sixth Circuit Court of Appeals ruling [National Cotton Council vs. EPA], that held that agricultural pesticide applicators, state pest controllers and others who spray pesticides on or near water will no longer be exempted from having to obtain a National Pollutant Discharge Elimination System (NPDES) permit, even if they follow all label and application requirements. EPA estimates that the ruling will apply to some 5.6 million annual pesticide applications for 365,000 applicators. The court granted EPA a two-year stay to April 2011, to give it time to develop a permitting program. EPA is expected to propose a rule in April 2010, and finalize it in December 2010.

“‘ASA believes that EPA must take great care in crafting a rule to minimize needless regulation and avoid forcing farmers to obtain permits for applying fully-approved crop protection products according to label directions,’ commented Dodson. ‘Adding new regulatory and permitting steps would decrease the ability of U.S. farmers to produce safe and abundant food. This entire direction taken by the court also opens up the possibility that producers would incur huge costs defending against nuisance citizen suits.’”

A National Corn Growers news release on this development from yesterday stated in part that, “During the meeting, issues such as biotechnology and pesticide use were discussed. [National Corn Growers Association President Darrin Ihnen] indicated that the growers stressed the importance of pesticides, used in environmentally safe ways, on the farm. Additionally, Administrator Jackson clarified the agency’s position on spray drift by explaining that the Clean Water Act would not be used to over-regulate farms in any way, including through the overregulation of spray drift.”

Darrin Ihnen was also a guest on yesterday’s AgriTalk Radio Program where he discussed the meeting with the two executive branch department heads in more detail, to listen to a portion of this conversation from yesterday’s AgriTalk show, just click here (MP3-4:11).

Climate Change

Ben Geman reported earlier this week at The Hill’s Energy and Environment Blog that, “Senate meetings on planned climate and energy legislation continued at a fast clip Wednesday but the bill’s architects – Sens. John Kerry (D-Mass.), Lindsey Graham (R-S.C.) and Joe Lieberman (I-Conn.) – are not far along enough to release a long-awaited draft before the Spring recess that begins Monday.

“There were at least two sets of meetings in the Capitol Wednesday afternoon and evening. The chairmen of several committees with jurisdiction over climate and energy huddled with Senate Majority Leader Harry Reid (D-Nev.) in his office. And later Kerry, Graham and Lieberman briefed freshman Democrats on the plan the three are crafting.

“Senators that met with Reid include Environment and Public Works Committee Chairwoman Barbara Boxer (D-Calif.), Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.), Commerce Committee Chairman Jay Rockefeller (D-W.Va.), Agriculture Committee Chairwoman Blanche Lincoln (D-Ark.), and Kerry, who helms the Foreign Relations Committee.”

And in a separate post from yesterday at The Hill’s Energy Blog, Ben Geman indicated that, “Sen. Byron Dorgan (D-N.D.) said Thursday that no decisions are coming soon about bringing energy and climate legislation to the Senate floor this year.

“There has been a flurry of activity of late as Sens. John Kerry (D-Mass.), Lindsey Graham (R-S.C.) and Joe Lieberman (I-Conn.) meet with industry groups, environmentalists and lawmakers about the bill they’re crafting.

“Dorgan noted that the Senate will first tackle the big, ‘heavily lobbied’ Wall Street reform bill.”

The Hill update added that, “‘The question of getting the energy bill up or some variation of it, that’s for later. No decision has been made, none will be made, at this point, for a while,’ Dorgan told reporters Thursday.”

“Dorgan has been pressing for floor action on a bill the Energy Committee passed last June. It includes new support for energy efficiency and imposes a national renewable electricity mandate.

That bill also expands oil-and-gas drilling in the eastern Gulf of Mexico. It does not include limits on greenhouse gas emissions.”

However, Amy Harder reported yesterday at the NationalJournal Online that, “The renewable energy standard included in the pending Senate energy bill does not do enough to spur growth in the industry, a coalition of 51 groups said in a letter sent today to Senate leadership.

The bill approved by the Senate Energy and Natural Resources Committee last July is ‘transparently anti-renewable energy, and will further delay renewable energy investments that are already moving too slowly,’ the groups said in the letter.”

Darren Goode reported yesterday at the NationalJournal Online that, “Ten coastal Senate Democrats are warning a trio of senators at the heart of a potential deal on climate and energy that they should reject a major expansion of offshore oil and gas drilling.

“The warning is the latest in a series of volleys involving Senate Foreign Relations Chairman John Kerry, D-Mass., and Sens. Lindsey Graham, R-S.C., and Joe Lieberman, I/D-Conn., who are holding scores of meetings this week as they prepare to draft a bill over the spring recess.

“The coastal Democrats, led by Sen. Bill Nelson of Florida, warned the three to be ‘mindful that we cannot support legislation that will mitigate one risk only to put our coasts at greater peril from another source.’”

Reuters writer Timothy Gardner reported yesterday that, “Three oil majors want U.S. senators crafting the climate bill to keep the federal government from regulating shale gas drilling methods that have made vast domestic reserves accessible but have been criticized for polluting water supplies.”

The article explained that, “‘Some of their staffers had asked the majors their views about what would be sensible in the climate bill,’ an industry source said.

In response, the companies submitted a document to the senators indicating they want states, not the federal government, to regulate hydraulic fracturing, or ‘fracking’ for natural gas, according to the source.

“The companies were ConocoPhillips, BP, and Shell Oil Co, the source said.”

Meanwhile, John M. Broder reported yesterday at The New York Times Online that, “Less than a year ago, cap and trade was the policy of choice for tackling climate change.”

“Today, the concept is in wide disrepute, with opponents effectively branding it ‘cap and tax,’ and Tea Party followers using it as a symbol of much of what they say is wrong with Washington.

“Mr. Obama dropped all mention of cap and trade from his current budget. And the sponsors of a Senate climate bill likely to be introduced in April, now that Congress is moving past health care, dare not speak its name.”

The Times article noted that, “Why did cap and trade die? The short answer is that it was done in by the weak economy, the Wall Street meltdown, determined industry opposition and its own complexity.”

Congressional Reporter Lisa Lerer of Politico was on yesterday’s “Washington Journal” program (C-SPAN). She discussed the climate bill, the negotiations up to this point, and whether or not the votes are there to pass the bill. To listen to a portion of this program, just click here (MP3-3:12)- the entire program is available here.

Food Security

Bob Meyer reported yesterday at Brownfield that, “Nearly one-thousand farmers, scientists, ag ministers, civil society group members, World Food Prize Laureates and others will meet in France next week for the first Global Conference on Agricultural Research for Development (GCARD). The group has been charged by the G8 to come up with ways to structure agriculture to meet the growing world food need.

“In preparation for the conference, a report funded by the World Bank, the European Commission and a range of international organizations and development agencies has been prepared by a team of global food and agriculture experts for presentation at the meeting.

The report cites a World Bank estimate that 1.4 billion people were living in poverty in 2005, since the economic crash of 2008 estimates are another 100 million people have joined that list. The group says a steady decline in policy attention to agriculture and rural development has been a major cause for the increase. It charges that while short-term emergency food aid has increased, little has been done to address hunger long-term in developing and developed countries. Except for China, India and Brazil, ‘capacity of most developing countries in agricultural research and development has been winding down.’ Just four countries, the United States, Japan, France and Germany, accounted for 66 percent of all global agricultural public research and development in 2000. Meanwhile, 80 countries with a combined population of 625 million people conducted only 6.3 percent of total agricultural R & D.”

Trade

A news release issued yesterday by Rep. Jerry Moran (R-Kansas) stated that, “Congressman Jerry Moran (R-KS) and Congressman Roy Blunt (R-MO) recently introduced a resolution to support increased market access for exports of U.S. beef and beef products to Japan. Currently, Japan restricts access to a large number of U.S. beef products. H. Res. 1196 states that Japan should immediately expand market access for U.S. beef products, and urges the Obama Administration to insist on increased market access from Japan. U.S. Senator Mike Johanns (R-NE) has introduced similar legislation in the U.S. Senate.

“‘It is time for Japan to fully open its markets to U.S. beef. For several years now, Japan has used non-scientific standards to restrict access to high quality U.S. beef products,’ said Moran. ‘Japan asks for fair treatment of their products and we’re asking for the same fair treatment – which means an adherence to internationally recognized, science-based trade standards.’”

The AP reported today that, “Nearly a year after nations banned U.S. pork over fears about swine flu, China has become the last one to lift its embargo and is expected to accept shipments by early next month.

It’s a move welcomed by an industry that has suffered several years of losses, but some experts caution farmers shouldn’t expect to see a surge in exports. China still produces most of the pork it consumes and won’t accept pork containing ractopamin, an additive used in the U.S. that causes hogs to turn feed to muscle instead of fat.”

And Reuters news reported yesterday (article posted at DTN, link requires subscription) that, “The Agriculture Department hopes to soon resolve a Russian ban on imports of U.S. chicken, Undersecretary Jim Miller said on Thursday in an update that also touched on trade issues with China, another key market.

“Russia suspended imports of U.S. poultry meat on Jan 19, saying a chlorine wash routinely used by U.S. processors violates its food safety standards. Russia is the top export market for U.S. chicken.

“‘We are continuing to have conversations,’ Miller told a House Appropriations subcommittee. ‘Hopefully, we can get this resolved very soon.’”

CFTC Issues

The Commodity Markets Oversight Coalition, an assimilation of over 75 different organizations, sent a letter yesterday to the Chairman and Ranking Member of the Senate Agriculture Committee.

In part, the letter stated that, “The undersigned organizations would like to commend your efforts as you work on new legislation to reform the U.S. derivatives markets. We understand that your committee will soon introduce a draft of this legislation. It is in light of this that we write you today.

“Formed in 2007, the Commodity Markets Oversight Coalition is an informal alliance of industry groups, consumer advocates and academics, representing commodity producers, processors, distributors, retailers, and residential, commercial and industrial end-users. We believe that policy in the commodity trading markets should aim to strengthen oversight, transparency and stability to address inadequacies in the existing derivatives markets, both regulated and over-the-counter.”

The letter added that, “We believe that commodities trading, including swaps, futures and options and related markets and exchanges, were established as a price discovery and risk management tool for bona-fide hedgers of physical market exposures. Speculators play a role in these markets by facilitating the risk-taking needed to keep markets functional and liquid. However, the CMOC has expressed concern that, due to watered-down oversight and the rise of complex and opaque trading environments and products, the purpose of these markets – tools for legitimate commercial industry – has been compromised.”

“This week, the U.S. Senate Banking Committee, under the leadership of Senator Chris Dodd of Connecticut, approved new legislation to reform the financial services industry. Title VII would reform the over-the-counter derivatives markets. We understand that before this legislation moves to the floor your committee will finish work on its own derivatives proposal that will have emphasis on commodities trading.”

The letter noted that, “We are pleased that the committee, under your leadership, is taking on this challenge. We take this opportunity to urge that your legislation include the following reforms:

Mandatory exchange trading for standardized derivatives contracts to ensure adequate transparency and federal oversight, and to reduce systemic risk.

Mandatory clearing requirements for all other contracts that are not being utilized by bona- fide commercial hedging interests to manage risks, but rather by swap dealers, banks, or other purely financial market participants.

A narrow end-user exemption to clearing and collateral requirements that will allow bona-fide non-financial hedgers continued flexibility and choice in hedging products; however this exemption should be written so as to avoid any new “loophole” to truly non-physical market participants.

Additional authorities to the CFTC to establish speculative limits on all markets and in the aggregate across all markets, and to access activity on foreign boards of trade that allow U.S. access or that trade derivatives on commodities destined for U.S. delivery.

New enforcement authorities to the CFTC so regulators may prosecute ‘reckless’ manipulation in the same manner as its sister-agency the SEC.

Additional financial and personnel resources should also be afforded federal regulators in order to implement and enforce new mandates and authorities.”

Keith Good

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