FarmPolicy

July 21, 2018

Biofuels; Crop Insurance; Climate Issues; Ag Economy; and FSA Update

Biofuels

The “Washington Insider” section of DTN indicated yesterday (link requires subscription) that, “Last week, the Environmental Protection Agency published its final criteria for federal renewable fuel standards established by the 2007 Energy Independence and Security Act. Those targets total 36 billion gallons of renewable fuels by 2022, including 21 billion gallons from cellulosic sources such as switchgrass or crop residues. The targets ratchet up annually, but require that 12.95 billion gallons, or 8.25 percent of the fuel supply come from renewable sources by 2010.

“The law also requires EPA to define what fuels qualify as ‘renewable,’ and there has been some nail-biting in the biofuels industries on this score. Already existing ethanol plants or those under construction on Dec. 19, 2007 — the day the law took effect — were grandfathered, so their products automatically qualify. However, corn-based ethanol from new plants must emit at least 20 percent less greenhouse gas than gasoline over its life cycle to qualify. The rule EPA published Friday says corn-based ethanol produced in modern plants powered by natural gas are ‘renewable’ under that standard, while that produced in new coal-fired facilities would not.

The main concern of ethanol proponents was the requirement in the law that EPA’s analysis consider ‘indirect emissions’ — those from land-use changes resulting from using corn and other food grains for energy.”

Yesterday’s DTN update added that, “EPA had made such analyses, and was roundly criticized for its approach, especially since its preliminary finding was that relatively few of the most efficient ethanol production technologies would qualify. Subsequently, EPA reviewed its studies and reduced its estimate of indirect effects on the grounds that its earlier analyses assumed unrealistically low corn yields and unrealistically low use of ethanol by-products for animal feed than are now expected. EPA said those changes mean more corn will be available for all uses, and the anticipated effects on global markets and prices would be smaller than formerly estimated. And, that means lower emissions from clearing forest land to grow crops.

Ethanol supporters are happy that more corn ethanol technologies now can produce renewable fuel under the standard, but still worry that the consideration of indirect effects in defining the RFS could mean trouble in later regulatory examinations — a reasonable concern since the precision of such estimates is extremely low, and the pressure to boost them is heavy. In fact, some environmental groups are already criticizing EPA’s determination, saying it underestimates the greenhouse gas emissions resulting from indirect land-use changes.”

Two organizations representing oil interests stated yesterday that they would pursue legal action regarding the EPA’s final rule on the RFS.

The National Petrochemical & Refiners Association (NPRA) noted yesterday that, “[NPRA] today filed a petition for review with the U.S. Court of Appeals for the District of Columbia Circuit challenging portions of the Environmental Protection Agency’s (EPA) final rule for the second stage of the Renewable Fuel Standard program (RFS2), published March 26, 2010.

“‘The petition NPRA filed today does not challenge the overall RFS2 program and does not call into question the important role renewable fuels play in our nation’s transportation fuel mix,’ NPRA President Charles T. Drevna said. ‘Rather, our concern is with the unreasonable retroactive application of certain provisions of the rule and fundamental fairness in the implementation of policy.’”

And the American Petroleum Institute noted in a statement yesterday that, “While the U.S. oil and natural gas industry recognizes and appreciates the role of ethanol and other biofuels in the fuel marketplace, we are deeply concerned that the Environmental Protection Agency’s final RFS2 rule could result in higher consumer costs. By setting retroactive requirements, refiners, and ultimately consumers, will be penalized for EPA’s inability to get this rule out on time as directed by Congress.”

Also yesterday, the DomesticFuel Blog stated that, “Under the expanded Renewable Fuels Standard, or RFS2, all producers of ethanol regardless of feedstock will be required to register with the Environmental Protection Agency (EPA). In an effort to help ethanol producers understand what they need to do, the Renewable Fuels Association (RFA) has created two documents intended to provide producers with information they need to comply.

“First, there is a comprehensive 29-page summary that includes detailed explanations of the steps necessary to help guide both grain ethanol and cellulosic ethanol producers through the process. RFA has also developed a shorter registration checklist that includes all the key steps and deadlines for ethanol producers to register and begin generating Renewable Identification Numbers (RINs) necessary to track the required use of ethanol.”

Meanwhile, a news release issued yesterday by The Brazilian Sugarcane Industry Association (UNICA) indicated that, “A landmark report by the International Food Research Policy Institute (IFPRI) titled ‘Global Trade and Environmental Impact of the EU Biofuels Mandate’ has concluded that more open trade in renewable fuels will enable Europe’s biofuels policy to deliver on its commitment to reduce carbon in transport, mainly because the most emission-efficient biofuel will be utilized: Brazilian sugarcane-based ethanol, which reduces greenhouse gas emissions by about 90% compared to petrol.

“‘The report, prepared for the European Commission, shows that Brazilian sugarcane ethanol production will have virtually no impact on food prices, is highly competitive on the European market and provides the most significant reduction in greenhouse gases (GHG),’ says UNICA’s Chief Representative in the European Union, Emmanuel Desplechin.”

In other news regarding biofuels, a news release issued yesterday by Rep. Leonard Boswell (D-IA) stated that, “Today, Congressman Leonard Boswell (D-IA) and Congressman Lee Terry (R-NE) held a news conference to highlight a bipartisan effort to boost our country’s homegrown energy industry by improving infrastructure for moving ethanol from the Midwest to the rest of the country. The Renewable Fuel Pipeline Act of 2010, H.R. 4674 will also create jobs and strengthen the agriculture industries in Iowa and Nebraska.”

Crop Insurance

Philip Brasher reported yesterday at the Green Fields Blog (The Des Moines Register) that, “Thirty senators wrote the Agriculture Department today to complain about its latest proposal to cut spending for crop insurance. The cuts include a cap on the commissions that agents can earn, a move that would fall especially hard on agents in Iowa, where the commissions are the highest.

“In a letter to the USDA today, the senators called the insurance agents ‘a crucial component’ of the insurance system and suggested that the commission cap would affect the availability of coverage to farmers.”

Climate Issues

As a general political background to the climate debate, Mike Allen reported on Sunday at Politico that, “An emboldened President Barack Obama will take a stronger hand with Congress in coming weeks…”

The article stated that, “During protracted negotiations over the health care bill, Obama was criticized for giving congressional leaders too much leeway and too little direction and for bending too easily to the timetables of Capitol Hill.

No more. Aides say that with the momentum from the most complex domestic bill to pass Congress in 45 years, Obama now will push Congress to close campaign-finance loopholes opened by the Citizens United case, adopt his overhaul of the No Child Left Behind education bill and perhaps even tackle a clean-energy bill.”

However, Josh Gerstein reported yesterday at Politico that, “Democrats who held out hopes that President Barack Obama’s health reform win would mean a quick boost to the party’s political fortunes are getting a reality check – a reminder that it takes more than one good week to shake up a year of sliding polls.

“Obama and his health reform plan did get a bump in several surveys immediately after the House vote eight days ago – but the numbers in some of those polls flattened out, showing how difficult it will be for Obama to capitalize on reform, even after his top legislative goal cleared Congress.”

In more specifics on the climate issue and the dynamic between the executive and legislative branches, Washington Post writer Juliet Eilperin reported yesterday at the Post Carbon Blog that, “On March 5, [Sen. Lisa Murkowski (R-Alaska)] sent [Environmental Protection Agency administrator Lisa P. Jackson] a series of 13 questions asking how the agency would seek to regulate carbon dioxide emitters under the Clean Air Act in 2011 and beyond.

“On Friday, Jackson sent a reply answering a couple of Murkowski’s questions, estimating that 1,700 emitters would face regulation in 2011 and 3,000 in 2013.”

A news release issued yesterday by Sen. Murkowski indicated that, “U.S. Sen. Lisa Murkowski, R-Alaska, today requested a meeting with EPA Administrator Lisa Jackson to clarify the impacts that EPA regulation of greenhouse gases will have on the nation’s economy.”

“‘At this point, it does not seem probable that additional correspondence will elicit a sufficient level of detail for me and other members of Congress to understand what your agency is preparing to do,’ Murkowski wrote to Jackson today. ‘Regrettably, your letter fails to shed any new light on how your agency intends to implement its pending Clean Air Act regulations.’”

Meanwhile, John M. Broder reported yesterday at The New York Times Online that, “The Environmental Protection Agency said Monday that it would not require power plants or other industrial sites to obtain federal pollution permits for emitting greenhouse gases before next January.

The statement formally affirms an agency announcement last month that it would phase in the regulation of climate-altering gases over several years, starting with the largest sources.

“E.P.A. regulation of carbon dioxide and other gases that contribute to global warming is a hugely controversial matter arising from the agency’s finding late last year that such gases are a threat to human health and welfare. Numerous state officials, industry groups and members of Congress have protested the agency’s intent to regulate those gases, and the E.P.A. is facing what could be years of litigation.”

Mr. Broder added that, “President Obama and members of his cabinet have repeatedly said that they would prefer that Congress act to address climate change through comprehensive energy legislation. But the administration is moving forward with a regulatory plan in case Congress continues to be deadlocked on the issue.

“Lisa P. Jackson, the E.P.A. administrator, said the timetable announced Monday was a calibrated plan to begin to apply the Clean Air Act to major stationary sources of heat-trapping gases.”

Reuters writer Tom Doggett noted yesterday that, “The EPA has not yet determined the amount of emissions that could be emitted by facilities before permits would be required. That so-called ‘tailoring’ decision will come later this spring, the EPA said.

“The EPA is also expected to issue final greenhouse gas standards for cars and trucks this week.”

Christopher Snow Hopkins reported yesterday at the NationalJournal Online that, “Sens. John Kerry, D-Mass., Lindsey Graham, R-S.C., and Joe Lieberman, I-Conn., may be gone for Easter recess, but their staffs are hard at work refining their climate and energy proposal. The three lawmakers have just over three weeks before their target date: April 22, otherwise known as Earth Day.”

With respect to the developing legislation, Jim Snyder reported yesterday at The Hill’s Energy and Environment Blog that, “Sen. Bernie Sanders is expressing ‘deep disappointment’ with climate legislation Sen. John Kerry and two colleagues are crafting.

Sanders (I-Vt.) argues the bill could become a ‘bonanza’ for the coal industry.

“‘I have serious concerns about provisions that could harm our environment and provide new federal government support for polluters,’ Sanders, a leading advocate of greenhouse gas emission curbs, wrote to Kerry last week.”

And in a “Q and A” article today, which was posted at the Los Angeles Times Online, Jim Tankersley noted that Michael Brune, who is taking the reins of the Sierra Club, “recently discussed his approach to the climate change issue.

In an interview, he outlined how he’s willing to concede on offshore drilling, nuclear energy and other issues.”

More specifically with respect to agriculture, Lisa Abend reported on Saturday at Time Online that, “Here we go again. On March 22, a scientist at the University of California at Davis pointed out a flaw in ‘Livestock’s Long Shadow,’ a 2006 report by the United Nation Food and Agriculture Organization (FAO) that attributes 18% of the world’s carbon emissions to animal agriculture. It didn’t take long for the bashing to begin again. ‘Eat Less Meat, Reduce Global Warming — or Not’ ran a headline on the FoxNews website. ‘Meat Avoidance Cures Flat Feet and Other Lies,’ mocked another on a the Cattleman’s Blog. London’s Telegraph put it succinctly, ‘Now It’s Cowgate.’”

Ag Economy

Marcia Zarley Taylor reported yesterday at DTN that, “From Ohio to South Dakota, Corn Belt land values have experienced a long-term appreciation streak that would shame stock market investors and far outstrip pure inflation, even counting the 1980s correction. Agricultural real estate may lack the prestige of the S&P 500, but university researchers have found that, for most of the last 40 or 50 years, farm real estate investors found superior returns from owning the good earth.

“‘The last five years have been almost unchartable,’ said Bruce Sherrick, a University of Illinois economist who admits he has been humbled trying to forecast farmland’s gains. With technology advances like drought- and disease-tolerance on the horizon, he doubts the extended rally will end any time soon.

“The National Council of Real Estate Investment Fiduciaries found U.S. farmland appreciated by 6 percent in 2009, a rate that was well below the 2008 return of 15 percent but still respectable.”

With respect to the pork sector, Purdue University Economist Chris Hurt noted yesterday that, “The latest inventory count from USDA indicates that the greater liquidation of the breeding herd will drop pork production more than had been anticipated. Reduced supplies will be complemented by much stronger demand given recovery in the U.S. economy and continuing expansion of pork exports. This means robust profits will return for producers. Profits are forecast at about $18 per head this year, compared to an average loss of $20 per head in 2008 and 2009.”

Meanwhile, P.J. Huffstutter noted yesterday at the Money & Company Blog (Los Angeles Times) that, “Strawberry farmers in Florida – who typically dominate the U.S. production of the sweet red berry from Thanksgiving through Easter – have been having a tough row to how. They started out this year’s season facing unusually cold temperatures, which delayed their harvest.”

“But earlier this month, Florida saw its weather warm up – and that sent its strawberry fields into overdrive.”

The update explained that, “As a result, there’s a glut of berries in the market right now – a glut that has driven down prices for growers. On Monday, the USDA reported that flats of 8 1-pound containers of medium to large fruit was selling for between $4 to $6, a substantial drop from the nearly $17 to almost $19 that farmers were getting in early February.

That price drop has prompted some Florida farmers to dump their crop or let it rot in the fields.”

The AP reported yesterday that, “The nation’s top federal antitrust investigator on Monday assured desperate dairy farmers that the government also wants to know why they are being paid so little for milk when the price shoppers pay in stores is holding steady.

“At the invitation of U.S. Sen. Charles Schumer, Assistant Attorney General Christine Varney met with milk producers from around the state, who blame a lack of competition among milk processors on years of industry consolidation.”

And Bloomberg writer Rudy Ruitenberg reported yesterday that, “A global crop reserve system is needed to reduce price volatility, curb speculation and prevent a food crisis, said researchers from Germany and France.

“Centralized global stocks could bring ‘peace and quiet’ to world food markets, said Joachim von Braun, director of Germany’s Center for Development Research, at a conference on agriculture research in Montpellier, France, yesterday.”

FSA Update

A news release issued yesterday by the USDA’s Farm Service Agency (FSA) stated that, “Agriculture Secretary Tom Vilsack today announced that USDA has awarded a major contract to improve the delivery of agricultural services and benefits to producers by using modern, secure and reliable technology. The Application Transformation and Modernization (ATM) System Integrator Blanket Purchase Agreement contract was awarded to SRA, International of Fairfax, Va.

“Modernizing USDA’s business and information technology is part of Vilsack’s goal to transform USDA into a premier organization of highly motivated, collaborative and mutually-supportive employees who are committed to creating an inclusive, diverse workplace environment that achieves high standards of performance and exceptional customer service.”

The release added that, “As part of the cultural transformation of USDA, the Farm Service Agency (FSA) will be one of the first agencies to use the ATM Blanket Purchase Agreement to support the implementation and development of the Modernize and Innovate the Delivery of Agricultural Systems (MIDAS) Project. The FSA MIDAS Project is a priority modernization effort that will transform the way FSA delivers farm program services and benefits to producers, farmers and ranchers through more than 2,200 offices throughout the United States.”

Keith Good

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