FarmPolicy

August 21, 2019

Biofuels; Climate Issues; Ag Policy Issues; Trade; and CFTC Issues

Biofuels

DTN writer Todd Neeley reported yesterday (link requires subscription) that, “Ames, Iowa-based Renewable Energy Group has laid off employees, idled plants and cut employee pay in an effort to keep the company afloat, according to a company official.

The Dec. 31, 2009, lapse of the $1 Mixture Excise Tax credit, commonly known as the blenders’ tax credit, has brought U.S. biodiesel production to a standstill, virtually eliminating an important market for U.S. soybeans.

“‘Due to the continued lapse of the biodiesel tax credit, REG continues to suffer from significantly limited sales and reduced sales forecasts,’ said Alicia A. Clancy, REG corporate affairs coordinator. ‘Due to these market conditions, we have made the difficult decision to idle the facilities at Ralston and Newton’ in Iowa.”

Yesterday’s article noted that, “Since Jan. 1, the largest U.S. biodiesel producer and its independent network plants have laid off about 45 percent of all staff as a result of the tax credit lapse, Clancy said. In addition, she said all remaining REG employees have taken pay cuts.”

“This week, REG Chairman and CEO Jeff Stroburg sent a letter to U.S. House of Representatives Ways and Means Committee Chairman Sander Levin, D-Mich., essentially pleading for the tax credit to be reinstated.

A proposed tax credit extenders package in House Resolution 4213, which includes a proposed renewal of the blenders’ tax credit, is sitting in Levin’s committee while Congress is on recess until April 12. The Senate passed the measure on March 10.”

Iowa GOP Senator Chuck Grassley issued a strong statement yesterday regarding this issue, noting that, “[House Speaker Nancy Pelosi (D-California)] and [Senate Majority Leader Harry Reid (D-Nevada)] were playing with fire when they played politics with the biodiesel tax credit. They knew 17 months ago that this tax credit needed to be extended. Instead they made it a part of the political mix for the last year by only including it with controversial provisions. In February, Senator Baucus and I had a bipartisan solution that would have given biodiesel producers a chance to make it through the political storm. Unfortunately, the Democrat leadership reneged on our effort and biodiesel workers are now getting Pelosi’s pink slips. It sounds more and more like we were sold a bill of goods when the current leadership said they wanted to turn the economy around with green jobs. Instead, they are focused on winning political points while unemployment stands at 9.7 percent.”

And Senate Agriculture Committee Chairman Blanche Lincoln (D-Arkansas) indicated yesterday in a news release that, “[Sen. Lincoln] today sent a letter to Senate Majority Leader Harry Reid and Speaker of the House of Representatives Nancy Pelosi urging both to make the completion of Senate-House negotiations on a critical package of tax cuts and other job-creation measures the first legislative priority following the current state and district work period.”

In my home state of Arkansas, the lapse in the biodiesel tax credit has resulted in biodiesel production nearly ceasing for the entire first quarter of this year,” Chairman Lincoln said.

The release explained that, “The Senate passed the American Workers, State and Business Relief Act on March 10, and the legislation now has to be reconciled with the House version of the bill before it can be signed into law.”

Yesterday’s press release noted that, “The Senate-passed version of the bill contains Lincoln’s $1.5 billion disaster assistance package for farmers and ranchers who incurred significant agricultural losses last year.”

Climate Issues

Elaine C. Kamarck indicated yesterday at Politico that, “Advocates for a strong climate change bill feared it had been subsumed by the health care conflict.

“The administration’s big health care push, they thought, left no oxygen in Washington for a second mega fight. And climate change skeptics got a boost from the e-mail mini-scandal enveloping British scientists. In addition, most everyone assumed that Congress had no energy for another tough vote this year.”

The Politico article added that, “But this hiatus might mean just the opposite.

While everyone was focused on health care, environmental and energy legislation advocates had time to rethink their policy. The delay might be just what the doctor ordered.”

“A healthy portion of the credit for this must go to a bipartisan counterproposal by Sen. Maria Cantwell (D-Wash.) and Sen. Susan Collins (R-Maine). Their bill would give consumers some of the money raised from pricing carbon,” the Politico article said.

Meanwhile, Alexander Bolton reported yesterday at The Hill Online that, “President Barack Obama is trying to neutralize the oil industry to advance energy reform, according to Democrats who see him taking a page from his healthcare playbook.

But his decision to support offshore drilling could come at a cost. Liberals are concerned he might jettison their chief goal — limits on carbon emissions — in the final hours to pass the legislation, similar to the way the public option was sacrificed to pass healthcare reform.”

And in a related article on the climate debate, Bloomberg writers Jim Efstathiou Jr. and Kim Chipman reported yesterday that, “President Barack Obama’s pledge to expand offshore oil and natural-gas drilling may help Democrats deliver legislation that regulates carbon dioxide emissions before any fuel is produced.”

“Obama had highlighted offshore drilling as a prospect for compromise with Republicans on energy and climate legislation Jan. 27 in his State of the Union address. Now, the administration’s proposal may bring additional lawmakers onboard as efforts are made in the Senate to craft a new version of the stalled measure.”

Yesterday’s Bloomberg article added that, “Obama’s plan could be reshaped as Senators John Kerry, a Massachusetts Democrat, Lindsey Graham, a South Carolina Republican, and Joseph Lieberman, a Connecticut independent, seek to craft climate legislation after a House-passed approach stalled, said Kevin Book, a Washington-based managing director for Clearview Energy Partners LLC. The compromise, which Kerry said could be introduced the week of April 22, may give states more say over offshore drilling.

“‘This sets a baseline which is easy to beat,’ Book said of Obama’s plan in an interview. ‘So if Congress comes in with anything above and beyond that baseline, it’s going to generate money and make the climate bill look prettier.’”

Ben Geman reported yesterday at The Hill’s Energy and Environment Blog that, “The White House insists its oil-and-gas drilling plan isn’t a matter of horse trading for the climate change votes.

“White House spokesman Bill Burton on Thursday said President Barack Obama’s decision to expand offshore oil-and-gas drilling is just what Obama thinks is the right policy for the country.”

In other climate policy developments, John M. Broder reported yesterday at The New York Times Online that, “The federal government took its first formal step to regulate global warming pollution on Thursday by issuing final rules for greenhouse gas emissions for automobiles and light trucks.

“The move ends a 30-year battle between regulators and automakers but sets the stage for what may be a bigger fight over climate-altering emissions from stationary sources like power plants, steel mills and refineries.

“The new tailpipe rules, jointly written by the Transportation Department and the Environmental Protection Agency, set emissions and mileage standards that would translate to a combined fuel economy average for new vehicles of 35.5 miles per gallon by 2016. Most drivers will see lower mileage figures in actual driving.”

The Times article added that, “The E.P.A. is now writing greenhouse gas standards for stationary sources, a much larger effort whose impact will be felt across the entire economy. Officials have said those regulations would not go into effect before next year at the earliest, but they are already being fiercely challenged by lawmakers, state governments and an array of industry groups.”

Agricultural Policy Issues

In more specific news regarding federal agricultural policy, Mitch Lies reported yesterday at the Capital Press Online that, “House Agriculture Committee Chairman Collin Peterson, D-Minn., in the next few weeks will start work on the 2012 Farm Bill, 32 months before the bill is due for completion.

“Given his ambitious goals, that might not be time enough.

“Peterson and fellow Agriculture Committee member Rep. Kurt Schrader, D-Ore., met with farmers on March 30 at the North Willamette Research and Extension Center in Aurora. He laid out an aggressive agenda for the next farm bill that includes an overhaul of some long-standing farm programs.”

Yesterday’s article stated that, “One big item on Peterson’s agenda involves changing USDA’s crop insurance from a crop-by-crop program to a whole-farm program.

“As part of the proposal, the USDA would eliminate the flat annual fee growers pay for insurance in exchange for a fee more consistent with what’s actually being insured.

“‘I’ve gotten some resistance from some of my people because they’ve got this mentality that they buy crop insurance kind of as a marketing tool,’ Peterson said. ‘It’s not really insurance.’

“‘What I’m looking at is getting a system where you can have insurance to cover the cost of what you’ve got in that crop, or something close to it,’ he said. ‘So if you have a loss, you could cover your bank loan and you could farm another year.’”

The article noted that, “Currently, [Peterson] said, about 400 different crops are insured through USDA’s crop insurance programs. Insuring smaller crops, he said, is expensive for growers and the government.

“Under his proposal, farmers and ranchers could buy insurance to cover perennial crops, cover price drops or other factors that can decimate a farm’s bottom line.

“‘The idea is you could buy insurance that would fit your situation, whatever your situation might be,’ Peterson said.”

Later, the article stated that, “A second big part of Peterson’s agenda involves changes in price supports. A key to that proposal involves doing away with loan rates.

“‘The loan rates are so low that if we get the loan rates, we’re out of business,’ Peterson said.”

“Removing the loan rates and changing price supports to an approach that takes into account crop loss due to natural forces and price losses due to the economy will put farmers on better footing, Peterson said.”

In other news regarding crop insurance, USDA’s Risk Management Agency (RMA) indicated in a recent press release that, “[RMA] Administrator William J. Murphy announced today that its combined insurance plan will be available shortly for all crops that have a contract change date of April 30, 2010 or later. The combination insurance plan will be used for insurance coverage starting with the 2011 crop year. The combination plan, also known as the COMBO rule, revises the Common Crop Insurance Regulations to combine the Actual Production History, Crop Revenue Coverage, Revenue Assurance, Income Protection, and Indexed Income Protection plans into a single insurance plan.”

In other policy news, Zoe Tillman reported yesterday at The Gazette Online (Prince George’s County Maryland) that, “Phil Miller, one of the owners of the 267-acre Miller Farm in Clinton, said that although his family has managed to cope with the increasing costs of running a farm in Maryland, he knows farmers who have not been so lucky.

From the expansion of environmental regulations to the federal estate tax, Miller said he and the other southern Maryland farmers who gathered Thursday to speak with U.S. Department of Agriculture Secretary Tom Vilsack are facing a growing list of challenges as their influence is shrinking.

“‘They’ll always pick on the farmer,’ Miller said.”

The article noted that, “Vilsack, who was joined by U.S. House Majority Leader Steny H. Hoyer (D-Dist. 5) of Mechanicsville and Maryland Department of Agriculture Secretary Buddy Hance, told the packed room in the Prince George’s County Soil Conservation District office in Upper Marlboro that he is pushing policies to aid owners of small farms, such as Miller.”

A news release issued yesterday by the USDA’s Farm Service Agency stated that, “USDA today released 2009 actual and 2010 benchmark yields for Average Crop Revenue Election (ACRE) program for wheat, long grain rice, medium grain rice, oats and barley in a majority of states. USDA will publish data for additional states and other crops as it becomes available.

Actual and benchmark yields are used in calculating payments through ACRE, which provides producers an option to protect themselves against declines in market revenue. The latest benchmark and actual yields, along with detailed information about the ACRE program and ACRE calculations, can be found at: http://www.fsa.usda.gov/dcp.

“USDA also reminds producers they have until June 1, 2010, to enroll their farms in either the 2010 Direct and Counter-cyclical Program (DCP) or the ACRE program.”

Trade Issues

A news release issued yesterday by the Senate Agriculture Committee Ranking Member Saxby Chambliss (R-Georgia) stated that, “Today [Sen. Chambliss] issued the following statement regarding the release of the 2010 National Trade Estimate (NTE), Sanitary and Phytosanitary Barriers Report and 2010 Report on Technical Barriers to Trade by the Office of the U.S. Trade Representative (USTR):

“‘The three reports released today highlight barriers to U.S. trade and investment. The reports on sanitary, phytosanitary and technical barriers to trade are particularly important to U.S. agriculture since farmers and ranchers are disproportionately the target of these measures. The importance of standards and export agreements based on sound science cannot be over stated. The tension to resume trade at any cost and strict adherence to international standards is a difficult balance to meet as the implications we have seen in the near constant negotiations regarding exports of U.S. beef to Japan and poultry to Russia.’

“‘I welcome the U.S. Trade Representative’s focus on enforcement and Ambassador Kirk’s work to decrease trade barriers on behalf of farmers and ranchers.’”

Recall that on Saturday, President Obama announced 15 executive branch recess appointments.

Included in the appointment announcement were Michael Punke: Nominee for Deputy Trade Representative – Geneva, Office of the United States Trade Representative, Islam A. Siddiqui: Nominee for Chief Agricultural Negotiator, Office of the U.S. Trade Representative, and Jill Long Thompson: Nominee for Member, Farm Credit Administration Board.

Barry Estabrook indicated yesterday at The Atlantic Online that, “The Obama administration’s schizophrenic approach to agriculture policy—making PR gestures toward sustainable farming with one hand while nudging ahead the agendas of agribusiness giants like Monsanto and Dow Chemical with the other—was on full display this weekend when the President used a recess appointment to install Islam Siddiqui as the chief agricultural negotiator in the Office of the United States Trade Representative.

“‘He was a singularly poor choice,’ said Dr. Marcia Ishii-Eiteman, senior scientist with the Pesticide Action Network North America. ‘He is the wrong person with the wrong background. We are surprised and very disappointed that President Obama recess-appointed him. There should have been a full Senate vote.’”

On the other hand, DTN Political Correspondent Jerry Hagstrom reported this week (link requires subscription) that, “Major farm groups on Monday praised President Barack Obama’s recess appointments of Michael Punke as deputy trade representative and head of the U.S. Trade Representative’s Geneva office, Islam (Isi) Siddiqui as chief agriculture negotiator and former Rep. Jill Long Thompson as a member of the Farm Credit Administration Board.”

The DTN article noted that, “The farm groups’ positive reactions to the appointments were not surprising since 42 agriculture groups, organized as the AgTrade Coalition, had written Senate Majority Leader Harry Reid, D-Nev., and Senate Minority Leader Mitch McConnell, R-Ky., on Jan. 21 expressing ‘deep concern’ about the delays in the Senate confirmation of Punke, a former USTR official and a former aide to Senate Finance Committee Chairman Max Baucus, D-Mont., and Siddiqui, a former USDA official and a vice president for biotechnology and trade for CropLife America.”

“The American Farm Bureau Federation said: ‘These two appointments are very important for not only agriculture, but trade in general. The holds on their conformations had nothing to do with their qualifications, so we are pleased President Obama made the recess appointments.’

“John Keeling of the National Potato Council said achieving Obama’s goal of doubling exports would be impossible without filling key trade positions.”

Mr. Hagstrom noted that, “Siddiqui also got an endorsement Monday from National Farmers Union President Roger Johnson, who said Siddiqui had gotten a ‘bum rap’ when small farm and organic groups opposed him because his work for CropLife America had involved representing Monsanto and other agribusiness companies.”

“The American Farmland Trust, the National Cattlemen’s Beef Association and the National Pork Producers Council also praised Obama’s decision to fill the positions,” the DTN article said.

CFTC Issues

Brady Dennis reported in today’s Washington Post that, “Lawmakers on the Senate Agriculture Committee are crafting new rules to oversee the vast, unregulated derivatives market, legislation that could become a central element of a larger regulatory overhaul effort currently headed to the Senate floor.

Committee Chairman Blanche Lincoln (D-Ark.) and ranking Republican Saxby Chambliss (Ga.) plan to shepherd a bipartisan bill through their committee soon after Congress returns from its two-week April recess. Lincoln said in a recent speech that she expects the legislation to be incorporated into a wide-ranging package, spearheaded by the Senate banking committee’s chairman, Christopher J. Dodd (D-Conn.), aimed at revamping the nation’s financial regulatory system.”

The Post article noted that, “The Lincoln-Chambliss effort is significant because the two senators on the banking committee whom Dodd had assigned to tackle derivatives oversight, Jack Reed (D-R.I.) and Judd Gregg (R-N.H.), spent months working through the details but recently reached an impasse in their negotiations. The massive bill that recently passed Dodd’s committee on a party-line vote includes placeholder language on derivatives from an earlier draft.

If Lincoln and Chambliss strike a workable bipartisan deal on derivatives — a goal that has eluded other lawmakers — it could help push Dodd’s legislation across the finish line. At the same time, some industry officials, who spoke on the condition of anonymity because they continue to lobby lawmakers on the issue, said they expect that legislation headed up by Lincoln could be more favorable to the financial industry than the language currently in Dodd’s bill.”

For additional background on this issue, click here.

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Lastly today, a news release issued yesterday by Pearson Education stated in part that, “The volatility of food prices impacts us all including the average consumer, farmers, commodity traders and our government policymakers. The increasing growth in biofuel production means that energy markets and food markets are more closely linked than ever before. The economics behind these peaks and valleys will affect what consumers pay at the grocery store and at the gas pump.

“In The Economics of Food: How Feeding and Fueling the Planet Affects Food Prices (FT Press, ISBN-13: 9780137006106, $25.99, 256 pps., hardcover, April 2010), leading agricultural economist Patrick Westhoff gives readers an inside look into what really causes large swings in food prices and what factors are likely to cause them to rise and fall in the future. The increased demand for crops not only to feed people but to power society puts an additional strain on world food supplies.”

Visit http://www.ftpress.com/store/product.aspx?isbn=0137006101 to download a chapter from this new book and learn more.

Keith Good

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