FarmPolicy

April 22, 2019

Crop Insurance (SRA); Animal Ag (Antibiotics); Climate Issues; Biofuels; and Regulation Issues

Categories: Climate Change /Ethanol

Crop Insurance- Standard Reinsurance Agreement (SRA)

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Crop insurance agents in the major Corn Belt states are going to take the biggest financial hits in a new contract between crop insurers and USDA. The agreement cuts expense reimbursements and underwriting gains to companies by $6 billion over the next 10 years.

“Fives states classified as the Corn Belt — Indiana, Illinois, Iowa, Minnesota and Nebraska — are the most profitable states for the crop insurance industry but will take the largest cuts under the new standard reinsurance agreement with about a 30 percent reduction in administrative and operating (A&O) compensation and underwriting gains.

These cuts will be distributed to help boost insurance for companies in the states now considered underserved. That has been described as ‘rebalancing’ the program, said Keith Collins, a former USDA chief economist who is now a crop insurance industry consultant.”

The DTN article explained that, “In addition to the A&O cut, the Corn Belt is going to take the biggest underwriting gain reductions, Collins said. ‘This is where their big cut really comes.’

“One of the key objectives in the cut is to scale back agent commissions, Collins said. ‘They felt that agent commissions in the Corn Belt were excessive relative to commissions in the rest of the nation.’

“Agent commissions have been typically 18 percent to 20 percent of premiums, with some agents garnering more depending on their business, Collins said. Those percentages will have to drop to 14 percent to 15 percent of premiums nationally because of the caps being put in place on agent commissions.”

Mr. Clayton pointed out that, “Collins said a big part of the $6 billion cuts will fall on crop insurance agencies with more cost cutting. For the bulk of farmers across the country, service will continue as normal. ‘But I think the companies are very concerned about being able to maintain their service to producers,’ Collins said. ‘Regarding the companies themselves, what cuts like this mean is that it limits their ability to build surplus in a really bad year.’

“The second USDA proposal to the industry had a ‘soft cap’ stating companies would be capped at paying up to 80 percent of their administrative and operating reimbursement in agent commissions. The latest draft limits the amount of dollars paid to an agent based on the A&O costs in an individual state and nationally.

Collins said that will cause problems because the actual A&O costs and cap won’t be known until about a year after the policies are sold.

“‘So it’s going to be very difficult for a company to know whether they are in the cap or outside the cap as they are going through the year,’ Collins said.”

Yesterday’s DTN article added that, “National Crop Insurance Services members met with Risk Management Agency officials last Friday to discuss the details of the third contract proposal and some technical issues, but the $600-million-a-year cut in A&O reimbursement and underwriting gains will stand. USDA is expecting companies to sign the contract sometime in July.”

Philip Brasher reported yesterday at The Green Fields Blog (Des Moines Register) that, “The cuts in agent commissions would fall hardest in Iowa and other corn-growing states where the payments can exceed 20 percent of premium.

“Some $4 billion from the cuts, which would take place over 10 years, would go toward reducing the federal deficit. The other $2 billion in savings would be earmarked for other USDA programs, including land conservation. The USDA also is shifting some money to increase commissions and service in areas of the country considered to be underserved.

“USDA spokesman Justin DeJong said the insurance program ‘was in urgent need of reform, and USDA completed negotiations with companies in a way that will bring sustainability to the crop insurance program, while maintaining a reasonable rate of return to ensure the viability of companies who participate in the program.’”

The SRA was a topic discussed on Thursday at a House Agriculture Subcommittee hearing, for more details on the specifics covered in this meeting, including impacts on the Farm Bill baseline, see this FarmPolicy.com hearing transcript.

Animal Ag (Antibiotics)

The Washington Insider section of DTN reported yesterday (link requires subscription) that, “Two lawmakers–– one from the House and one from the Senate –– are calling on the Obama administration to expand its efforts to monitor the use of antibiotics in animal feed. In a letter to Agriculture Secretary Tom Vilsack, House Rules Committee Chairman Louise Slaughter, D-N.Y., and Senate Agriculture Appropriations Subcommittee member Dianne Feinstein, D-Calif., urge the administration to bolster several initiatives they say would shore-up data gaps on agricultural drug usage.

The two have sponsored legislation that would limit the agricultural community’s ability to administer seven classes of antibiotics to animals for growth promotion purposes in order to prevent antibiotic resistance in humans. ‘The lack of data regarding agricultural usage of antibiotics makes it impossible to assess whether or not current usage is either prudent or responsible,’ the two say in their letter to Vilsack.”

Climate Issues

Ben Geman reported yesterday at The Hill’s Energy Blog that, “A planned meeting Wednesday between President Barack Obama and a bipartisan group of senators to discuss energy policy has been postponed, according to White House and Senate aides.

“A White House official said the meeting was postponed for scheduling reasons and would take place early next week.”

Carol E. Lee and Darren Samuelsohn reported yesterday at Politico that, “[Senate Majority Leader Harry Reid] plans to convene a second round of talks on energy and climate legislation with the Democratic caucus on Thursday. A meeting last week ended without debate because presentations took too long.

“Democratic senators planning to go to the White House included Reid, Kerry, Environment and Public Works Committee Chairwoman Barbara Boxer, Energy and Natural Resources Committee Chairman Jeff Bingaman, Commerce, Science and Transportation Chairman Jay Rockefeller, Maria Cantwell and Sherrod Brown, along with Lieberman.

“Several Senate Republicans also have the white house trip on their agenda, including conference chairman Lamar Alexander, Susan Collins, Olympia Snowe and George Voinovich.”

Meanwhile, Ben Geman reported on Monday at The Hill’s Energy Blog that, “A centrist Republican that President Barack Obama is courting on energy legislation on Monday rejected the idea of greenhouse gas limits applied only to electric utilities, just days after a senior White House official floated the concept.

“‘No. I said no cap-and-trade,’ said Sen. Richard Lugar (R-Ind.), speaking to reporters in the Capitol.”

On the other hand, Josh Voorhees and Robin Bravender of ClimateWire reported yesterday at The New York Times Online that, “Environment and Public Works Chairwoman Barbara Boxer (D-Calif.), whose own climate legislation stalled soon after she passed it out of committee without a single Republican vote, did not rule out supporting a utilities-only proposal. ‘I’m open to looking at all different proposals,’ she said.

“Sens. Ben Cardin (D-Md.) and Frank Lautenberg (D-N.J.), both members of Boxer’s EPW Committee, offered their conditional support.”

Bloomberg writers Mark Drajem and Jim Snyder reported yesterday that, “Senator Sherrod Brown, an Ohio Democrat wary of the impact of climate legislation on U.S. manufacturers, says he is pushing to include billions of dollars of loans and tax credits in any energy measure.

“Brown said he wants the Senate to add $30 billion in government-backed loans for manufacturers, and is asking the Obama administration for an additional $5 billion in tax credits for companies that invest in clean-energy facilities.”

“Brown has organized a bipartisan group of Midwestern lawmakers worried that climate legislation would undercut local manufacturers and give an advantage to overseas competitors in countries such as China. Brown has proposed including a Buy America provision in any climate bill and helped frame a letter to lawmakers drafting the legislation saying it must include import tariffs to protect domestic producers,” the Bloomberg article said.

In addition, Dow Jones writer Tennille Tracy reported yesterday that, “As U.S. Senate lawmakers attempt to determine the fate of energy legislation, an influential Democrat is boosting efforts to suspend a controversial greenhouse-gas rule passed earlier this year by the U.S. Environmental Protection Agency.

After introducing a bill to impose a two-year halt on the new EPA rule, Sen. Jay Rockefeller, a Democrat from coal-rich West Virginia, is now working to round up supporters for his legislation.”

One Democratic aide said the senator has already corralled about 52 votes for his bill and will need 60 votes to overcome a possible filibuster,” the Journal article said.

Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “[Sen. Charles Grassley, R, Iowa] said he hopes an energy bill can come out this year. Some type of energy bill, such as the one approved last year by the Senate Energy and Natural Resources Committee, needs to move by the end of the year, Grassley said. Known as the Bingaman bill after committee chairman Jeff Bingaman, D-N.M., the American Clean Energy Leadership Act doesn’t have a cap-and-trade component, but does expand renewable energy, promote energy efficiency, create a smart grid for electricity and expand energy such as natural gas.”

And The Washington Post editorial board opined in today’s paper that, “President Obama will bring senators to the White House soon in another attempt to achieve bipartisan accord on energy and climate policy. The president’s push could be the last opportunity to pass a significant bill any time soon.”

The Post rhetorically asked, “Is there a way forward? Some observers argue that it’s more realistic for Democrats to press only for politically attractive things such as clean-energy mandates, efficiency standards, research and development funding and lots of energy subsidies. But that approach is expensive and almost certainly inadequate to meet even the underwhelming medium-term emissions targets Mr. Obama has set. Besides, the Democrats’ left flank in the Senate has threatened to oppose an energy bill without some kind of carbon price.

“Another option is to include those politically attractive measures, as well as GOP priorities such as generous provisions for nuclear power and some of the efficiency programs that Sen. Richard G. Lugar (R-Ind.) proposed in a bill he recently unveiled — but to add a cap on emissions from utilities. These account for about 40 percent of U.S. carbon dioxide emissions, and many utilities already have agreed to submit to cap-and-trade regulation. This, too, would be imperfect: It would not raise as much money or cut emissions as much as the Kerry-Lieberman proposal would. But putting a price on carbon even in one economic sector might make it easier to establish a more effective cap in the future. It’s a Plan C worth considering.”

Biofuels

Jonathan Wheatley reported yesterday at the Financial Times Online that, “If President Barack Obama is serious about reducing US reliance on oil and moving towards cleaner energy, he should remove a tariff on imported ethanol that protects the US maize-based industry and locks out sugarcane-based ethanol, according to Marcos Jank, president of the Brazilian sugarcane industry association.

“‘The US and Europe should end their discriminatory trade policies if they are serious about weaning the world from fossil fuels and not just scoring short-term political points,’ he told the Financial Times.”

Meanwhile, DTN writer Todd Neeley reported yesterday (link requires subscription) that, “The U.S. ethanol industry was born in the Midwest, and most of the country’s ethanol is still produced here, but USDA hopes to change that.

U.S. Agriculture Secretary Tom Vilsack said during a press conference Tuesday that USDA plans to do what it can to make ethanol a national industry by investing in infrastructure and technology.

“In a couple of days, Vilsack said, USDA is set to release a report to offer a roadmap on how to build on the success of corn-based ethanol and to meet the goals of the federal Renewable Fuels Standard. The RFS mandates the use of 36 billion gallons of ethanol and other biofuels by 2022.”

The DTN article added that, “For starters, Vilsack said he believes the U.S. Environmental Protection Agency will approve the use of E15 in at least some vehicles yet this year.

“‘The potential could be as high as 100 million vehicles that could become eligible for ethanol use,’ he said. This includes flexible-fuel vehicles and vehicles that can use higher ethanol blends, such as E15.

That’s why there needs to be more attention focused on expanding ethanol infrastructure, including offering more blender pumps in all regions of the country, said Vilsack.”

A news release issued yesterday by Sen. John Thune (R-SD) stated in part that, “Senators Chuck Grassley, John Thune, Mike Johanns and Kit Bond today pressed President Barack Obama on his administration’s decision to further delay the entry of E15 blends of gasoline into the market. The Senators asked the President for prompt action on the waiver petition and immediate consideration of an interim blend of E12.”

And Joseph Morton reported in today’s Omaha World-Herald that, “If only ethanol could blush.

“The corn-based renewable fuel was praised to the heavens Tuesday at an energy event on Capitol Hill organized by the Midwestern Governors Association.

“Nebraska’s U.S. senators — Ben Nelson, a Democrat, and Mike Johanns, a Republican — gave opening remarks extolling their long-standing devotion to the fuel. Both served as chairman of the association while governor of Nebraska — a state now conspicuously absent from the regional association.”

The article stated that, “Nelson and Johanns decried the U.S. Environmental Protection Agency’s recent announcement that it would delay a decision on whether to raise the cap on ethanol blends in gasoline to 15 percent from 10 percent.

“The delay could slow the development of new biofuels, Nelson said. ‘The delay also puts jobs in Nebraska, the Midwest and all of the U.S. at risk.’”

In other developments, Reuters writer Amy Pyett reported yesterday that, “Australia is investigating complaints of U.S. dumping of biodiesel on the domestic market, the nation’s customs agency said on Tuesday, a move that could see Canberra follow Europe in imposing anti-dumping duties.”

Regulation Issues

A news release issued yesterday by the Rural American Solutions Group stated that, “Today, Co-Chairs of the Rural America Solutions Group Frank Lucas (R-OK), Sam Graves (R-MO) and Doc Hastings (R-WA) sent a letter to Transportation and Infrastructure Committee Chairman James Oberstar, Agriculture Committee Chairman Collin Peterson, Small Business Committee Chairwoman Nydia Velazquez and Natural Resources Committee Chairman Nick Rahall asking for hearings on H.R. 5088 [text], America’s Commitment to Clean Water Act.

“This bill greatly expands the scope of the Clean Water Act by removing the word ‘navigable’ from its current definition. As a result, every body of water – from farmers’ irrigation canals, to streams, small ponds and backyard muddle-puddles – could suddenly be subjected to sweeping new federal regulations and permitting. This vast expansion of government authority would threaten jobs, increase costs for farmers and small businesses, and impact local water storage and delivery systems.”

In other news, Ike Wilson reported yesterday at the Frederick News Post Online (Maryland) that, “Chuck Fry and others who have spent most of their lives on farms are finding it more difficult to maintain their vocations.

Fry, a Point of Rocks turkey farmer, said farmers are increasingly at the brunt of criticism for polluting the Chesapeake Bay without crediting them for their good management efforts. They are fighting back.

“More than 200 farmers and others concerned about the rhetoric surrounding the Chesapeake Bay clean-up initiatives sent an 18-page petition to Gov. Martin O’Malley.”

The article added that, “‘Maryland farmers are fed up and frustrated at the misinformation intentionally promulgated by certain environmental advocates to make agriculture the scapegoat for all that’s wrong with the bay,’ Maryland Farm Bureau President Patricia Langenfelder said.

This finger-pointing ignores the efforts family farms have been making to reduce the nutrients leaving the fields through the implementation of best management practices and regulated nutrient management plans, Langenfelder said.”

Keith Good

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