FarmPolicy

August 21, 2019

Climate Issues; Biofuels; Farm Bill Issues; Trade; Animal Agriculture; and Ag Economy

Climate Issues

An update posted yesterday at CQPolitics reported that, “Despite House passage last week of an offshore drilling overhaul, the kickoff of the Senate’s long-awaited debate on a companion bill is being greeted by universally low expectations.

“Senate Majority Leader Harry Reid is expected to launch the debate Monday by filing a motion to proceed to his energy bill, which would overhaul federal oversight of the outer continental shelf and boost natural-gas-powered and electric cars while also providing $4.5 billion for state and federal recreational and public lands efforts over five years.

Reid’s move would set up a midweek procedural vote that is widely expected to fall short of the 60 votes needed to take up the bill.”

Meanwhile, Darren Samuelsohn reported yesterday at Politico that, “President Barack Obama’s ‘Plan B’ for tackling global warming is under attack in the courts and on Capitol Hill.

“Through federal lawsuits, two conservative attorneys general, a major coal company and the U.S. Chamber of Commerce are leading the charge to overturn the Environmental Protection Agency’s ability to write its own climate rules.

“Key coal-state Democrats and nearly all Republicans are also unified in their bid to slow down the EPA via legislation — and they’re determined to force a series of votes on the issue before the next big suite of rules start kicking in next January.”

Yesterday’s article explained that, “Bids to stop the EPA started even before the agency concluded last December that greenhouse gases are a threat to public health and welfare, issuing its all-important endangerment finding that essentially triggered a series of climate-themed rules under the Clean Air Act.

But EPA’s moves are now front and center as the Obama administration starts exercising its administrative muscle after Senate Democrats last month shelved a broader climate bill for the year.

“‘People on the pro- and anti-policy side are increasing the intensity of their curiosity of what EPA is doing because they don’t have a process to focus on,’ an Obama administration official said in an interview. ‘We’re definitely the most significant game in town.’”

Mr. Samuelsohn explained that, “The EPA took its first big step in the spring when it unveiled new climate-themed standards for motor vehicles, the byproduct of several years of legal wrangling and closed-door negotiations with industry, states and environmentalists.

“More rules will come in January for power plants and other major stationary sources. And the EPA is also trying to limit the reach of its future rules on smaller industrial sources by issuing a so-called tailoring rule that sets minimum emission thresholds before any standards would kick in.

“The legality of the tailoring rule is under scrutiny in court, but conservatives want to drive home their point that the agency — unless ordered otherwise — is obligated under the law to start setting new restrictions on churches, schools and, maybe someday, lawn mowers.”

(Note: See a related Wall Street Journal editorial on this issue from September 3, 2009 which noted that, “The agency is required to regulate sources that emit more than 250 tons of a given air pollutant annually, which may be reasonable for conventional pollutants like NOX or SOX. But this is a very low limit for ubiquitous CO2, and so would capture schools, hospitals, farms, malls, restaurants, large office buildings and many others. To exempt these sources, the tailoring rule unilaterally boosts the rule for greenhouse gases from 250 tons to 25,000 tons, an increase of two orders of magnitude”).

In a related article regarding the “tailoring rule” (background available here and here), Robin Bravender of Greenwire reported yesterday at The New York Times Online that, “Environmentalists are suing U.S. EPA over a rule that aims to regulate greenhouse gases from only the largest industrial sources, arguing that the agency exempts too many big polluters.

“The Center for Biological Diversity is joining a number of industry groups in challenging EPA’s ‘tailoring’ rule, which will force large facilities to limit their greenhouse gas emissions starting next January. But while industry groups argue that EPA climate rules will hurt businesses, CBD says the agency is not going far enough.”

More broadly on the climate issue, Reuters writer Jeff Mason reported today that, “The United States stands by its 2020 target for reducing greenhouse gas emissions despite the Senate’s failure to pass legislation to fight climate change, the top U.S. climate envoy said on Monday.

Todd Stern told Reuters a U.S. proposal, made last year ahead of U.N. climate talks, to reduce emissions roughly 17 percent by 2020 compared to 2005 levels or 3 percent from 1990 levels was still on the table.”

And Bloomberg writer Alex Morales reported yesterday that, “Developed countries must give ‘clear proof’ they’ve started disbursing $30 billion of climate aid that they pledged last year to poorer nations, the new United Nations climate chief said.

“Evidence of payment will be needed at the UN’s annual end- of-year climate negotiations in Cancun in November and December, Christiana Figueres said at a briefing today as a week of talks started in Bonn. About $10 billion should be paid out this year, a third of the total which covered the years 2010, 2011 and 2012, she said.”

More specifically with respect to agriculture, the AP reported yesterday that, “Advances in conventional agriculture have dramatically slowed the flow of greenhouse gases into the atmosphere, in part by allowing farmers to grow more food to meet world demand without plowing up vast tracts of land, a study by three Stanford University researchers has found.

“The study, which has been embraced by many agricultural groups but criticized by some environmentalists, found that improvements in technology, plant varieties and other advances enabled farmers to grow more without a big increase in greenhouse gas releases. Much of the credit goes to eliminating the need to plow more land to plant additional crops.”

The article pointed out that, “The study, published in June in the Proceedings of the National Academy of Sciences, has been embraced by the agriculture industry as proof that some of environmentalists’ complaints are off the mark.

“‘It’s actually something that I’ve been saying for quite some time,’ said Leon Corzine, 60, an Assumption, Ill., corn farmer and past president of the National Corn Growers Association. ‘We really need to talk more about the environmental benefits. The new practices that we do, the new tools in the tool box, whether it’s seed or equipment — our efficiency gains are really kind of dramatic.’

“But some environmentalists said the study is flawed, arguing it’s based on unrealistic scenarios of what would have happened if yields hadn’t increased during the study period.”

Biofuels

David R. Baker reported yesterday at the San Francisco Chronicle Online that, “In the race to replace oil, electric cars seem to be leaving biofuels in the dust.

“Five years ago, biofuels such as ethanol and biodiesel looked like the best bet for breaking the world’s addiction to oil. Biorefineries turning corn into ethanol sprouted across the Midwest, while startups trying to make fuel from wood chips or grass soaked up venture capital. Big automakers considered electric cars a lost cause.

“Now the situation has been reversed. The buzz surrounding electric transportation has never been louder, while the biofuel industry struggles to regain momentum after two brutal years.”

The article added that, “Many energy analysts, however, caution against counting biofuels out.

“Cellulosic ethanol – made from crop stubble, wood chips or grass – could prove to be economical in the next few years, they say. The recession may have delayed the progress of cellulosic entrepreneurs, but it didn’t wipe them out.

“In addition, most energy analysts believe both electricity and biofuels have a place in transportation’s future, even if their exact roles have not yet been decided. For example, electricity may be a fine option for powering cars, but not planes.”

Reuters writer Tom Doggett reported yesterday that, “U.S. retail gasoline prices fell for the first time in three weeks, the Energy Department said on Monday, but the savings at the pump could be short-lived with higher crude oil costs.

“The national price for regular unleaded gasoline declined 1.4 cents over the last week to $2.74 a gallon, but still up 18 cents from a year ago, the department’s Energy Information Administration said in its weekly survey of service stations.

Higher oil prices, which account for more than half the cost of making gasoline, shot up 3 percent to $81.34 a barrel on Monday at the New York Mercantile Exchange, the highest price in nearly three months.”

Farm Bill Issues- SURE

DTN Executive Editor Marcia Zarley Taylor reported yesterday at the Minding Ag’s Business Blog that, “When Congress wrote what rational people would consider the most complex formula yet for farm disaster aid in the 2008 Farm Act, it was supposed to (1) be a fairer system; (2) compensate people who’d experienced whole farm revenue loss, not a yield loss on a single crop as past farm programs did; (3) pay higher rates to those with better crop insurance coverage. In other words, reward farmers who paid the high premiums for higher levels of coverage. But as I reported in a story on DTN today, these principles aren’t working as the Farm Service Agency struggles to administer the 2008 disaster program.

Just tiny differences between farmers in the same Iowa county with nearly identical circumstances can result in one farmer receiving a disaster payment of $80,000 and the other receiving nothing, a state FSA official told me. A group of about 40 Iowa farmers who purchased so called 90/100 Group Revenue Plans (GRP) are in the ‘nothing’ category now, even though they anticipated receiving up to $245 per acre compensation when they applied for emergency aid last December on their 2008 crop. Farmer Kevin Vierkandt is their spokesperson, and he’s miffed at what he considers are FSA’s unkept promises.

“Part of the reason for confusion is that price guarantees in 2008 crop insurance policies experienced a mind-altering range, given the fireworks in commodity prices that season, so from the start, fair was never going to be equal when calculating aid under the new Supplemental Revenue Assistance Program (SURE). For the 2008 corn crop, GRP policy spring price guarantee was $3.75 per bu.; multiperil (MPCI)’s spring price paid $4.75; all revenue-based products’ spring price was $5.40. Farmers with the deluxe 90/100 GRP policies paid extra to add a 150 percent price multiplier, effectively bringing their price guarantee on lost bu. to $6.25.”

Yesterday’s DTN update added that, “The new disaster program calculated aid based on crop insurance coverage, but Congress gave FSA discretion to implement these county yield indexed policies like GRP. Otherwise, it was possible to overpay group-risk policyholders for losses, Kansas State University economist Art Barnaby tells me in an e-mail message.

As Washington experts ran the numbers, though, the agency fiddled with the compensation rates on 90/100 GRP policies three times in recent months. When Iowa farmers applied for aid in December 2009, their county offices plugged in $6.25 per bu. as a base price. When new software revised the program, counties found the price changed to $4.75 (the MPCI price); finally in March USDA revised rates again, and dropped the price on GRP to $3.75 (GRP price without the 150 percent adjuster). The season average cash price for corn hit $4.06, so growers with lower level price guarantees would have trouble showing losses.

That change effectively meant few people with GRP policies qualified for aid, even though MPCI corn policyholders received about $69 per acre in Hardin County, an Iowa State University estimate showed.”

Also with respect to SURE, a USDA news release from yesterday stated that, “USDA Farm Service Agency (FSA) Administrator Jonathan Coppess today announced that producers have until Thursday, Sept. 30, 2010, to submit an application for payment under the 2008 Supplemental Revenue Assistance Payments (SURE) Program. SURE provides financial assistance for crop production and or quality losses due to a natural disaster.”

Trade

Reuters writer Emma Ashburn reported yesterday that, “The Obama administration’s top trade official said on Monday ‘real progress’ could be made in the long-stalled Doha round of world trade talks by the end of 2010.

“Political changes will help spur momentum for the World Trade Organization talks, now in their ninth year, said Ron Kirk, who has insisted large developing countries like Brazil, China and India must do more to open their markets to U.S. farm and manufactured goods.

“‘I’m confident and hopeful that once we get past the elections in Brazil, now that we’re through the elections in Japan, and others, that we will have enough momentum going into the end of the year to make some real progress,’ Kirk told reporters in Washington.”

Ambassador Kirk is scheduled to testify tomorrow morning at a Senate Agriculture Committee hearing titled, “Promoting Agricultural Exports: Reviewing U.S. Agricultural Trade Policy and the Farm Bill’s Trade Title.”

Animal Agriculture- Antibiotics

Sally Schuff reported yesterday at Feedstuffs Online that, “Denmark’s experience with livestock production since the country’s 1995 ban on antibiotics for growth promotion may not be quite the doomsday scenario that is often touted in U.S. livestock circles — at least not according to a top Danish government veterinary official who testified before a congressional subcommittee investigating the growing public health threat of antibiotic resistance.

“Dr. Per Henriksen, a veterinarian who heads the Danish Veterinary & Food Administration’s division for chemical food safety, animal welfare and veterinary medicinal products, testified at a key July 12 hearing on antibiotic use in food animals at the invitation of the House energy and commerce subcommittee on health. It was the third hearing the subcommittee held since the spring on the risks and policy options for dealing with antibiotic resistance.

“‘The Danish swine industry has been producing pigs without the use of growth promoters for many years now and has increased both the production and the productivity,’ Henriksen testified. ‘The same picture applies in the broiler chicken and cattle industries.’”

The Feedstuffs article added that, “It was noted at the subcommittee hearing that Denmark’s ban on subtherapeutic antibiotic use had changed the structure of livestock operations in the country, with large, intensively managed operations replacing small farms.

In recent years, especially 2009, Denmark has seen an upward trend in the therapeutic use of antibiotics that cannot be explained by increasing animal numbers.

“‘However, as this increase appears more than 10 years after the ban of growth promoters, we do not relate this to the ban,’ Henriksen testified.

“The increase is being addressed by Denmark’s new ‘yellow card’ initiative, which singles out farms using antibiotics above a set threshold and mandates a reduction in use.

“Denmark has elaborate data collection on animals and veterinary issues.”

Ag Economy

Liam Pleven and Tom Polansek reported in today’s Wall Street Journal that, “Wheat prices have staged the most drastic rise in more than 50 years, as a drought in Russia fuels growing worries that it could lead to a global shortage of the grain.

“Harsh heat and a lack of rain in Russia have killed half of the crop in some hard-hit areas. The slump in production in one of the world’s most fertile breadbaskets has pushed prices up 62% since early June, and last month saw the biggest and fastest increase since 1959.

“Wheat prices, which briefly rose above $7 a bushel on Monday, are at their highest level since September 2008, the year when low supplies of the grain fueled a global food crisis that led to riots in several countries.”

Meanwhile, University of Illinois Agricultural Economist Darrel Good pointed out yesterday (“Supply Concerns Drive Crop Prices”) that, “Corn, soybean, and wheat prices have experienced an impressive rally over the past month. From the lows in late June to the high on August 2, December 2010 corn futures rallied nearly $.75, November 2010 soybean futures rallied $1.40, and September wheat futures rallied $2.55.

“The increase in prices was triggered by the June 30 USDA reports showing smaller than expected June 1 domestic inventories of corn and soybeans and smaller than expected planted acreage of corn. June 1 wheat inventories were larger than expected, but prices increased based on prospects for smaller crops outside the U.S. Large year-over-year declines in wheat production are expected in Russia, Kazakhstan, and Canada. Last year, those three countries exported 1.6 billion bushels of wheat, or 41 percent of the total non U.S. exports.

“Crop prospects in Russia and Kazakhstan have continued to deteriorate and the crop in western Europe came under some late stress. Foreign wheat production could be down as much as 4 percent this year. In addition to the ongoing concerns about world wheat production, there are some concerns about the yield potential for the U.S. corn and soybean crops. While crop condition ratings have remained high, the impact of the unusual combination of extremely wet and warm conditions in June and July in the Corn Belt are not clear. Total June and July rainfall in the Corn Belt was the second largest in the past 50 years; only 1993 had a larger total. The two-month average temperature in the Corn Belt was the fourth highest of the past 50 years. This combination of extreme rainfall and temperatures had not been observed in the previous 50 years. Additional crop yield concerns are being generated by the very warm start to August and the prospects for additional stress on the crops in the Delta region.”

After additional analysis, yesterday’s extension update added that, “The price rally of the magnitude of the past month is difficult to sustain. A continuous flow of supportive fundamental information is required for prices to continue to move higher. In particular, the strength in wheat prices may be difficult to sustain. Even with further reductions in estimated world crop size, year ending stocks will remain fully adequate. If relatively high prices persist into the fall of the year, an increase in planted acreage in the northern hemisphere would be expected.

“Near term prospects for corn and soybean prices are tied closely with prospects for the U.S. crops. Expectations about crop size fall in a wide range. The USDA’s August Crop Production report will provide an important benchmark.”

Keith Good

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