FarmPolicy

August 21, 2019

Policy Issues; Biofuels; Animal Agriculture; Climate Issues; and the Ag Economy

Policy Issues: Farm Bill

Elton Robinson reported yesterday at the Delta Farm Press Online that, “The ‘Killer Bs’ could inflict some major whelps on the cotton program during the 2012 farm bill debate, according to National Cotton Council president and CEO Mark Lange.

“Lange’s soubriquet for the impact of budget, baseline and Brazil could first buzz into Washington on the wings of November elections.”

With respect to the budget, the article noted that, “‘There is a good chance that Republicans may take the House in fall elections and if they do, there will be a number of ‘budget hawks’ coming to Congress. If that happens, we may be writing a 2012 farm bill with tremendous pressure on ag spending,’ said Lange, speaking at the Southern Cotton Ginners Summer Meeting in Memphis.

“Lange said there’s also a possibility of a budget reconciliation package in the spring of 2011 ‘that could catch agriculture right in the midst of the debate.’”

And on the baseline, Mr. Robinson reported that, “Lange noted that given current high prices for corn and soybeans, ‘the only price support money built into the Congressional Budget Office’s current baseline — beyond direct payments — is for cotton. When [House Ag Committee Chairman Collin Peterson (D-Minn.)] starts his discussion about a revenue package, where’s he going to find the money? The only place to take money is from direct payments or cotton’s price support system.’”

Brazil could also challenge the marketing loan, Lange says. ‘I think we’re going to be writing the farm bill with the Brazil case hanging over our shoulder.’

Brazil has suspended retaliation on U.S. goods and services going into the country, but Lange noted that it still has the right to do so,” yesterdays article said.

Policy Issues: Trade

In other news regarding trade and agriculture, Gary Hufbauer and Robert Lawrence noted in a column published this week at Foreign Affairs Magazine Online that, “Originally scheduled to conclude in 2005, the Doha Round trade negotiations have dragged into their ninth year, with no end in sight.”

“Many of the obstacles facing the Doha negotiations are political. The resolution that came out of the G-20 meeting in Toronto earlier this year was especially vapid: the best the G-20 member states could muster was to reiterate support for coming to an agreement and to direct negotiators to ‘report on progress at our next meeting in Seoul,’ where the G-20 ‘will discuss the way forward.’ In other words, nothing is expected to happen.”

The authors stated that, “U.S. President Barack Obama pushed trade policy to the back burner while he concentrated on health-care and financial reform. He needed nearly unanimous support from Democrats in Congress to enact his domestic agenda; trade agreements, meanwhile, are risky for Democratic politicians because many depend on unions, which are concerned that trade costs jobs. To counter such arguments, the Obama administration must demonstrate that trade agreements would boost U.S. employment by doubling exports. The White House also needs strong support from Republicans, who tend to be allied with business. So far, U.S. firms are lukewarm about the Doha Round because it seems to offer little from the large emerging economies, especially China.”

The piece added that, “Meanwhile, the United States should phase out cotton subsidies — which were ruled illegal by the WTO two years ago — and put a cap of about $9 billion annually on all its agricultural subsidies. Washington should also agree to extend duty-free, quota-free treatment to virtually all the exports of the least developed countries and allow duty-free imports on all manner of environmental goods, including ethanol. Such a gesture would give substance to the development promise of the Doha Round and, in a modest way, put the United States on the right side of the climate agenda.”

***

Dow Jones news reported yesterday (article posted at DTN, link requires subscription) that, “Russia has partially lifted its ban on U.S. chicken by allowing shipments from 10 U.S. production facilities, a U.S. Department of Agriculture spokesman said Wednesday.

“Russia, the largest foreign market for U.S. chicken before it enacted the ban on Jan. 1, is expected to clear one more U.S. plant by Thursday, bringing the total to 11 plants allowed to export, the spokesman said.”

Policy Issues: Disaster Aid

A news release from yesterday by the Environmental Working Group (EWG) stated that, “Large agriculture interests across Arkansas are projected to receive more than $210 million in taxpayer dollars under a controversial disaster aid program conceived by Senate Agriculture Committee chair Blanche Lincoln (D-Ark.) and embraced by the White House.

“On Aug. 6, after Lincoln’s plan to compensate farmers for 2009 crop losses ran into trouble on Capitol Hill, the White House moved to salvage it – and boost Lincoln’s reelection prospects — by pledging $1.5 billion in already appropriated funds to underwrite the controversial and unorthodox idea.”

The release added that, “EWG’s analysis shows that beneficiaries of the Lincoln plan would receive a lucrative taxpayer bailout even if they incurred only minor losses.

“Lincoln, who is in a tough fight for reelection, has contended there is nothing partisan or unusual about asking the administration to underwrite her disaster aid program from existing U.S. Department of Agriculture funds.”

A similar EWG release from yesterday pointed out that, “Large agriculture interests across Louisiana are projected to receive more than $98 million in taxpayer dollars under a controversial disaster aid program conceived by Senate Agriculture Committee chair Blanche Lincoln (D-Ark.) and embraced by the White House.”

Biofuels

The Washington Insider section of DTN reported on Tuesday (link requires subscription) that, “Renewable fuels advocates are working now on efforts to regain political momentum lost when the Congressional Budget Office concluded last month that the industry no longer needed the expensive, $0.45 per gallon blender credit it has been receiving. At this time, the industry faces the problem of renewing the biodiesel subsidy that expired in January and extending the ethanol blender credit that will expire at the end of this year. And, it faces continuing uncertainty over the coming decision by the Environmental Protection Agency regarding the proposed lifting of the current 10 percent gasoline blend cap.

For example, at a recent conference in Minnesota, House Agriculture Committee Chairman Collin Peterson, D-Minn., told the group he is concerned about ‘what is going on regarding energy, especially ethanol and biodiesel.’

“He commented that he believes the administration listens far too much to ‘elements of the environmental movement who have way too much influence.’ He went on to criticize both EPA and the Department of Energy, saying ‘oil industry interests have some ties with Energy Secretary Stephen Chu that a lot of people are not aware of, and Chu has become enamored with drop-in fuels, something the oil companies are behind.’ Drop-in fuels are biofuels that can be used in existing systems.”

The DTN item indicated that, “Peterson said drop-in fuels ‘cost about three to four times more’ to produce than corn- based ethanol and DOE and EPA are not being realistic about the potential of some proposed fuels, especially cellulosic-based fuels.

Peterson said he is ‘very, very worried’ about the two agencies’ impact on ethanol policy and ‘if we don’t get this straightened out, this could impact corn more than the farm bill because the safety net is inadequate to hold things up…. We could be back to $2 corn.’ The challenge, Peterson said, includes getting extensions for both the ethanol and biodiesel tax incentive programs.

“Renewable energy supporters’ expected strategy in the Senate likely will be to offer an amendment to the bill that Senate Majority Leader Harry Reid, D-Nev., is expected to offer following the current recess. Those proposals would include a mandate for production of flex fuel vehicles, funding for ethanol blender pumps and a loan program for pipeline to expand the U.S. ethanol market, among other provisions. Efforts are under way to urge Reid to allow the amendment. Reid is planning a Clean Energy Summit in Las Vegas in early September.”

With respect to cellulosic biofuels, a recent Congressional Research Report (“Meeting the Renewable Fuel Standard (RFS) Mandate for Cellulosic Biofuels: Questions and Answers,” by Kelsi Bracmort- July 28) explained that, “The Renewable Fuel Standard (RFS) was expanded under the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140) in an effort to reduce dependence on foreign oil, promote biofuel use, and stabilize transportation fuel prices, among other goals. Over a 15-year period, the RFS seeks to establish a market for biofuels in the transportation sector by requiring that increasing amounts of biofuels—36 billion gallons by 2022—be blended into transportation fuel. The mandate is to be accomplished with an assortment of advanced biofuels, including cellulosic biofuels—fuels produced from cellulosic materials including grasses, trees, and agricultural and municipal wastes. The cellulosic biofuel allotment in the mandate, as established by Congress in EISA, was 100 million gallons due in 2010, increasing to 16 billion gallons by 2022. However, on March 26, 2010, the U.S. Environmental Protection Agency (EPA) issued a final rule for implementation of the RFS that sets a new, lower cellulosic biofuel mandate of 6.5 million gallons for 2010.

“Recent analysis has suggested that the United States might not have sufficient cellulosic biofuel production capacity to meet the 2010 RFS mandate of 100 million gallons instituted by Congress in EISA. The cellulosic biofuel community may fare better at achieving the new mandate set by EPA if certain obstacles are overcome. No commercial-scale cellulosic biofuel plants are currently operating. Roadblocks include unknown levels of feedstock supply, expensive conversion technology that has not yet been applied commercially, and insufficient financial support from private investors and the federal government.”

The CRS report added that, “Even before enactment of EISA, reported production data indicated that overcoming any or all of the hurdles to increase cellulosic biofuel production to meet the original 2010 RFS mandate of 100 million gallons set by Congress was unlikely. The new 2010 cellulosic biofuel mandate of 6.5 million gallons announced by EPA may be attainable with a relatively small number of pilot- or demonstration-scale projects. EPA acknowledges that the pilot or demonstration facilities tasked with producing the majority of the cellulosic biofuel mandate seldom operate continuously or at full ‘nameplate’ capacity. Thus, some argue, it is difficult to state with certainty how much cellulosic biofuel will be produced and over what time frame. EPA anticipates that more than one- third of the mandate will be met with cellulosic ethanol production from the Range Fuels plant located in Georgia.

“According to data provided by the Renewable Fuels Association, two of the 20 U.S. cellulosic ethanol projects currently under construction or development that could produce more than 1 mgy are expected to come online in 2010. Combined, these two facilities are expected to produce roughly 18 mgy of cellulosic ethanol in their first stage of operation. Cellulosic ethanol production capacity of 100 million gallons may not be reached until 2012 or later.”

Animal Agriculture

Jean Guerrero reported in today’s Wall Street Journal that, “Two years after California voters approved a law designed to create humane standards for farm animals, it isn’t clear if these hens are leading lives of luxury—or being treated cruelly.

The law, known as Proposition 2, doesn’t take effect until 2015, but it is already generating confusion among egg producers who aren’t sure if they need to get bigger cages like those at J.S. West or let the hens roam free. As a result, few have made any changes at all.

“The law mandates that egg-laying hens must be able to fully extend their limbs, lie down and turn in a circle within their enclosures. Michigan approved similar regulations last year, and gave egg producers 10 years to make changes. Other states—including Ohio, Arizona and Florida—have adopted less restrictive regulations.”

The article added that, “The California requirements have proven resistant to uniform interpretation. ‘Who knows what the law states,’ said Debbie Murdock, executive director of the Association of California Egg Farmers, which has called for clearer guidelines.

“There is also ambiguity over how the law is going to be enforced, or by whom.

According to California state legislators, no decision has been made on who will have the final say; possibilities include the Department of Food and Agriculture and the Department of Public Health.”

Today’s article indicated that, “[Wayne Pacelle, the president of The Humane Society of the U.S.] says the only way to comply with the new laws is to go cage-free, because, he asserts, no commercially viable cages in existence—including the enriched colony system—give hens the room to perform the behaviors described in the law.”

The Journal article pointed out that, “John Lewis Jr., president of Farmer John Eggs in Bakersfield, says he doesn’t know what to do with his small, family-run company’s 600,000 hens. He doesn’t want to put them in a cage-free environment because, he says, they would be running around in their own feces and he would have to feed them antibiotics.

“Plus, when they are on the ground, he said, ‘If something scares them, they all run into a corner and pile on top of each other and suffocate very quickly.’”

Climate Issues

Bloomberg writer Stuart Biggs reported yesterday that, “New Zealand’s sheep farmers are flocking to a government carbon trading program that pays more to plant trees than sell wool and mutton.

“The system, begun in 2008 and the only one of its kind outside Europe, awards farmers credits that are sold to offset greenhouse gas emissions. The project may earn them about NZ$600 a hectare ($172 per acre) a year on land unprofitable for grazing animals, said David Evison, a senior lecturer at the University of Canterbury’s New Zealand School of Forestry.

Forests planted for carbon credits may increase to 30,000 hectares a year compared with 3,500 hectares in 2009, the government estimates. The system is a welcome alternative for sheep farmers who’ve struggled for decades from a combination of slumping wool prices, drought and competition for land from the dairy and lumber industries, says Neil Walker, a forester in the Taranaki region of New Zealand’s North Island.”

Agricultural Economy- Dairy

The U.S. Department of Agriculture’s National Agricultural Statistics Service indicated yesterday in its Milk Production report that, “Milk production in the 23 major States during July totaled 15.3 billion pounds, up 3.0 percent from July 2009 [related graph]. June revised production at 15.2 billion pounds, was up 2.9 percent from June 2009. The June revision represented an increase of 23 million pounds or 0.2 percent from last month’s preliminary production estimate.”

The number of milk cows on farms in the 23 major States was 8.37 million head, 26,000 head less than July 2009, but 19,000 head more than June 2010,” the NASS report said.

A USDA Daily Radio news item from yesterday included additional analysis on the dairy estimates; to listen to this one-minute audio recap that includes remarks from Agriculture Department Outlook Chairman Gerry Bange, just click here.

Also yesterday, USDA’s Economic Research Service noted in its Livestock, Dairy, and Poultry Outlook report that, “The most recent USDA forecasts indicate that feed prices will likely be higher next year than in the current year. The corn price forecast is $3.50 to $4.10 per bushel for the 2010/11 crop year, a rise from current year projected prices. However, soybean meal prices are forecast slightly lower, at $250 to $290 per ton, for the 2010/11 crop year. The feed price outlook will keep the milk-feed price ratio for both the balance of this year and into next year below a level that usually signals expansion.”

Keith Good

Comments are closed.