FarmPolicy

Biofuels- Taxes; Ag Economy; Climate Issues; and the Farm Bill

Biofuels- Taxes

David Herszenhorn and Jackie Calmes reported in today’s New York Times that, “President Obama announced a tentative deal with Congressional Republicans on Monday to extend the Bush-era tax cuts at all income levels for two years as part of a package that would also keep benefits flowing to the long-term unemployed, cut payroll taxes for all workers for a year and take other steps to bolster the economy.

“The deal appeared to resolve the first major standoff since the midterm elections between the White House and newly empowered Republicans on Capitol Hill. But it also highlighted the strains Mr. Obama faces in his own party as he navigates between a desire to get things done and a retreat from his own positions and the principles of many liberals.

“Congressional Democrats pointedly noted that they had yet to agree to any deal, even as many Republicans signaled that they would go along.”

The Times article explained that, “In addition to dropping his opposition to any extension of the current income tax rates on income above $250,000 for couples and $200,000 for individuals, [Pres. Obama] agreed to a deal on the federal estate tax that infuriated many Democrats. The deal would ultimately set an exemption of $5 million per person and a maximum rate of 35 percent — a higher exemption and far lower rate than many Democrats wanted.

“‘The House Democrats have not signed off on any deal,’ Representative Chris Van Hollen of Maryland, who has been representing House Democrats in formal negotiations on the tax issue, said Monday night. ‘We will thoroughly review and discuss the proposed package in the caucus.’

“Some senior Democrats said an agreement by Mr. Obama to accede to Republican demands on the estate tax could lead to a revolt among lawmakers.”

Today’s article added that, “[Senator Jon Kyl of Arizona, who represented Senate Republicans in the formal negotiations on the tax plan], along with Senator Blanche Lincoln, Democrat of Arkansas, was a chief architect of the version of the estate tax in the agreement with Mr. Obama. Other Senate Democrats are likely to be receptive to the proposal. The estate tax lapsed this year, but was scheduled to return on Jan. 1 with an exemption of $1 million per person and a maximum rate of 55 percent.

“Republicans who deride the estate levy as the ‘death tax’ have long sought to eliminate it.”

Jonathan Weisman, John D. McKinnon and Janet Hook reported in today’s Wall Street Journal that, “In reaching the deal, whose details still need to be worked out, Mr. Obama brushed past the demands of many in his own party to curb tax cuts for the wealthy. Some liberal lawmakers and activists were left seething, particularly over last-minute concessions to Republicans on the estate tax. Democratic leaders didn’t agree to the deal during meetings on Monday with Mr. Obama and Vice President Joe Biden, according to a House aide.”

“In the Senate, Tom Harkin (D., Iowa) called it ‘an understatement’ to say he was disappointed.”

Alexander Bolton reported yesterday at The Hill Online that, “Vice President Biden will go to Capitol Hill Tuesday to sell Democrats on the tentative deal President Obama struck with congressional Republicans to extend the Bush tax cuts for two years.

“He will attend the Senate Democratic Caucus lunch at 1:30 p.m., according to his schedule.”

John Stanton reported last night at Roll Call Online that, “Democratic leaders in both chambers face a hard sell this week in persuading their rank and file to back the deal reached by Republicans and the White House to pass a two-year extension of all the Bush-era tax cuts in exchange for a one-year extension of unemployment insurance.”

And in a separate Roll Call article from last night, Mr. Stanton reported that, “Sen. Bernie Sanders on Monday all but promised to filibuster President Barack Obama’s controversial agreement with Republicans to extend all of the Bush-era tax cuts for two years.”

The New York Times editorial board opined today that, “President Obama’s deal with the Republicans to extend all the Bush-era income tax cuts is a win for the Republicans and their strategy of obstructionism and a disappointing retreat by the White House.”

With respect to biofuels and the tax agreement, Reuters writer Charles Abbott reported last night that, “Congress is likely to extend the major U.S. ethanol incentive, rather than let it expire at the end of the month, but it will cut the tax credit by 20 percent or so, an analyst and an industry spokesman said on Monday.

“Mark McMinimy of Washington Research Group said the most likely outcome was for a one-year extension of the tax credit at 36 cents a gallon, down from the current 45 cents.

“The Renewable Fuels Association, a trade group, said it believed ethanol was part of ongoing discussions for an omnibus tax bill dominated by estate and income tax rates. A business lobbyist also said ethanol was believed part of the talks.”

Mr. Abbott explained that, “If included in the omnibus bill, biofuel provisions were expected to be similar to a proposal last week by Senate Finance Committee chairman Max Baucus — a 36-cent excise credit for ethanol, an 8-cent credit for small ethanol producers, extension of the 54-cent ethanol tariff and revival of the $1 a gallon biodiesel credit.”

Yesterday’s article noted that, “RFA spokesman Matt Hartwig said the Baucus provisions could be an early look at the likely final result of congressional action, a view held by others in the ethanol industry.

“‘Is 36 cents better than zero? Absolutely,’ said Hartwig, but he added the industry would continue to seek a higher support rate or a longer-term extension.”

Similarly, Chris Clayton reported last night at the DTN Ag Policy Blog that, “Right now, though, it remains to be seen exactly what will be in this tax bill, including the language on biofuel tax credits. There is a lot of speculation Monday that the ethanol blender’s credit will look like the plan that Senate Finance Committee Chairman Max Baucus, D-Mont., offered before the weekend, with a 36-cent blender credit rather than the current 45 cents a gallon.”

Meanwhile, in an analytical look at developments influencing corn prices (“Corn Prices Looking For Direction”), University of Illinois Agricultural Economist Darrel Good noted yesterday that, “One of the largest uncertainties is the fate of the ethanol blenders’ tax credit. That credit is currently at $.45 per gallon of ethanol blended into the fuel supply, but that credit is set to expire on January 1, 2011. Congress could choose either to renew the credit at the current or lower level or let the expiration stand. All options are being debated without a strong indication of the likely outcome. A renewal of the tax credit, even at a lower level, would point to continued strong ethanol demand and the likelihood of ethanol production exceeding the mandate of 13.95 billion gallons in 2011. Without the tax credit, ethanol production would presumably not drop below the mandate. The relationship between ethanol and gasoline prices would determine if production exceeded the mandate while the level of ethanol and gasoline prices would influence the price of corn. Current ethanol and gasoline prices favor ethanol blending (ethanol prices lower than gasoline prices) and would support corn prices at current or higher levels.”

In a short column from yesterday, Senator Ben Nelson (D-Neb.) stated that, “Ethanol’s opponents are also trying to use the recent bump in commodity prices to prevent renewal of the Volumetric Ethanol Excise Tax Credit, commonly referred to as the blender’s credit, which is set to expire at the end of the year.

“If those critics succeed in cutting ethanol subsidies it would be a terrible mistake that would harm the industry at a time when it’s helping our economy and reducing oil consumption in the U.S.”

Sen. Nelson added that, “A proposal in the House Ways and Means Committee would only extend the ethanol tax credit for one-year and at a reduced rate, from 45 cents to 36 cents per gallon.

“We need to continue the present tax credit which is why I am a sponsor of S. 3231, the GREEN Jobs Act of 2010 which would extend the current tax credit for another five years.”

Ag Economy

Leslie Josephs and Banikinkar Pattanayak reported yesterday at The Wall Street Journal Online that, “China may be Asia’s fastest-growing major economy, but the continent’s second-biggest market, India, is driving prices of two prized commodities.

“Sugar and cotton prices are surging as India restricts exports to make sure its own booming population has enough of both commodities. Poor harvests from key sugar and cotton producers have left both markets struggling to meet growing global demand.”

In a separate article regarding sugar, from a domestic perspective, DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Barring a court appeal, a federal judge has now ordered that USDA must ensure biotech seed companies ‘plow under’ Roundup Ready sugar beet stecklings, effectively becoming the first federal judge in the U.S. to order the destruction of a previously deregulated biotech crop.

“U.S. District Judge Jeffrey White on Friday issued his preliminary injunction in the U.S. District Court of Northern California requiring four companies holding permits from USDA to grow the stecklings, or seedlings, to ‘plow under the stecklings’ by no later than the afternoon of Dec. 14.”

The DTN article added that, “Just a day earlier White had raised doubts about his own ruling that Roundup Ready sugar beet stecklings be ‘removed from the ground’ with the judge questioning why plaintiffs in the lawsuit assumed that meant the stecklings should be destroyed. His Friday language left no doubt.

“Four companies involved in producing Roundup Ready sugar beets — Monsanto Co., American Crystal Sugar co., Syngenta Seeds Inc., and Betaseed Inc. — have appealed White’s ruling to the Ninth Circuit Court of Appeals, seeking to block destruction of the stecklings.”

Yesterday’s article indicated that, “The legal battle over Roundup Ready sugar beets doesn’t affect the 2010 crop harvested earlier this fall, but has raised a lot of questions about the ability to plant Roundup Ready sugar beets next spring.”

Meanwhile, Dow Jones News reported yesterday that, “World grain prices could as much as double by 2050 as population growth and climate change put growing pressure on resources, according to a report published Monday.

“Corn prices could rise 100.7% while the cost of rice could increase 31.2% as production struggles to keep pace with the world’s rapidly-expanding population in the face of rising temperatures, research from the International Food Policy Research Institute found.

“While global food prices have fallen in the past century, the report said it expects this trend to reverse. ‘Increasing demand driven by population and income growth is greater than productivity growth, which is hampered by the negative productivity effects of climate change,’ it said.”

Climate Issues

Juliet Eilperin and William Booth reported in today’s Washington Post that, “The U.N.-sponsored climate talks, which began here a week ago, entered a new phase Monday, as delegates and high-ranking ministers from nearly 200 countries settled into vast, sunless meeting rooms, intent on restoring the credibility of a process aimed at slowing global warming.

“While last year’s climate talks in Copenhagen produced little despite attracting more than 100 heads of state, some experts suggested this wonkish two-week meeting in a resort better known for college undergrads’ drunken excesses could end up laying the groundwork for a future climate agreement.

“‘In stark contrast to Copenhagen, there’s less acrimony, and less ambition and less expectations,’ said Jennifer Haverkamp, managing director for international climate policy at the Environmental Defense Fund. ‘Ironically, that seems to have opened the door to some modest progress.’”

Domestically, Robin Bravender reported yesterday at Politico that, “The U.S. Supreme Court will take on another landmark global warming lawsuit, the high court announced today.

“The court will hear an appeal next year from electric utilities in the high-profile American Electric Power v. Connecticut case. Power companies are challenging a lower court ruling that allowed states and environmental groups to move ahead with a public nuisance lawsuit seeking to force the utilities to slash their greenhouse gas emissions.

“Monday’s decision marks a victory for the utilities -– American Electric Power Co., Duke Energy, Southern Co., Xcel Energy Inc. and the Tennessee Valley Authority -– that want the court to toss out the decision that could force them to reduce their greenhouse gas emissions.”

In other climate related developments, Darren Samuelsohn reported yesterday at Politico that, “Would anyone notice if the White House didn’t have a special energy and climate office?

“That’s the million-dollar question as President Barack Obama considers giving Carol Browner a promotion to deputy chief of staff.

“Browner took charge of the newly-created enclave two years ago and was seen as the leader of an all-star green team. But while her stock has risen with the president, her portfolio has shrunk with the new political reality.”

And a Greenwire article by Elana Schor, which was posted yesterday at The Inhofe EPW Press Blog (Sen. James Inohfe (R-OK)), reported that, “The political collapse of cap-and-trade climate legislation won’t dislodge greenhouse gas emissions reductions from the top of the Senate Environment and Public Works Committee’s agenda next year, Chairwoman Barbara Boxer (D-Calif.) vowed today.

“Briefing reporters on her priorities for the international climate talks proceeding in Mexico, Boxer framed her hard-fought re-election victory last month — as well as Californians’ rejection of a bid to delay the landmark state global warming law — as a sign of public support for cutting carbon emissions without a comprehensive climate bill.”

Yesterday’s update added that, “Boxer said she expects the environment panel to keep the climate issue front and center through briefings, hearings and other events in 2011. Even as she acknowledged that the cap-and-trade approach passed last year by the Democratic-controlled House is dead for the time being, Boxer said committee action on some form of a climate bill could well come in the 112th Congress.”

Farm Bill

A news release from Friday by the Michigan Farm Bureau (MFB) regarding its annual meeting last week indicated that, “On national farm policy, delegates debated at length about farm bill legislation which will be discussed in Congress next year. That legislation, [Sarah Black, director of the MFB Public Policy and Commodity Division] said, will impact every farmer in Michigan.

“Delegates supported federal programs that may include direct payments but focused on improving the Average Crop Revenue Election (ACRE) program to encourage farmer participation; and a broader definition of specialty crops. Delegates also added new language to the policy that would compensate equine owners for losses due to government-imposed regulations that prevent the sale of horses for meat processing.”

The release added that, “Among new national policies passed was one on antibiotic use, which opposed recent political efforts to restrict their use in farm animals.

“‘The limitation or elimination of animal antibiotic use from the livestock industry will have negative economic and animal health consequences,’ the policy reads. ‘The use of antibiotics is approved by FDA only after a complete scientific review and testing process has been completed. … The animal agriculture industry relies on the veterinarian community to assist with and oversee animal health. … We believe that veterinary oversight is defined as a working relationship with a licensed veterinarian.’

“Another state policy titled Livestock and Poultry Health reinforced that stand, saying ‘we strongly support the current approval process for antibiotic use in farm animals.’”

Recall that Urban C. Lehner, the DTN vice president of editorial operations, recently noted that, “Others, like the Iowa Farm Bureau, are looking for a richer, county-based ACRE program, and are willing to give up direct payments to get it.

“But the Oklahoma Farm Bureau likes direct payments and the new chairman of the House Agriculture Committee is an Oklahoman. So the chances of Congress abandoning direct payments are slim.”

As Senator Debbie Stabenow, the Michigan Democrat who is up for reelection in 2012, moves to chair the Senate Agriculture Committee, perhaps the Michigan Farm Bureau’s views could be similarly influential.

Keith Good

Posted by Keith Good • December, 7, 2010 • 4:40 am