- FarmPolicy - http://farmpolicy.com -

Biofuels; Agricultural Economy; Grocery Issues; and, Regulations

Biofuels (Cellulosic Feedstocks, Oil Prices)

Christopher Doering reported in yesterday at The Des Moines Register Online that, “Iowa made a record 3.9 billion gallons of ethanol in 2014, but output of the fuel faces uncertainty next year as the U.S. government debates the future of a controversial rule mandating the blending of ethanol in gasoline, a trade group said Monday.

“Iowa, the largest ethanol producing state, accounted for roughly 27 percent of country’s production this year. The increase in production in 2014 was the first noticeable one in years after output hovered at about 3.7 billion annually since 2011, according to Iowa Renewable Fuels Association.”

Mr. Doering noted that, “For the first time, a small amount of the ethanol production came from cellulosic feedstocks such as corn stover and corn kernel fiber. Despite falling short of cellulosic production goals in recent years, producers of the nascent fuel are starting to show signs of delivering. In 2014, Poet-DSM opened its $275 million facility in Emmetsburg. DuPont plans to open its $225 million cellulosic ethanol plant in Nevada next year.

“IRFA said the ethanol industry is facing uncertainty in Congress where some lawmakers are considering legislation that would change or repeal the Renewable Fuels Standard that requires increasingly more ethanol to be included in the country’s gasoline supply. Growth is further hindered by the inability of consumers to have access to higher blends of ethanol, such as gasoline containing 15 percent of the largely corn-based fuel, the group said.”

Samantha Pearson reported earlier this week at The Financial Times Online that, “Raízen, Royal Dutch Shell’s joint venture in Brazil, plans to spend close to $1bn on ‘second generation’ ethanol plants over the next decade in one of the boldest investments yet in biofuel production from sugarcane waste.

“The company, Brazil’s largest ethanol producer, will invest about R$2.5bn ($930,000) on eight plants before 2024 in an effort to increase its biofuel output by up to 50 per cent.

“The first plant, with an annual capacity of 40m litres, was finished last week. In total, the plants will produce 1bn litres a year, João Alberto Abreu, Raízen’s agroindustrial director, told the Financial Times.”

The FT article explained that, “The investment comes as many Brazilian ethanol producers are struggling to stay afloat and represents a critical vote of confidence in the commercial prospects of second generation or cellulosic ethanol following decades of research and failed attempts.

“Only in 2012, BP cancelled plans for a $300m cellulosic ethanol plant in Florida, saying it believed it could make better returns elsewhere.

“However, companies including the US chemicals group DuPont have since piled into the industry, investing in plants that produce biofuel from agricultural waste such as corn husks or the bagasse left over from sugar cane and conventional ethanol production.”

Meanwhile, Timothy Puko reported in today’s Wall Street Journal that, “Oil prices hit fresh five-year lows on Monday on signs a global glut will keep growing.”

Today’s article noted that, “Light, sweet crude for February delivery, the U.S. benchmark, ended down 2.1% at $53.61 a barrel on The New York Mercantile Exchange. The February contract for Brent crude settled down $1.57, or 2.6%, to $57.88 a barrel on London’s ICE Futures exchange.

The closing prices were the lowest since May 2009, adding to a series of new lows oil markets have set this year. Prices are falling because of a sharp rise in U.S. production that has crowded out imports, leaving the global market oversupplied. The Organization of the Petroleum Exporting Countries also opted to maintain its production quotas at its November meeting, sending the market into a tailspin.”

And in a related article, Josh Mitchell and Amy Harder reported in today’s Wall Street Journal that, “In recent years, the federal government required passenger cars and trucks to become much more fuel-efficient, with a goal to more than double average miles per gallon by 2025. More than a dozen states ordered auto makers to boost sales of electric vehicles, helped by billions of dollars in federal spending. And President Barack Obama’s administration increased spending on intercity passenger rail, joining states like California in planning for Asian- and European-style bullet trains.

“Those policies now face a changed landscape: a nearly 44% slide in oil prices since June that has sent the average price of gasoline to around $2.40 a gallon, according to the U.S. Energy Information Administration.”

The Journal writers pointed out that, “The developments highlight the difficulty of designing long-term policies around volatile crude-oil and gasoline prices. They also point to a long-standing reality in American energy policy: Even before the latest price drop, gasoline has long been far cheaper than in advanced economies in Europe and Asia, making it tough to promote alternatives.”

In a separate perspective on the impact of lower oil prices, Bloomberg writer Lauren Etter reported this week that, “As crude prices tumble, landowners across Texas are accelerating production of a different kind of oil — olive oil.”

Ms. Etter noted that, “Five years after one of the biggest oil booms in decades boosted royalty checks, a steep decline in oil prices has Texans seeking new ways to stay ahead. About 70 farmers across the state — up from 24 in 2008 — are hoping to cash in on America’s growing appetite for olive oil, a small part of the latest effort to diversify the economy of the second most-populous U.S. state.

In 2013 Texas farmers planted about 500,000 olive trees, up from 80,000 trees in 2008, according to figures from the Texas Olive Oil Council. The council expects around two million trees to be planted by the end of next year.”

The Bloomberg article noted that, “Texas isn’t traditionally olive country, and two decades ago the state had virtually no olives to speak of. In the late 1990s a handful of farmers became intrigued by the prospect of growing olives in the state. As it turned out, the climate in parts of central and southern Texas was well suited to the Mediterranean specimen.

“The U.S. is among the world’s largest consumers of olive oil, yet it produces just a fraction of its own consumption. About 97 percent of the olive oil used in the U.S. is imported from overseas, primarily Italy and Spain, according to the American Olive Oil Producers Association.

Last year the U.S. imported $1.1 billion worth of olive oil, up from around $400 million in 2000, according to import figures from the U.S. Department of Agriculture.”

 

Agricultural Economy

An update yesterday from USDA’s Radio News Service indicated that, “As farmers do last second land rental rate negotiations, what is the likelihood of a major decline in rents and land values?” The one-minute audio presentation included remarks from outgoing USDA Chief Economist Joe Glauberclick here to listen.

In other developments, Veronica Rocha reported this week at the Los Angeles Times Online that, “Though major storms have brought much-needed rainfall to the state this fall and early winter, especially in Northern California, meteorologists warn that there is no guarantee that they will continue — noting that in 2010 areas such as Southern California saw massive rainfall in December, only to revert to drought conditions almost immediately afterward.

“‘If the drought persists, there will be catastrophic consequences for all kinds of species — especially those dependent on water, like amphibians,’ [Gold Country Wildlife Rescue spokeswoman Jackie Nott] said. ‘It is very likely there will be pockets of local extinction for these animals.’”

Veronica Rocha and Rong-Gong Lin II reported yesterday at the Los Angeles Times Online that, “Health officials issued a winter weather warning for Southern California mountains and valleys as an extremely cold storm is expected to hit Tuesday afternoon, bringing rain and snow.”

The article stated that, “The latest cold front from Canada is expected to drop up to a foot of new snow on the eastern San Gabriel Mountains.

Two to 4 inches of snow could blanket parts of the Antelope Valley including Acton, Lancaster and Palmdale starting Tuesday afternoon into Wednesday.”

In trade related news, J. Andrew Curliss of The News & Observer (Raleigh, N.C.) reported recently that, “Japan imposes a relatively modest 4.3 percent tariff on imported pork but has a separate system, known as the ‘gate price,’ that more fundamentally controls what U.S. pork farmers can send there.

“The ‘gate’ amounts to what experts say is a roughly 25 percent additional duty on U.S. pork exports to Japan; it effectively keeps out low-priced cuts.

“The U.S. pork industry, which stretches from North Carolina to the upper Midwest, wants the tariff and the ‘gate’ gone as part of a big trade deal nearing completion. Any deal on pork would likely keep prices higher for U.S. consumers as a result of the increased demand abroad.”

The article noted that, “Pork has become such an important point in trade talks that, for the moment, the entire Trans-Pacific Partnership could hinge on swine and a few other key agriculture products, said Darci Vetter, a U.S. trade representative who is the lead negotiator on agriculture products.

“Vetter said in a recent interview that the talks are ‘delicate,’ and that pork is ‘one of the most difficult parts of our negotiation.’

She said the U.S. will not make a TPP deal without breaking down Japan’s significant barriers on pork, but she stopped short of saying all protections would go away. Japan has so far been reluctant to make any change.”

Meanwhile, Chuin-Wei Yap reported today at the China Real Time blog (Wall Street Journal) that, “Smuggling in the world’s second largest economy might conjure images of small-package, high-value commodities coveted by Chinese urbanites, such as iPhones, cocaine or even lobsters. But another contraband of a more common variety has been flowing in vast quantities across China’s 800-mile border with Vietnam: rice.

“How much? It’s likely that more rice is being smuggled from Vietnam into China than the volume sent in legal shipments, the chief of China’s cabinet-level State Council’s rural policy unit Chen Xiwen said at a university conference over the weekend. That means there may be at least 1.2 million metric tons of rice smuggled into the mainland in the first 11 months this year – a quarter of the total amount of rice the U.S. consumes in a year.

“By official volumes, Vietnam is already China’s largest rice supplier, accounting for slightly more than half of China’s total rice imports.”

 

Grocery Issues

Mitch Smith reported in today’s New York Times that, “Here in southwest Kansas, where small communities have struggled since the Dust Bowl to retain businesses and residents, a town’s viability is measured by what has not yet closed. Losing a post office is considered the kiss of death. Losing a school can be a terminal diagnosis.

But losing a grocery store, as Plains did in 2001, is a problem that, while not necessarily lethal, is most certainly cause for concern.

“‘A grocery store is the heart of the town,’ said Jeanne Roberts, who is leading the effort to open a new shop. ‘In small towns, it’s the social gathering place. And when you don’t have that social gathering place and you’re going outside, then you don’t feel connected.’”

The article noted that, “Many people in Plains are fighting — against the odds, but with some notable success — to bring fresh groceries back to their one-square-mile city limits.

“Supporters of the project believe a grocery store will serve as a catalyst for further development and an antidote to the demographic trends that have ravaged this part of the nation for decades.”

Julie Jargon and Annie Gasparro reported in today’s Wall Street Journal that, “Consumers weighing whether to dine out at a tablecloth restaurant or a fast-food joint now have additional options to consider: the grocery store and the minimart.

“Supermarkets have long offered items like rotisserie chicken, and convenience stores have served roller-grill hotdogs and heat-lamp pizza. But in recent years companies in both categories have reformatted their stores and beefed up their menus with fresh, made-to-order offerings that they hope will woo eaters from traditional restaurants and burger joints and lead them to buy other goods the stores sell as well.”

The Journal writers indicated that, “Sales of prepared foods and baked goods at Whole Foods Market Inc., which pioneered the sale of fresh-cooked items in its stores, more than doubled to $2.7 billion in fiscal 2014 from $1.3 billion in 2007. That puts Whole Foods on a par with restaurant companies like Chipotle Mexican Grill Inc., whose sales were $3.2 billion last year. Other grocery chains are following suit. Industry giant Kroger Co. is experimenting with putting grilling stations between its meat and seafood areas, and Mariano’s, a Chicago-area unit of Roundy’s Inc., has opened new outlets with sushi counters and oyster bars.”

 

Regulations

Timothy Cama reported yesterday at The Hill Online that, “The incoming Republican chairman of the Senate Environment and Public Works Committee said fighting environmental regulations will not be his top priority in the next Senate.

“Instead, Sen. James Inhofe (R-Okla.) plans to focus on funding transportation infrastructure, the other main role of the environment panel.

“‘Transportation and infrastructure are going to be the first thing out of the chute,’ Inhofe told the Tulsa World.”

An update yesterday from the U.S. Fish and Wildlife Service (“Service Initiates Status Review of Monarch Butterfly under the Endangered Species Act”) noted that, “The U.S. Fish and Wildlife Service today announced it will be conducting a status review of the monarch butterfly under the Endangered Species Act (ESA). The Service has determined that a petition from the Center for Biological Diversity, the Center for Food Safety, the Xerces Society for Invertebrate Conservation and Dr. Lincoln Brower to list a subspecies of monarch (Danaus plexippus plexippus) presents substantial information indicating that listing may be warranted.”

And lastly today, Robert Costa reported in today’s Washington Post that, “Rep. Michael G. Grimm (R-N.Y.), who pleaded guilty in federal court last week to felony tax fraud, privately told House Republican leaders Monday that he will resign, following calls from Democrats for him to step down.

“Grimm spoke with House Speaker John A. Boehner (R-Ohio) by phone Monday, according to Republicans familiar with the exchange.

“Grimm could face up to three years in prison. He is scheduled to be sentenced June 8.”

Keith Good