FarmPolicy

December 16, 2017

Monday Quick Take: Ag Economy; Trade; Biofuels, and, the Budget

Agricultural Economy

As the ongoing drought in California persists, with resulting adverse water policy determinations for many Golden State farmers, Cindy Change and Matt Hamilton reported in Monday’s Los Angeles Times that, “A winter storm swept through Southern California on Sunday, bringing scattered showers, hail and thunder while higher elevations were expected to see a foot of snow overnight.

“The low-pressure system brought a smattering of storm cells, dumping rain throughout the region from San Luis Obispo to Orange counties.”

Monday’s article noted that, “After a morning lull in precipitation, a second, weaker storm is expected to pass through Monday afternoon. But the rain will not put much of a dent in the state’s lingering drought.

“‘Right now it’s enough to make my cactus smile and to green everything up,’ said Bill Patzert, a climatologist with the Jet Propulsion Laboratory in La Cañada Flintridge. ‘But we would need an inch a day for the next 30 days to make a dent in this drought…. Let’s get right down to it, this is puny.'”

Reuters news reported on Monday that, “Striking truck drivers resumed some roadblocks in Brazil on Monday even as the government cracked down on protesters and promised to implement a law to lower toll costs and give other benefits to the transport sector.

“In the southern state of Rio Grande do Sul, where police had cleared roads by detaining protesters and bringing in back-up troops on Sunday, protesters were stopping trucks at 10 points, the local highway police said. Police were working to clear them, a spokesman said.”

Monday’s article explained that, “The nearly 2-week-old movement has slowed grain deliveries, forced meat-processing plants to close and started to leave some grocery stores with bare shelves.

The country’s No. 2 and 3 soy-exporting ports of Paranagua and Rio Grande have warned that dwindling soy stocks at the ports could affect exports if roadblocks continue.”

Meanwhile, Alexandra Stevenson and Paul Mozur reported in today’s New York Times that, “The smartphone tells the story of a kiwi fruit in China.

With a quick scan of a code, shoppers can look up the fruit’s complete thousand-mile journey from a vine in a lush valley along the upper Yangtze River to a bin in a Beijing supermarket. The smartphone feature, which also details soil and water tests from the farm, is intended to ensure that the kiwi has not been contaminated anywhere along the way.”

Today’s article noted that, “Controlling China’s sprawling food supply chain has proved a frustrating endeavor. Government regulators and state-owned agriculture companies have tried to tackle the problem in a number of ways — increasing factory inspections, conducting mass laboratory tests, enhancing enforcement procedures, even with prosecutions and executions — but food safety scandals still emerge too often.

Chinese technology companies believe they can do it better. From the farm to the table, the country’s biggest players are looking to upgrade archaic systems with robust data collection, smartphone apps, online marketplaces and fancy gadgetry.”

Trade

The New York Times editorial board indicated on Monday that, “The Obama administration and the governments of 11 countries could conclude a sweeping trade agreement known as the Trans-Pacific Partnership in the coming months. Members of Congress should make sure that this and other deals being negotiated are good for America.”

The Times item, added that, “In recent years, trade agreements have become increasingly comprehensive, covering subjects that go far beyond familiar trade issues like tariffs and quotas. The T.P.P. negotiators, for instance, are discussing labor rights, environmental protection, patent and copyright law and how governments treat state-owned businesses. Done right, such deals can raise standards everywhere, protecting workers and opening new markets for American businesses. But there are potential downsides, too, including possible job losses.”

Biofuels

Dan Morgan, a retired reporter and editor with The Washington Post, noted in a column in yesterday’s Des Moines Register that, “Every day nearly a thousand railroad cars roll across the country carrying part of the soaring U.S. energy production that has shaken the global oil cartel and sent gasoline prices plummeting. The cargo is ethanol made from home-grown corn.

“This other American energy boom has been overshadowed by the stunning comeback of the domestic oil industry. President Barack Obama didn’t mention ethanol, biofuels, or agriculture in his State of the Union address, even as he boasted that the country was ‘number one in oil and gas.’ Yet a thriving renewable fuels industry also deserves a share of the credit for the energy renaissance.”

 

Mr. Morgan indicated that, “Based on numbers from the Department of Energy and the oil industry, the amount of ethanol used daily in the United States is now roughly equivalent to the gasoline from 1.2 million barrels of crude oil. That’s about the volume of oil from North Dakota’s Bakken shale, and only slightly less than Qatar’s daily output in 2014.

“Without ethanol, global stocks of oil would have been lower and crude oil prices would have been $10 a barrel higher at the end of 2013, according to a study last year by economist Philip K. Verleger Jr., an energy adviser to Presidents Gerald Ford and Jimmy Carter. Ethanol sold for less than gasoline for all but seven weeks between the start of 2011 and last November, according to data collected by Oil Price Information Service and New York Mercantile Exchange. ‘Blending ethanol with gasoline has been profitable to the refining industry and some of that has been passed on to consumers,’ said Scott Irwin, a University of Illinois agricultural economist.”

Yesterday’s column pointed out that, “Yet ethanol from corn is now out of favor in Washington. In 2011, Congress cancelled a 33-year-old tax credit for blending it with gasoline. For more than a year, the White House has been considering a proposal by the Environmental Protection Agency to scale back requirements for biofuels in gasoline and diesel fuel that were set in 2007 energy legislation. EPA has taken other actions as well that could slow or even end the growth of ethanol, based on the agency’s concern about the fuel market’s ability to absorb larger volumes.

“The just-released White House annual economic report to Congress does cite the growth of ethanol and biofuels along with other energy achievements. But President Obama, once an enthusiast, last mentioned ethanol publicly on Aug. 17, 2011, when he stressed the need to ‘figure out how we can make biofuels out of things that don’t involve our food chain.'”

Concluding, Mr. Morgan noted that, “With grain prices near lows of a few years ago and ethanol production at record levels, corn farmers insist they can grow more crops for energy without hurting consumers or the land. ‘No matter how you slice it, corn produces food and energy more efficiently than anything else,’ said Ron Alverson, a corn farmer and founding chairman of Dakota Ethanol, a 48 million gallon-a-year plant in Wentworth, S.D.

The administration may not see it that way. Even so, the biofuels industry deserves better than to be the orphan of President Obama’s energy policy. In an ‘all of the above’ energy strategy, it seems only fair to give the ‘corn patch’ a place alongside the ‘oil patch.'”

Budget

Mike DeBonis and Paul Kane reported on the front page of Monday’s Washington Post that, “House Republican leaders will face a familiar dilemma this week when they try again to approve funding to keep the Department of Homeland Security functioning through the end of September: They know their party is too divided to resolve the crisis on its own but fear the political fallout if they rely on Democrats to get them out of the jam.”

The Post article noted that, “By late Sunday, [Speaker John] Boehner’s House Republicans had no clear path to a solution other than retreating from their demands that the DHS funding measure include provisions that would block ­implementation of President Obama’s executive actions on immigration.”

Speaker Boehner addressed the DHS funding issue yesterday on “Face the Nation.”

Keith Good

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