Ethanol

USDA Forecasts Significant Drop in U.S. Ag Trade Deficit as Exports Rise

Fri, 27 Feb 2026 21:24:46 GMT

USDA now projects the U.S. agricultural trade deficit will narrow to $29B in FY2026 , down from about $50B a year ago. Undersecretary for Trade and Foreign Agricultural Affairs Luke Lindberg says the trade team isn’t done yet.

(Data: USDA)

“Our goal is to get back to surplus, but going from $50 billion (forecasted) to $29 billion in one year shows tremendous progress, 43% down over this time last year, and we’re continuing to make good progress on seeing that drop even further,” Lindberg says.

Exports rising

Three areas with notable increases in exports by year-end of 2025 include:

Dairy exports up 15%
Ethanol exports up 11%
Corn exports up 29%

Simply put, the U.S. ag trade balance is export value minus import value. Lindberg says the export side of the equation is where his team can make the most impact.

“We’ve seen great opportunities as our producers can take new advantage of some of these trade deals the president has put in place. So, the stat that I love to say right now is over half the world’s population and over half the world’s GDP have come to some kind of a trade agreement with the president in his first year in office. That’s a lot of mouths to feed and a lot of dollars that can be buying U.S. products.”

In recent decades, the U.S. maintained a positive trade balance up until 2020 when the surpluses were much smaller or became deficits.

How USDA says it will push exports

To build back trade, Agriculture Secretary Brooke Rollins’ team is sticking to a three-point plan:

Get better trade agreements.
Build willing buyer and willing seller relationships.
Hold trading partners accountable.

“Our team and our friends over at the U.S. Trade Representative’s Office have done a tremendous job opening up market access with our dealmaker-in-chief, President Donald J. Trump. Our team at USDA plays an outsized role in getting our farmers and ranchers out there to sell their products. I refer to it as building buyer-seller relationships. And so we’re aggressively approaching that this year, with getting our farmers and ranchers and our agribusinesses on the ground in these countries where they have market access today that they didn’t have yesterday,” he says.

Trade missions: 2026 schedule and priorities

To continue to build trade relations and boost exports, Lindberg points to the traditional USDA agribusiness trade missions ( of which there are six scheduled in 2026 ), and the rapid response trade missions called TRUMP missions (Trade Reciprocity for U.S. Manufacturers and Producers).

“We really do have a robust, aggressive schedule this year to make sure we’re quickly getting into these markets that the president has unlocked,” he says. “We need market access. We need to be able to compete on a fair and level playing field to export our products around the world.”

Domestic angle: imports, tariffs, and “level playing field”

As for the domestic demand of ag products, and potentially reducing the value of agricultural imports, Lindberg says farmers should also have a level playing field stateside.

“Our farmers and ranchers now have a better playing field, both overseas, where we’re taking down trade barriers, but also here domestically, through the President’s aggressive use of tariffs and the way in which he has restructured the opportunities that exist domestically for our farmers. And we’re seeing that in the trade data, where on a dollar-for-dollar basis, we’re going to be importing a significant amount less this year than we did even last year. And what that does is it means more Americans, more of their dollars are going towards food that is produced, consumed, slaughtered, raised, processed, right here in the United States of America, and I think that’s a win as well.”

The next agribusiness trade mission is to the Philippines.

USDA Trade Team Returns from Malaysia with a Focus on These Key Ag Products

Fri, 16 Jan 2026 13:39:24 GMT

As a follow up to the Oct. 26, 2025, trade deal announced by President Donald Trump, the USDA trade team just returned from a recent Trade Reciprocity for U.S. Manufacturers and Producers (TRUMP) mission.

Luke Lindberg, USDA undersecretary for trade and foreign agricultural affairs, says there were good, productive meetings toward elevating the relationship between the U.S. and Malaysia, which ranks as the 26^th largest ag trade market.

“These TRUMP missions were one of the aspects of [Agriculture] Secretary [Brooke] Rollins’ and my three-point plan to really ramp up U.S. agricultural exports. So, the president’s done a tremendous job of negotiating these new agreements around the world, and our job is to get on the ground with farmers, with U.S. agribusinesses, and start to make deals happen,” Lindberg says. “The analogy I’ve been using is the president is opening the door, and it’s our job to drive a bus through it.”

The trip to Malaysia had a delegation of 16 agribusinesses and trade associations. In recent years, the biggest U.S. agricultural exports to Malaysia have been soybeans, dairy products, cotton, vegetables and nuts.

“The whole barnyard kind of came with us this time around, because one of the things that the U.S. trade representative’s team and we did with USDA and the White House was we actually got Malaysia to agree that the U.S. food system is safe, and that’s in the language of the agreement,” he says.

Of the specific categories he shared, there was progress on many fronts including:

Soybeans — In 2024, Malaysia imported almost 452 metric tons of U.S. soybeans. Lindberg says U.S. leaders met with the largest soy crush facility, and he sees opportunities for growth.
Dairy — In total for 2024, Malaysia imported $118 million in dairy products. “We’ve seen a tremendous increase in dairy access and opportunities there, 23% growth this past year for dairy,” Lindberg says.
Ethanol — “We had a great conversation around ethanol opportunities,” Lindberg says. “Malaysia is a regional distributor of fuels, and so working ethanol into the fuel supply chain that can really spread throughout the ASEAN region, a lot of good opportunities out there.”
Beef — “We visited a very successful restaurant group in Malaysia that’s been begging for U.S. beef for a long time,” Lindberg says. “They’ve actually invested in a beef processing plant in the United States to get their beef halal certified so that they’re ready to go for when the actual duties shift and the regulations come into full force.”

Lindberg says a key tenant of the trade deal is to reduce or eliminate all tariffs.

“A lot of our producer groups haven’t been able to compete on a level playing field in Malaysia in the past, and now they have that access and that opportunity,” he explains. “When our groups can compete on a level playing field, I think we win more often than we lose.”

Next steps include a Malaysian delegation visiting Washington, D.C., next week.

“We’re marching forward here with a great opportunity on the horizon. I think it’s progressing nicely,” Lindberg says. “These rapid-response missions are largely driven by building these kind of new opportunities that really didn’t exist yesterday and exist today. In the next couple months, we’ll see full implementation of the deal, and that’ll really be the access-opening opportunity for our producers.”

Looking ahead this year, Lindberg says the USDA trade team is “hyperfocused” on fixing the agricultural trade deficit. With 2026 agribusiness trade missions announced for Indonesia, Philippines, Turkey, Australia and New Zealand, Saudi Arabia, and Vietnam, he highlights time spent in Southeast Asia is a strategy to build trade in a region with growing GDP and positive consumption trends for U.S. agricultural goods.

“It’s going to be a dynamic year for U.S. trade,” Lindberg says. “I keep saying to folks: Trade agreements are great, but sales are the goal.”

Jet Fuel May Propel the Future of Dairy Nutrition

Thu, 28 Aug 2025 15:00:00 GMT

Advancements in agriculture continue to move at a supersonic pace. One of the latest developments: jet fuel made from corn.

Corn-based Sustainable Aviation Fuel (SAF) takes biofuels to a new level beyond ethanol production. It actually begins with ethanol, which is then enhanced via “Alcohol-to-Jet” pathways to form a fuel suitable for aviation.

According to the American Coalition for Ethanol , SAF is “a renewable alternative to conventional jet fuel that could be used in today’s aircraft and immediately improve the environmental impact of flight.” Relying on renewable sources like corn, SAF is said to deliver equivalent performance to petroleum-based jet fuel with a fraction of its carbon footprint, and is suitable to use in today’s existing aircraft engines and infrastructure.

At an estimated 80% reduction in overall CO₂lifecycle emissions compared to fossil fuels, SAF promises to drive the “decarbonization” of air travel.

Like ethanol, corn-based SAF could yield massive quantities of co-products. The U.S. livestock industry is poised to embrace those resources, according to Dr. Kurt Rosentrater, Professor of Agricultural and Biosystems Engineering at Iowa State University.

On a recent episode of The Dairy Podcast Show , Rosentrater noted that after just two decades, dried distillers grains with solubles (DDGS) have become a widely implemented staple in animal nutrition.

“When the ethanol industry was in its earliest stages, I remember having conversations with companies saying, ‘in a couple of years, we’re going to be dealing with 10 million tons of DDGS. What are we going to do with all of that? We’re going to have to burn it and landfill it,’” he recalled. “Well, right now we’re sitting at about 33-35 million tons per year, and we’re not landfilling it, we’re not burning it. We’re using it in beef, dairy, swine, fish, and pet foods, plus we’re exporting about a third of it.”

Rosentrater credited dairy and livestock nutritionists with optimizing ingredients like DDGS for a variety of species. At the same time, ethanol manufacturers have fine-tuned production practices to create more consistent, specialized, and high-quality co-products.
He expects that same ingenuity to prevail if corn (and also potentially soybeans) is channeled at a large scale into SAF production. “In the past few years, there has been a big push among lots of different organizations about the idea of the ‘circular economy,’” he shared. “I laugh at that, because, in agriculture, we’ve been doing the circular economy for generations.”

The first commercial-scale facility converting U.S. corn into SAF is currently slated to be in the dairy-boom state of South Dakota. Gevo’s Net-Zero 1 plant near Lake Preston, SD, is projected to produce an estimated annual 60 million gallons of SAF, plus an accompanying 1.32 billion pounds of protein and animal feed and 30 million pounds of corn oil.

Although the South Dakota plant was initially slated to begin production in 2025, delays in financing and carbon pipeline approval/access have stalled the project.

Still, proponents of SAF note that airlines have already made commitments to purchase sustainable fuels to offset their carbon footprints. And they argue that using only the starch fraction of corn for fuel, while preserving the protein and nutrients for livestock feed, helps negate “fuel-versus- fuel” debates.

USDA Prepares to Protect Farmers in a Trade War

Wed, 05 Mar 2025 19:24:04 GMT

As the clock struck midnight on March 4, President Donald Trump’s new tariffs on imports from Canada, Mexico and China went into effect. Almost immediately, global markets started to react, and trading partners retaliated.

While the full economic consequences of the trade war remain to be seen, Secretary of Agriculture Brooke Rollins has promised to have a plan, such as the Market Facilitation Program (MFP), ready for farmers, if needed. In 2019, MFP provided direct payments to producers impacted by retaliatory tariffs, resulting in the loss of traditional exports.

“Everything is on the table right now. Everything. I know that President Trump, whom I speak with regularly, realizes the state of the farm economy in this country,” Rollins said on Sunday at Commodity Classic . “The last time, I know, he pushed Secretary Perdue to ensure we were able to make whole–as best as we could–some of those, and hopefully most of those, if not all, who had been hurt. We’re building the team at USDA to ensure we have the structure and the plan in place to allow us to move very quickly.”

In an interview with Farm Journal at Commodity Classic, USDA Economist Seth Meyer says he has been instructed by Secretary Rollins to be ready for a relief program, and he’s started calculating what possible relief could look like.

“Calculating something right today would not be helpful because we don’t know where we’re going to be, but absolutely, the Secretary instructs: ‘You need to be ready, have your pencil sharpened and have your tools available. Think about how you would proceed,’” Meyer says. “We are ready in that backstop. It won’t be easy. We’ve talked a lot about different countries. We’ve talked about reciprocal trade, but we are indeed sharpening our pencils to be able to do what she’s asked us to do.”

Here are the key details of the U.S. tariffs and retaliation from Canada, Mexico and China.

(Farm Journal)

Canada responded swiftly with plans to impose 25% tariffs on nearly $100 billion of U.S. imports over two tranches. Mexican President Claudia Sheinbaum plans to announce retaliatory tariff and non-tariff measures against the U.S. at an upcoming rally in Mexico City’s central square.

Meyer’s question is, “Can Mexico afford to retaliate?”

(Farm Journal)

As President Trump’s tariffs drew swift retaliation from trading partners, the ag industry was quick to react.

Impact on Farm Machinery
Equipment makers are concerned about the additional duties, especially after a rough year for the industry.

“We have spent decades laying down supply chains across the world. Our industry is global — 30% of all equipment made in the U.S. is destined for export. Canada is our largest market outside of the U.S.,” says Johan “Kip” Eideberg, senior vice president – government and industry relations, Association of Equipment Manufacturers (AEM). “If we want to create more jobs here in America, we need to sell more equipment and that means selling to customers outside of the U.S.”

As detailed in From the Factory to Your Fields: Where Farm Equipment Is Made , the ag equipment manufacturing industry is fully integrated across the three North American allies involved in the so-called “trade wars.”

“Anytime you disrupt those tightly connected supply chains — and tariffs would be a direct disruption — it’s going to have a serious impact on equipment manufacturers and on our farmers,” Eineberg says. “Given that Canada is our largest export market, we’re sending almost $10 billion worth of goods to Canada every year, there’s a lot at stake here.”

In 2018, Eineberg estimates, tariffs on steel, aluminum and farm inputs from China drove up the cost of making equipment in the U.S. by about 9 percentage points.

“Obviously, manufacturers will try to absorb as much of that as they can, but inevitably some of it will be passed down to the consumer, which in this case is our farmers and ranchers,” he adds.

AEM is also sounding the alarm on the compounding effect of tariffs, specifically due to the tight integration of manufacturing cycles on both sides of the border. There are often cases, Eineberg says, where components and raw materials are shuttled three to five times across the border between different factories in the manufacturing process. That means each time a piece of steel or other raw material being manufactured into a component for a tractor crosses the border, the tariffs multiply.

An example of the cross-border journey of one piece of agriculture equipment from raw material to delivery on the farm.

(AEM)

Impact on Rural America and Fertilizer
American Farm Bureau President Zippy Duvall expressed alarm about potential harm to farmers resulting from imposing stiff tariffs on the top three agricultural markets by value for the U.S.

“Farm Bureau members support the goals of security and ensuring fair trade with our North American neighbors and China, but, unfortunately, we know from experience that farmers and rural communities will bear the brunt of retaliation.” Duvall says.

Of note, more than 80% of the U.S. supply of potash , a key fertilizer product, comes from Canada.

“Tariffs that increase fertilizer prices threaten to deliver another blow to the finances of farm families already grappling with inflation and high supply costs,” Duvall adds. “The uncertainty hits just as operating loans are being secured and spring planting approaches, leaving farmers in a tough spot.”

(Farm Journal)

Read: Fertilizer Manufacturers and Retailers React to Trade Tariffs

Impact on Soybeans
During the 2018 trade war with China, U.S. agriculture experienced more than $27 billion in losses, with soybeans accounting for 71% of those losses, according to the American Soybean Association (ASA). Unlike in 2018, farmers are in a more tentative financial situation in 2025. Commodity prices are down nearly 50% from three years ago, while the costs for land and inputs, such as seed, pesticides and fertilizer, are high.

In an ASA statement, it says for years the organization’s farmer-members have consistently maintained their position that they do not support the use of tariffs, which threaten important markets and raise input costs for farmers, as a negotiation tactic.

“Farmers are frustrated. Tariffs are not something to take lightly and ‘have fun’ with. Not only do they hit our family businesses squarely in the wallet, but they rock a core tenet on which our trading relationships are built, and that is reliability. Being able to reliably supply a quality product to them consistently,” says Caleb Ragland, ASA president and soybean farmer from Magnolia, Ky.

Soybeans by far make up the largest volume of ag products exported to China. In 2024, U.S. exporters sent 27 million metric tons of soybeans to China valued at $12.76 billion, according to USDA. Mexico is the second-largest customer for whole soybeans, soybean meal and soybean oil. Canada is the fourth-largest customer for soybean meal.

“Soybean producers face huge, disproportionate impacts from trade flow disruptions, particularly to China,” Ragland says. “And we know foreign soybean producers in Brazil and other countries are expecting abundant crops this year and are primed to meet any demand stemming from a renewed U.S.-China trade war.”

Impact on Corn and Ethanol Demand
Market analysis shows tariffs won’t solve the U.S. trade deficit and instead will just shift business to other countries, says Neil Caskey, CEO, National Corn Growers Association (NCGA).

“We issued a study back in the fall that documented the implications of tariffs and specifically retaliation in a trade war — it’s not good for corn farmers, farmers in general,” he says. “We did that in conjunction with the American Soybean Association, and it concluded a trade war is really only good for Brazil, and we hope to avoid that.”

The top two destinations for corn and ethanol are Mexico and Canada. According to Krista Swanson, chief economist, NCGA, 40% of U.S. corn exports go to Mexico and more than 40% of U.S. ethanol exports are shipped to Canada.

“[Corn] is a commodity [those countries] consume way more than what they produce, so they’re going to have to get it from somewhere,” she says. “There’s definitely some concern about losing corn [exports], but how much is lost is left to be seen because it depends on what happens with shifting trade flows.”

Impact on Beef and Pork Sectors
U.S. meat export could be impacted by the tariff war as well, with China singling out pork and beef for a 10% counter tariff. Mexico, China and Canada accounted for 8.4 billion in U.S. red meat exports last year, according to the U.S. Meat Export Federation (USMEF).

USMEF is disappointed no agreements were reached to avoid or postpone the tariffs, but president and CEO Dan Halstrom says just because there are tariffs, doesn’t mean trade will stop.

“I do think the thing that we have definitely in our favor is that demand for our products globally is record breaking. I mean, it’s as good as I’ve ever seen it in 40-plus years,” he says. “I think that we have a very unique product. We got to keep that in mind because that’s a big leverage point.”

Halstrom says it could be a bumpy ride for a while, but it’s not something exporters can’t overcome.

Read: Industry Comments on Retaliatory Tariffs on U.S. Pork and Beef

USDA's Rollins: 'Let's Go Barnstorm The World And Find New Partners' For Trade

Tue, 18 Feb 2025 18:25:26 GMT

On Brooke Rollins’ first full week on the job as Secretary of Agriculture, she addressed the 600 farmers, ranchers and industry leaders in Kansas City for the 2025 Top Producer Summit.

High on Rollins’ list of priorities was the topic of trade and President Donald Trump’s vision for U.S. agriculture moving forward.

While Rollins did not shy away from addressing the administration’s decision to implement trade tariffs, noting “farmer and rancher concerns are legitimate,” she focused on what she sees as her role ahead.

“My job is to ensure that as President Trump and our trade representatives are making their decisions that I am in the room and advocating on behalf of our people, on behalf of all of you,” she told Top Producer Summit attendees.

One of her key objectives, she says, is to find and expand market access for U.S. agricultural products domestically and abroad.

“Let’s go barnstorm the world, and let’s go find some more trade partners and access [to market opportunities],” she says.

Rollins says her goals for trade are a reflection of Trump’s vision and his determination to make agriculture part of the “golden age” he sees ahead for the U.S.

Trump is the consummate deal maker, Rollins notes, able to side-step bureaucracy and red tape in the process to work with world leaders.

“I don’t know that in the last 250 years, we’ve had anyone in office like President Trump,” she says. “He is a very unusual, remarkable and fearless man, and he wants to make a deal, and in the best way, and put America first.”

Agriculture Secretary Brooke Rollins spoke to a crowd of 600 farmers, ranchers and industry leaders at the 2025 Top Producer Summit.

(Jim Barcus)

Making Headway With Trade
Sen. Roger Marshall of Kansas, who moderated the conversation with Rollins, highlighted Trump’s work to build trade during his first term.

“He redid USMCA, and now that’s our largest ag partnership, with Mexico and Canada,” Marshall says. “He gave us South Korea and Japan, which has been so important to Kansas and our cattle industry, as well as trade 1.0 with China.”

Marshall then mentioned the headway he believes Trump and team have made with India.

“I see India replacing China as our major trade partner, as well that China is growing right now,” Marshall says. “I think there’s huge opportunities in India.”

U.S. ethanol, cotton and tree nuts are three of the top agricultural exports to India, a country that has in the past impeded agricultural trade with tariffs and non-tariff barriers alike. Trump called out the barriers to trade following recent conversations with India’s Prime Minster Modi.

A joint statement after the Trump-Modi meeting said Washington welcomed New Delhi’s recent steps to lower tariffs on select U.S. products and increase market access to U.S. farm products, while seeking to negotiate the initial segments of a trade deal by the fall of 2025.

Rollins says the progress underway with India was just one step forward to address what she described as a trade crisis for the U.S.

“Our exports are down $37 billion this year and likely to be down $42 billion in the months to come. This is a crisis, and this is something that I understand inherently,” Rollins says.

“We have a tremendous amount of work to do,” she adds. “But my promise to you is this, and my commitment will never waver, that every minute of every day for the next four years, I will do everything within my power with hopefully God’s hand on all of us and our work to ensure that we are not just entering the golden age for America, as my boss, President Trump, likes to say, but that we are entering the golden age for agriculture.”

Secretary Rollins joined Chip Flory on AgriTalk. Listen to their discussion about trade policy and tariffs; avian flu; and disaster and economic aid.

Your next read: Senate Overwhelmingly Confirms Brooke Rollins as 33rd Secretary of Agriculture

RFK Jr. and Zeldin Comment on How They Would Implement Trump Policy

Thu, 30 Jan 2025 22:46:07 GMT

Robert F. Kennedy Jr.'s confirmation hearing for Secretary of Health and Human Services (HHS) on Wednesday (Jan. 29) before the Senate Finance Committee lasted over three hours, revealing key points:

Vaccine stance: Kennedy attempted to soften his past anti-vaccine rhetoric, stating support for vaccines but struggling to explain previous controversial statements.
Health policy priorities: He emphasized addressing chronic diseases, promoting safe food, removing conflicts of interest in health agencies, and using “gold-standard science.” Kennedy said that federal dollars spent on SNAP and school lunch programs could be one place to start, “helping kids” avoid obesity and chronic illness by cutting out sugary drinks and “ultra-processed foods.” He would also fund federal research into the link between food additives and chronic illnesses, though he didn’t specify which ingredients sparked the most concern. “I don’t want to take food away from anybody,” Kennedy said.
Kennedy emphasized his support for American farmers, stating:
- “American farms are the bedrock of our culture, of our politics, [and] of our national security.”
- He was a “4-H kid” and spent summers working on ranches.
- He wants to work with farmers and food producers to remove burdensome regulations and unleash American ingenuity.
Agricultural practices and health. Kennedy expressed concerns about current agricultural practices:
- He criticized the use of certain chemicals in farming, stating they destroy soil microbiomes and cause erosion.
- He linked chemical-intensive agriculture to health problems, mentioning clusters of cancers, autoimmune diseases, and obesity in farming communities.
- He called for incentivizing transitions to regenerative agriculture and less chemically intensive practices.Kennedy told Sen. Roger Marshall (R-Kan.) that farmers are affected by cancers and autoimmune illnesses that he believes are caused by ingredients like food dyes. “We need to fix our food supply,” Kennedy said, noting that “seeds and chemicals” used by U.S. farmers are “destroying our soil” in the long term. When asked about Kennedy’s “seeds and chemicals” comment, Grassley told Politico: “I’ll have someone from Iowa State University talk to him.”
Collaboration with USDA. Kennedy emphasized his intention to work closely with the Department of Agriculture:
- He stated that MAHA (Make America Healthy Again) “simply cannot succeed without a partnership a full Partnership of American farmers.”
- He committed to working collaboratively with USDA and other federal agencies before implementing policies affecting food supplies.
- Kennedy mentioned that President Trump instructed him to work with Brooke Rollins at USDA to ensure policies support farmers. Rollins told reporters last week that she was supportive of Kennedy’s “Make America Healthy Again” movement. “But what is important and, if confirmed, what my role will be, will be to strike a balance between defending our farmers and our ranchers but also working with Bobby Kennedy, who I adore, to effectuate the president’s vision on all of the above,” Rollins said
Regulatory approach. Kennedy outlined his approach to agricultural regulations:
- He promised to work with farmers to remove burdensome regulations.
- Kennedy acknowledged the “very thin margins” farmers operate on and stated he doesn’t want any farmer to leave their farm for economic or regulatory reasons.
- He agreed that agricultural practice regulations should primarily be left to USDA and EPA.
- “I expect you to leave agricultural practice and regulation to the proper agencies,” Sen. Chuck Grassley (R-Iowa) told Kennedy. That means, for the most part, leaving policies that impact farmers to USDA and EPA, Grassley clarified.
Future of agriculture. Kennedy shared his vision for the future of American agriculture:
- He called for fixing the food supply as a top priority. Sen. James Lankford (R-Okla.) told Kennedy that he was happy the nominee addressed the “social media rumors” about agriculture.
- “You made it very very clear you’re not going to tell Americans what to eat, but you do want Americans to know what they’re eating,” Lankford said, calling that a “pretty fair perspective” on food policy.
- Kennedy advocated for supporting the transition to regenerative and sustainable farming practices.
- He mentioned plans to rewrite regulations to give smaller operators “a break.”
- Throughout the hearing, Kennedy attempted to position himself as an ally to farmers while also advocating for changes in agricultural practices to address health and environmental concerns.
Controversial past: Democrats challenged his history of health misinformation and grasp of Medicare and Medicaid.
Republican support: Some GOP senators backed Kennedy, with Sen. Ron Johnson (R-Wis.) calling him “awesome,” though the final vote remains uncertain.
Financial concerns: His financial ties to lawsuits against Merck raised conflict-of-interest questions.
Abortion stance: Kennedy sidestepped direct answers but aligned with Trump’s anti-abortion policies, shifting from his previous pro-choice stance.

Bottom line: With strong opposition and divided support, Kennedy’s confirmation vote is expected to be closely contested. Today he attends another confirmation hearing before the Senate Health, Education, Labor, and Pensions Committee. The Senate Finance Committee expects to hold its RFK Jr. vote next week.

Zeldin Confirmed as EPA Administrator

On Wednesday (Jan. 29), the Republican-led Senate confirmed former Congressman Lee Zeldin as the new administrator of the Environmental Protection Agency (EPA) in a 56-42 vote. A staunch Trump ally, Zeldin is expected to steer the agency in alignment with the former president’s environmental policies.

Vote breakdown: All 53 Republicans backed Zeldin, joined by three Democrats — Sens. Ruben Gallego (Ariz.), Mark Kelly (Ariz.), and John Fetterman (Pa.).
Policy direction: Zeldin is expected to roll back environmental regulations, emphasizing economic growth and private-sector collaboration.
Biofuel policy. Zeldin has raised concerns among ethanol and biofuel advocates due to his past opposition to the Renewable Fuel Standard (RFS) and ethanol. However, during his confirmation process, Zeldin made some commitments that suggest a potential shift in his stance. As a congressman, Zeldin had a history of opposing biofuels and the RFS. He signed letters expressing concern about proposed RFS volume increases, citing issues with the “E10 blend wall.” In 2017, Zeldin cosponsored an unsuccessful bill to repeal the RFS. He raised concerns about the validity and practicality of higher ethanol blends like E15 and E85. But during his confirmation process, Zeldin made several statements that indicate a potential change in his approach:
- He committed to giving producers and the industry certainty in the marketplace regarding Renewable Volume Obligations (RVOs).
- Zeldin acknowledged the importance of the RFS issue to President Trump and certain senators.
- He stated that no person or industry has any special influence over his decision-making, addressing concerns about his past connections to the oil industry.
Biofuel industry representatives have expressed cautious optimism:
- The Renewable Fuels Association (RFA) looks forward to working with Zeldin on keeping the RFS on track and addressing other priorities like E15 availability.
- The Iowa Renewable Fuels Association (IRFA) encouraged Zeldin to pursue the role biofuels can play in U.S. energy dominance.
- The American Coalition for Ethanol (ACE) appreciated Zeldin’s commitments to follow the law regarding RVO rulemakings and supporting year-round E15 nationwide.

Of note: While Zeldin’s past positions raised initial concerns, his recent statements during the confirmation process suggest he may be open to working with the biofuels industry in his new role as EPA Administrator.

Climate stance: Critics warn his leadership could weaken climate initiatives, favoring fossil fuel interests.
Reactions: Republicans praise his “common-sense regulation” approach, while environmental groups call his confirmation a serious setback for public health and environmental justice.

Bottom line. As Zeldin assumes leadership, his tenure is likely to reshape the EPA’s role in U.S. environmental policy for years to come.

Cassidy Casts Doubt on RFK Jr.’s HHS Nomination

Senate HELP Committee Chair Bill Cassidy (R-La.) delivered a blunt message to Robert F. Kennedy Jr. during Thursday’s hearing, signaling serious concerns about his nomination for Health and Human Services (HHS) secretary.

“I’ve been struggling with your nomination,” Cassidy stated in his closing remarks, a potential roadblock for Kennedy, given Cassidy’s influential position on the Senate Finance Committee. If Cassidy votes against Kennedy in the panel’s decision, the nomination may not advance.

The Louisiana senator expressed deep skepticism about Kennedy’s stance on vaccines, questioning whether he could be trusted to uphold sound public health policy. Cassidy specifically criticized Kennedy’s history of vaccine skepticism, warning that such views could erode trust in essential immunizations.

“A worthy movement, called MAHA, to improve the health of Americans?” Cassidy asked. “Or will it undermine it, always asking for more evidence and never accepting the evidence that is there?”

He also recounted a recent case of two children dying in a Baton Rouge ICU from vaccine-preventable diseases. “My concern is that if there’s any false note, any undermining of a mama’s trust in vaccines, another person will die from a vaccine-preventable disease,” Cassidy warned.

Beyond his own reservations, Cassidy’s remarks signal broader challenges for Kennedy’s nomination. Senate Minority Leader Mitch McConnell (R-Ky.), a childhood polio survivor, is unlikely to back a nominee with anti-vaccine ties. Sens. Susan Collins (R-Maine) and Lisa Murkowski (R-Alaska) also remain key votes to watch, with both urging Kennedy to support vaccinations.

Cassidy, up for re-election in 2026, has already drawn a Trump-aligned challenger, State Treasurer John Fleming. Though Cassidy emphasized his desire for Trump’s policies to succeed, he warned that anti-vaccine rhetoric could tarnish Trump’s legacy.

“I want President Trump’s policies to succeed,” Cassidy said. “But if there’s someone that is not vaccinated because of policies, of attitudes we bring to the department, and there’s another 18-year-old who dies of a vaccine-preventable disease… The greatest tragedy will be her death. I can also tell you an associated tragedy will be that it will cast a shadow over President Trump’s legacy, which I want to be the absolute best legacy.”

Bottom line: With Cassidy’s support in doubt and broader Senate skepticism, Kennedy’s path to confirmation remains steep.

Key Takeaways from Brooke Rollins' Confirmation Hearing for Agriculture Secretary

Thu, 23 Jan 2025 17:19:55 GMT

Brooke Rollins, President Trump’s nominee for Agriculture Secretary , addressed several issues during her confirmation hearing on Jan. 23 in an attempt to position herself as a supporter of diverse agricultural interests and commit to protecting producers.

In her opening statement, Rollins outlined several key priorities for USDA if confirmed, as is expected:

Rapid deployment of disaster and economic assistance authorized by Congress.
Addressing current animal disease outbreaks.
Modernizing and realigning USDA.
Ensuring long-term prosperity for rural communities.

Ethanol and Renewable Fuel Standard (RFS)

Rollins clarified her stance on ethanol and RFS, distancing herself from past positions of the Texas Public Policy Foundation:

She stated the Foundation’s position on ethanol/RFS was written a decade ago and was one of 900 to 1,000 papers produced annually.
Rollins emphasized she did not author those papers.
While admitting to being a defender of fossil fuels, she insisted she would be “a secretary for all of agriculture” and a “champion for all fuels.”

When asked again on biofuel policy, Rollins said, “Everyone knows where the president is on this.”

The regulatory effort under the first Trump administration to make sales of E15 available year-round, Rollins noted, was not developed by the domestic policy office that she headed but she still said she looked forward to working on the issue ahead. She also committed to working with Treasury secretary-designate Scott Bessent on the 45Z Clean Fuels Production Credit. And she will make sure Bessent has the “data and the voices around him to make the right decisions.”

Tariff Impact Aid for Farmers

During questioning, Committee Chairman John Boozman (R-Ark.) asked Rollins about her approach to working with President Trump’s trade agenda. Rollins responded that she would prioritize working with the White House to address any challenges farmers and ranchers might face under potential tariff implementations.

Rollins committed to supporting farmers in case of tariff-related harm:

She pledged to undertake efforts like the Market Facilitation Program (MFP) via payments from the first Trump administration. MFP was part of a broader effort by USDA to assist farmers impacted by retaliatory tariffs and trade disruptions.
Rollins has consulted with former USDA Secretary Sonny Perdue about the implementation of such programs.

On trade, Rollins committed to using USDA programs and policies to bring the trade deficit in agriculture down to zero. But Sen. Michael Bennet (D-Colo.) countered that things like a stronger dollar and other factors were bigger components of the agriculture trade deficit rather than a failure of USDA policy.

Proposition 12

Rollins committed to working with Sen. Joni Ernst (R-Iowa) and others on addressing Prop 12 as it is affecting several states.

Commitment to Agriculture and Public Service

Rollins emphasized her dedication to the agricultural sector.

“My role is to defend, honor and elevate our entire ag community in the oval office ... to ensure that every decision made has that front of mind,” she states.

Rollins shared a personal detail about her family. She revealed her mother was the oldest freshman in the Texas legislature, highlighting her family’s history of public service.

Bottom line: These statements demonstrate Rollins’ attempt to position herself as a supporter of diverse agricultural interests, including both traditional and renewable fuels, while also showing her commitment to protecting farmers from potential trade-related challenges.

Your Next Read: Trump Taps Texas Native Brooke Rollins for Secretary of Agriculture

Continuing Resolution Includes $31 Billion in Aid for Producers

Wed, 18 Dec 2024 16:20:47 GMT

Farm groups and farm-state lawmakers had to first sell Congress on the need for substantial aid via the Continuing Resolution (CR) , now congressional leaders must sell others to pass it.

While the measure still needs to pass both the House and Senate, the stopgap deal to avoid a government shutdown includes $10 billion in direct payments for farmers, $21 bllion in ag disaster aid, a one-year extension of the 2018 farm bill and year-round E15.

Passage of CR Now in Question

Congress actually passing the stopgap spending measure is far from a done deal. Washington insiders were confident Wednesday morning Congress would pass the measure with bipartisan support, but strong opposition from the incoming Trump administration later in the day on Wednesday is now throwing that into question.

A statement from President Donald J. Trump and Vice President-Elect JD Vance:

The most foolish and inept thing ever done by Congressional Republicans was allowing our country to hit the debt ceiling in 2025. It was a mistake and is now something that must be addressed.…
— JD Vance (@JDVance) December 18, 2024

President-elect Donald Trump has asked to keep certain measures House Speaker Mike Johnson (R-La.) supports in the continuing resolution (CR), like aid for farmers and natural disaster survivors, but also demanded the House ditch items that Democrats negotiated.

Trump has also requested that Republicans extend the suspension of the debt ceiling, a limit on how much the U.S. government can borrow, which is set to expire early in his new term next year.

Johnson’s legislative strategy has sparked significant discontent among Republicans, casting doubt on his ability to retain the gavel in the next Congress. On Tuesday, Johnson introduced a sprawling bill to extend federal funding until March 14, allocating $110.4 billion for natural disaster relief ($21 billion in ag disaster funding) and incorporating a range of unrelated policy provisions. Late-stage negotiations added $10 billion in aid for farmers, opening the floodgates to additional Democratic demands, including the transfer of RFK Stadium to D.C., a congressional pay raise, health plan regulations, and funds to rebuild Baltimore’s Francis Scott Key Bridge.

The concessions enraged GOP lawmakers across the party’s ideological spectrum, with members voicing concerns about Johnson’s leadership. Rep. Thomas Massie (R-Ky.) has already pledged not to support Johnson in future leadership elections, and private discussions among Republicans suggest Johnson may face insurmountable opposition come Jan. 3. The Freedom Caucus and moderates alike criticized his handling of the bill, while high-profile figures like Elon Musk, now a Trump adviser, lambasted the legislation as “criminal.”

Sen. John Cornyn (R-Texas) warned of potential Senate resistance, labeling the bill a “cramnibus.” Johnson defended the compromise as a necessary measure under a divided government, framing it as a preparatory step for Republicans to advance Trump’s “America First” agenda in the next Congress. However, with a slim three-seat majority and growing fractures within the party, Johnson’s future as speaker hangs in the balance.

Breaking Down the Proposed CR

While the fate of the stopgap spending measure is now in question, if passed, the funding would last through March 14 for fiscal year 2025 that began Oct. 1.

Highlights of the bill that will impact agriculture includes:

One-year extension of the 2018 Farm Bill, including provisions that don’t have “baseline,” or cost money to extend. Negotiators found $143 million in unspent agricultural funds to rescind to offset those extensions. GOP leaders said they would push to consider a new bill the first quarter of 2025.
$10 billion in farmer financial aid along the lines of a bill introduced by Rep. Trent Kelly (R-Miss.).
$21 billion in ag disaster aid for farmers and ranchers as part of an overall $100.4 billion disaster package. The measure sets aside $2 billion of the disaster aid specifically for livestock producers, with much of the rest available via block grants to states and territories and direct aid to farmers and ranchers. It includes $3 million specifically for regular testing of procedures in place for inspections of molasses imports at the Canadian border, a provision sought by U.S. sugar producers.
Year-round E15, including other biofuel provisions detailed below.
SNAP provision. Language extending authorization of a program that replenishes stolen Supplemental Nutrition Assistance Program (SNAP/food stamp) benefits, which Democrats said would prevent a $1.5 billion cut to those benefits.

Disaster Aid

The disaster crop loss program will likely operate similarly to the 2021 program without any of the 2022 quirks that made it into a debacle. The livestock program will likely operate similar to the 2022 livestock program where the Biden administration actually managed to get it right. The economic aid program is very similar to Kelly farm act with a factor applied to keep it within budget.

Direct Payments to Farmers

Paul Neiffer’s analysis of the $10 billion in financial aid included in the CR calculates what the possible payments could be, including $43 per acre for corn, $30 for soybeans, $31.80 for wheat, $85 for cotton and $70 for long-grain rice.

Possible payment calculations

(Paul Neiffer )

When will payments be received by farmers? Economic aid will come 90 days after enactment. As for ag disaster, the push is on to use the 2020 approach where most payments came out of USDA’s Kansas City office.

Here are the key details and the differences from the original FARM Act:

The same 8 crops are specifically identified (corn, wheat, soybeans, cotton, rice, peanuts, oats and barley).
You will be paid on total 2024 planted acres by crop plus 50% of prevent planted acres by crop.

How Ag Financial Aid Will be Determined

The calculation uses national avg payment yield for PLC. Regarding the legislative language on the minimum payment rate calculation for economic assistance, we previously used 8% of the reference price multiplied by the national average yield. The legislative calculation uses the national average payment yield for PLC instead.
The payment limit is lowered from $175,000 to $125,000 and if your Farm AGI exceeds 75% of total AGI, then this is doubled to $250,000. Definition of AGI remains the same and this limit is per entity/ per person. This means an LLC has one payment no matter the number of owners. AGI is based on a three-year average of 2020-2022 tax years.

Here is a table of Neiffer’s estimated per acre payment amounts based on his knowledge of the provisions:

Year-Round E15

CR package includes nationwide year-round sales of 15% ethanol gasoline (E15) and offers short-term biofuel blending relief to small refiners.

Previously, E15 was restricted during summer months, though eight Midwestern states had already been granted year-round sales earlier this year. The inclusion of the E15 language, based on a bill by Sen. Deb Fischer (R-Neb.), marks a major win for ethanol producers and farm state lawmakers who have spent years lobbying to permanently allow year-round E15 sales.

The bill would also provide short-term relief to some small refiners under the Renewable Fuel Standard (RFS) that retired renewable identification numbers (RINs) in 2016-18 in cases when their requests for “hardship” waivers remained pending for years. The bill would return some of those RINs to the small refiners and make them eligible for compliance in future years.

Enacting the stopgap funding bill would also make it unnecessary for eight states to follow through with a costly gasoline blendstock reformulation — set to begin as early as next summer — they had requested to retain year-round E15 sales in the midcontinent. Oil industry groups last month petitioned EPA to delay the fuel reformulation until after the 2025 summer driving season, citing concerns about inadequate fuel supply and the prospects that a legislative fix would make required infrastructure changes unnecessary.

Ethanol Groups React

Ethanol groups say the E15 legislative change could pave the way for retailers to more widely offer the high-ethanol fuel blend, which is currently available at 3,400 retail stations and last summer was about 10-30¢/USG cheaper than 10% ethanol gasoline (E10).

Offering the fuel year-round would be “an early Christmas present to American drivers,” ethanol industry group Growth Energy chief executive Emily Skor said.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said biofuels “champions” are fighting for the provision allowing the sale of E15 year-around. “We have been working to get a year-round E15 solution for over 10 years,” he said in a statement. “It would be monumental for ethanol demand to support rural farmers and would save drivers 10 to 20 cents at the pump.”

Calculating What It Means for Corn Demand

The potential increase in ethanol consumption and corn use due to year-round E15 sales is relatively modest based on the available information. The additional ethanol consumption from year-round E15 sales is estimated to be approximately 15 million gallons. This represents a small fraction of the total U.S. ethanol production. The 15-million-gallon increase in ethanol consumption would translate to an additional corn use of about 5.6 million bushels. It’s important to note that the impact of year-round E15 sales is limited by several factors:

Distribution network: E15 has a small distribution network, available at only a fraction of gas stations.
Consumer adoption: The shift to E15 may be gradual and dependent on factors such as price differentials and consumer awareness.
Seasonal demand: While year-round sales are now permitted, demand may still fluctuate seasonally.

Looking ahead, maintaining current corn use levels for ethanol (around 5.5 billion bushels) would require increasing the national average ethanol blend rate to 15-17% by 2042, given projected declines in gasoline consumption. This suggests that year-round E15 sales alone may not be sufficient to significantly boost corn use for ethanol in the long term. However, others note the quickest way to get consumer attention is with price and E15 is the cheapest option for most cars… in many markets it’s cheap enough that consumers seek it out. Also, some think it’s not even a question for new facilities to include E15 … it’s the easiest way to be competitive in a market. Either way, year-round E15 sales represent a symbolic victory for corn ethanol advocates, the immediate impact on ethanol consumption and corn use is expected to be minimal in the short run, but differences of opinion are in place regarding long-term impacts.

A bewildering assessment of the year-round E15 impact came from some traders, based on a Reuters article.

The concern expressed by traders regards a potential shift in demand from biodiesel to ethanol due to year-round E15 sales. That is a questionable conclusion. Consider:

Separate products with different applications. Ethanol and biodiesel are distinct biofuels with different uses and markets: Ethanol is primarily blended with gasoline for use in standard gasoline engines. Biodiesel is typically blended with petroleum diesel for use in diesel engines. This fundamental difference makes a direct substitution between the two unlikely in most applications.
Potential market impacts. While the products aren’t directly interchangeable, there are some potential indirect effects to consider:
- Fuel blending choices: Refiners and fuel blenders might adjust their overall biofuel strategy, potentially favoring increased ethanol blending if E15 becomes more widely available year-round.
- Feedstock competition: Both ethanol (from corn) and biodiesel (often from soybean oil) compete for agricultural resources. Increased demand for corn-based ethanol could impact crop planting decisions and prices.
- Policy uncertainty: The combination of year-round E15 approval and the upcoming change in administration adds complexity to the biofuels policy landscape, which could affect investment decisions in both ethanol and biodiesel sectors.
- Market reaction may be premature. The sharp drop in soybean oil prices mentioned in the Reuters story likely reflects short-term market uncertainty rather than a definitive shift in demand. Several factors suggest this reaction may be overblown:
  - Infrastructure limitations: Widespread adoption of E15 will take time due to the need for compatible fuel pumps and consumer education.
  - Separate mandates: The RFS has separate volume requirements for different biofuel categories, including biodiesel.
  - Diesel market stability: Demand for biodiesel is also driven by the diesel fuel market, which has different dynamics than the gasoline market.

Additional Details From the Bill

Democrats celebrated inclusion of priorities like funding for childcare and 9/11 survivors’ health care benefits; restrictions on China-related investments; legislation intended to crack down on publication of artificial intelligence-generated “deepfakes,” and on “junk” fees charged for hotel stays and concert tickets; new safety standards for lithium-ion batteries; and more.

Taxpayers would recoup some of the bridge rebuilding cost through proceeds from insurance and litigation payouts by the owner of the cargo ship Dali, which crashed into the bridge in March.

Also included is $25.6 million for residential security and protection of Supreme Court justices.

Negotiators also agreed to a 100% federal cost-share for Francis Scott Key Bridge reconstruction in Baltimore, a key demand of the Maryland delegation — who elsewhere in the bill had to accept language paving the way for a new Washington Commanders stadium on the old Robert F. Kennedy Memorial Stadium, while transferring a D.C. National Guard fighter squadron to Maryland.

Appropriators threw in an unrequested $300 million for fisheries disaster aid, which Sen. Lisa Murkowski (R-Alaska) and others sought.

The deal omits language that Democrats were seeking to unfreeze $20 billion in IRS enforcement funding.

What’s Next?

House Speaker Mike Johnson (R-La.) is expected to turn to Democrats to supply the bulk of votes needed to get the bill to the Senate. It appears lawmakers would have at least a day to review the package. It looks like Johnson will bring the CR up under suspension of the rules, which requires a two-thirds majority for passage.

A floor vote has yet to be scheduled, but the initial assessment is that the House will take it up as early as Thursday or more likely on Friday. That leaves the Senate little time to clear the measure before Friday’s midnight deadline. But even if the final action does not occur Friday, there is wiggle room on the weekend to get it done.

House Ag Panel Says Ag Economic Aid in Current CR Would Improve Ending Cash Position by 20% By End of 2025

The following is a quick fact sheet released by the House Ag Committee on the economic assistance that is provided in the current Continuing Resolution (CR), modeled off of Rept. Trent Kelly’s (R-Miss.) FARM Act (HR 10045). There is a background portion, a list of eligible commodities, a payment formula, administrative provisions, and estimated payment rates.

House Ag panel staffers say keep in mind that the payment rates in this document are estimates and “almost certain to change slightly once implemented. These rates are the best approximation based on the data cited in text. This does incorporate the minimum payment rate provision. You’ll see that those crops receiving payments via the minimum payment provision have an asterisk.”

The House Ag panel had the Agricultural and Food Policy Center at Texas A&M analyze the impact of the economic assistance provided through this provision. Their findings suggest that the funds will improve ending cash position on their Representative Farm system by nearly 20% by the end of 2025.

Additional Analysis on Potential Aid for Producers

The following is what Combest-Sell and crew put out about the ag financial aid and disaster aid:

Crop Loss Assistance

For crop loss disaster assistance for the 2023 and 2024 calendar years, the measure makes provision for nearly $21 billion.

The language is pretty wide open with slight refinements of prior years’ disaster bills. There are some carve-outs including: $2 billion of the total amount is provided for livestock losses in 2023 or 2024 due to drought, wildfires, or floods; block grant authority to compensate producers with timber losses, citrus, pecan, and poultry losses (including poultry infrastructure losses); and a special provision for agricultural producers who suffered losses due to Mexico’s failure to adhere to its water rights treaty with the U.S.

For the bulk of the disaster program, the eligible causes of loss are the same as those under the 2022 program, including losses of revenue, quality or production losses of crops (including milk, on-farm stored commodities, crops prevented from planting, and harvested adulterated wine grapes), trees, bushes, and vines, as a consequence of droughts, wildfires, hurricanes, floods, derechos, excessive heat, tornadoes, winter storms, freeze, including a polar vortex, smoke exposure, and excessive moisture occurring in 2023 and 2024.

Please note that while the 2022 statute was used again as base text (and it used 2020 which used 2019, etc.), that is not an endorsement of the badly flawed implementation used by the Vilsack USDA. We would say that the disaster program from 2020 and 2021 is more of the standard bearer to think back to.

Losses are to be covered under terms and conditions determined by the Secretary but subject to previous requirements that: (1) smoke tainted wine grapes due to wildfires are covered; (2) losses due to drought are eligible if in a county with a D2 drought for 8 consecutive weeks or D3 drought or higher at any time during the calendar year but excessive heat as a cause of loss can cover lesser drought if it meets STC parameters; (3) sugar beet and sugar cane disaster be implemented through processors that elect to deliver aid to their producers; (4) not more than 1 percent of funds may be used for implementation; (5) payment limitations required under previous ERP programs apply (i.e., $125,000 per entity, or $250,000 if not less than 75% of AGI is derived from farming); (5) higher pay limits for specialty crops and high valued crops under previous ERP programs apply (i.e., $125,000 per entity, or $900,000 if not less than 75% of AGI is derived from farming) (Note: there is *no* AGI means testing for disaster aid; the portion of AGI derived from agriculture is just used as a measure to determine eligibility for the higher pay limit)] ; (6) prescribed pay limits are separate for each of the 2023 and 2024 calendar years; (7) payments under the program plus crop insurance and/or NAP (less premiums or fees paid) cannot exceed 90% of the loss; and (8) the same future crop insurance purchase requirements under previous ERP programs apply. In addition, to the extent that any factor must be applied to stay within budget, one single factor must be applied to the eligible benefit of each producer (i.e., no progressive factor).

No gender or race-based components are expected to be applied either in light of the federal court’s injunction.

The Secretary may use $30 million to provide equitable relief for specialty crop A&O for 2022 and 2023 reinsurance years.

The Secretary shall use $3 million to test product coming into the country under the molasses tariff line to ensure that it is molasses.

USDA is required to report to Appropriations Committees on progress of implementation within 120 days of enactment and quarterly until all payments are made. We will be pushing with the new Administration at USDA to get the FSA back on track with a quick and clear implementation that treats a loss as a loss regardless of the gender or race of the producer. Federal courts will also be ensuring this.

Economic Loss Assistance

For economic loss assistance for the 2024 crop year, the measure provides $10 billion in relief.

The program is not as robust as the Rep. Trent Kelly (R-MISS.) bill (the “FARM Act”) that was introduced this fall and spread in popularity like wildfire. But it is still generous, and we hope that when coupled with disaster relief it will go a long way in helping producers until Congress reauthorizes a new Farm Bill next year with a strong, meaningful safety net.

The measure uses the Kelly model, with a 26% factor to keep overall costs within budget, and another factor (8% of reference price) that creates minimums that improve the payment rates for certain crops (barley, rice, peanuts, minor crops).

Eligible commodities are commodities eligible for a marketing loan, except wool, mohair, and honey.

Under the program, if the Secretary determines that the expected gross return per acre for an eligible commodity is less than the expected cost of production per acre for that eligible commodity, the Secretary shall make a 1-time economic assistance payment to each producer of that commodity within 90 days of enactment of the supplemental.

The expected gross return per acre for an eligible commodity is equal to the following:

For wheat, corn, grain sorghum, barley, oats, cotton, rice, and soybeans, [the projected average farm price for the commodity for the 2024–2025 marketing year contained in the most recent World Agricultural Supply and Demand Estimates published before the date of enactment of the Supplemental by the World Agricultural Outlook Board] X [the national average harvested yield per acre for the commodity for the most recent 10 crop years, as determined by the Secretary].

For other loan eligible commodities, a comparable estimate of gross returns, as determined by the Secretary.

The expected cost of production per acre for an eligible commodity is equal to—

For wheat, corn, grain sorghum, barley, oats, cotton, rice, and soybeans, the total costs listed for the 2024 crop year with respect to the commodity contained in the most recent data product entitled “national average cost-of-production forecasts for major U.S. field crops” published by the Economic Research Service.

For other loan eligible commodities, a comparable total estimated cost-of-production, as determined by the Secretary.

The amount of an economic assistance payment to a producer for a commodity is equal to [the economic loss for the commodity] X [the eligible acres of the commodity on the farm] X [26%].

The economic loss for a commodity is equal to the difference between the expected cost of production per acre for the commodity and the expected gross return per acre for the commodity.

Eligible acres of a commodity on a farm is equal to the sum of the acreage planted on the farm to the commodity for harvest, grazing, haying, silage, or other similar purposes for the 2024 crop year and an amount equal to 50% of the acreage on the farm that was prevented from being planted during the 2024 crop year to the commodity because of drought, flood, or other natural disaster, or other condition beyond the control of the producers on the farm, as determined by the Secretary.

The Secretary shall consider acreage planted to include any land devoted to planted acres for accepted skip-row planting patterns, as determined by the Secretary.

In determining the payment rate for a crop for which there is no sufficient available data, the Secretary shall use the data related to a similarly situated crop to establish a comparable rate.

In no case shall the amount of an economic assistance payment to a producer for an eligible commodity be equal to less than [8% of the PLC/ARC reference price for the commodity] X [the national average payment yield for the eligible commodity] X [the number of eligible acres for the commodity].

As for pay limits and means tests, the total amount of payments received, directly or indirectly, by a person or legal entity (except a joint venture or general partnership) under this section may not exceed —

(A) $125,000, if less than 75% of the average gross income of the person or legal entity for the 2020, 2021, and 2022 tax years is derived from farming, ranching, or silviculture activities; and
(B) $250,000, if not less than 75% of the average gross income of the person or legal entity for the 2020, 2021, and 2022 tax years is derived from farming, ranching, or silviculture activities.

Please note the “average” is different from “adjusted.” Recall the scenario where a farmer grosses $1 million on the farm but had expenses that exceeded this, so his AGI (adjusted gross income) was negative. He or his wife also had a job teaching history and science at the local school creating a situation where his non-farm income was more than 75% of his AGI and he was therefore not eligible for the higher limit to address the losses. Using “average” gross is meant to correct that problem.

The pay limits for economic assistance are separate from the pay limits for crop loss assistance described above. And, just like the crop loss portions, this economic assistance is not subject to the AGI means test to determine eligibility that traditional farm bill benefits are subject to.

We are sure that you have seen estimated payment rates floated in various publications. These are certainly within the range, but it is important to note that final numbers have not yet been determined.

Beyond Crop Loss/Economic Assistance

Besides the aforementioned economic and disaster aid, the CR/Supplemental also includes other priorities for agriculture, including year-round E15.

The package also extends the current authorities in the farm bill for one year; makes investments in the FFAR research program; provides scholarships to 1890 universities; and addresses problems with fraudulent skimming of food stamp benefits from EBT cards.

First Thing Today: Scouts Measure Sub-par Spring Wheat Yield Potential

Wed, 21 Sep 2022 07:45:15 GMT

Good morning!

Short-covering leads to modest rebound overnight... Corn futures saw a mix of followthrough selling and short-covering overnight, but as of 6:30 a.m. CT most corn contracts are steady to a penny higher. Soybeans also saw two-sided trade overnight but most contracts are currently around a penny higher. Winter wheat futures are up 3 to 4 cents thanks to some corrective trade, but spring wheat is mixed, with nearbys firmer and deferred months under pressure. The U.S. dollar index and crude oil futures are slightly higher.

Scouts measure sub-par spring wheat yield potential... Scouts on Day 1 of the Wheat Quality Council Tour through North Dakota and neighboring areas of Minnesota and South Dakota measured an average yield of 37.9 bu. per acre, which is down from last year’s first-day yield of 43.1 bu. per acre and the five-year average of 45.7 bu. per acre for Day 1. Routes favor central and southeast North Dakota on the first day, and conditions are expected to worsen as scouts get into western areas of the state. Scouts reported that the poorest crops they saw yesterday were in southwest areas of North Dakota, where fields had already been cut for hay.

Russian ag ministry hopes to export some of its grain stockpile... Russia’s ag ministry hopes to receive government approval to export 532,800 MT of grain stockpiles from the 2008 to 2013 crop years to free up storage space and lessen federal budget spent caring for the stocks. The ministry hopes to have a decision by September. Exporters are opposed to the proposed sales as their margins are thin due in part to recent big crops.

Senate healthcare reform debate continues... Republicans voted to begin debate on health care Tuesday, but then their first vote rejected a provision that would have rolled back parts of ObamaCare. There were several provisions in the package, including ones that would have allowed insurers to offer plans that don’t meet ObamaCare standards and one that would have helped low-income people transition from Medicaid to private insurance. The chamber is expected today to vote on a plan to largely repeal ObamaCare with a two-year expiration deadline, the idea being to give lawmakers more time to come up with a replacement plan. The GOP also has a “skinny repeal” fall-back plan that would rescind ObamaCare’s requirement that many employers provide health insurance and would strike down a mandate penalizing those who don’t have health insurance. Get more details .

Biofuel programs at USDA targeted for defunding... The Bioenergy Program for Advanced Biofuels and Biomass Crop Assistance Program would be defunded under a bill to be offered today by Rep. Andy Biggs (R-Ariz.) as he maintains the programs disregard market signals and cost taxpayers money. However, the legislation would certainly run into opposition in the Senate.

Reuters: Brazil trade chamber postpones decision on taxing U.S. ethanol... Brazil’s foreign trade chamber, Camex, has put off for 30 days a decision on whether to impose a tariff on ethanol to curb a surge in imports from the U.S., a senior government official who attended the meeting told Reuters on Tuesday. The official said the chamber could not agree on applying a tariff and may consider quotas for imported ethanol at its next meeting. The quota proposal to be discussed would allow in 500,000 MT a year of ethanol and apply a 20% tariff on any imports beyond that quota. Brazilian ethanol imports jumped 330% in the first half of 2017 compared to the same period a year earlier to around 1.3 million cubic meters, mostly from the United States.

FOMC meeting concludes today... The Federal Open Market Committee (FOMC) meeting will wrap up today, and without a post-meeting press conference, the attention will solely be on the statement released at the conclusion of the confab. The market will look for any signals the Fed sends on the next rate action, on any timing hints on when the initial phase of the reduction in the Fed’s massive $4.5 trillion balance sheet will start and on how the Fed characterizes recent economic data which has been less than stellar. Another key will be on inflation as that has emerged as a factor mentioned or talked about by global central bankers in recent weeks. Expectations are the Fed will retain its guidance that it expects only “gradual” rate increases ahead.

Clovis officially nominated for key USDA post... President Donald Trump officially nominated Sam Clovis for USDA undersecretary for research, education and economics on Tuesday. His nomination has been controversial although many farm and commodity groups recently noted their support. Senate Agriculture Chairman Pat Roberts (R-Kan.) said a nominee who regarded crop insurance as unconstitutional “might as well not show up” to his committee hearing. In a 2013 interview with an Iowa talk radio host, Clovis listed crop insurance subsidies as spending that he said was unconstitutional. Roberts later said “it’s too early” to say whether Clovis’ expected nomination should be withdrawn. Clovis should have the opportunity to talk with the Agriculture Committee leaders and explain “why in the hell he said that,” Roberts said.

Food inspectors on strike in Brazil... Federal food inspectors in Brazil resumed their protest this week, slowing oversight at meatpacking companies, ports and airports. The Anffa Sindical union says inspectors lack sufficient staff to ensure the safety of the country’s meat shipments and are demanding the government hire 1,600 more inspectors. The union is also asking the government to add veterinarians to more efficiently handle food inspections. The first day of the strike last week lasted 24 hours. This week’s protest is slated to last 48 hours and more stoppages are planned. This comes in the wake of a bribery scandal involving the country’s food inspectors as well as a U.S. decision to cut off fresh beef imports from Brazil due to food safety concerns.

Uzbekistan lifts ban on U.S. pork... Uzbekistan has lifted a ban on U.S. pork put in place in 2014 after an outbreak of porcine epidemic diarrhea virus (PEDV), according to the U.S. Meat Export Federation (USMEF). “The suspension was very unfortunate because initial shipments of U.S. pork had just reached Uzbekistan a short time before the ban, and the product was quite well-received,” said Yuri Barutkin, a USMEF representative in the region. The lifting of the ban “did not happen as soon as we would have liked, but we never gave up,” he said.

Beef prices working on a low?... On Tuesday, Choice and Select boxed beef prices again strengthened, signaling beef prices may have put in a low. Movement was decent at 113 loads. So far there has been some light cash market tests at $116 in Iowa and $118 in Nebraska, steady to down a bit from trade ranging from $118 to $120 in these areas last week. But sales volume has not been enough to set a trend. Today’s online Fed Cattle Exchange auction should provide additional cash market insight.

Strong pork movement... Pork movement surged to 424.78 loads on a 70-cent rise in the pork cutout value on Tuesday. This was a dramatic improvement from load counts ranging from roughly 251 to 287 the prior three business days. This could help cash hog prices to stabilize after softening the first two days of the week.

Overnight demand news... Egypt purchased 300,000 MT of wheat from Russia, 60,000 MT of wheat from Romania and 60,000 MT of wheat from Ukraine. Algeria bought up to 500,000 MT of milling wheat from optional origins, with traders saying the wheat will likely come mainly from France. Japan received no offers in its simultaneous buy and sell auction at which it was seeking 120,000 MT of feed quality wheat and 200,000 MT of feed barley.

*Correction... In “Evening Report” we reported that USDA in June forecast grocery store prices would rise 1% to 2% in 2017. It actually forecast prices would hold steady to rise 1% this year in its update last month.

Today’s reports:

9:30 a.m., Weekly Ethanol Production -- EIA
1:00 p.m., FOMC meeting concludes -- Fed
2:00 p.m., Broiler Hatchery -- NASS

First Thing Today: Risk Aversion Overnight

Wed, 21 Sep 2022 02:37:03 GMT

Good morning!

Risk aversion weighs on markets overnight... Rains moving across Iowa early this morning as well as unease about a possible trade announcement from the Trump administration weighed on the grain and oilseed markets overnight. As of 6:30 a.m. CT, corn is down 3 to 4 cents, soybeans are 8 to 9 cents lower, winter wheat is posting losses of 6 to 8 cents, and spring wheat is down 11 to 17 cents. Outside markets are also price-negative, with the U.S. dollar index posting moderate gains and crude oil futures under pressure.

Forecast remains non-threatening... Rains over the weekend favored North Dakota and Nebraska as well as Ohio, and rains are moving across Minnesota and the northern half of Iowa early this morning. While temperatures are expected to warm a bit this week, no threatening heat is anticipated. Plus dry areas of Iowa and Illinois are expected to see some relief. The National Weather Service forecast for Aug. 19-23 calls for wet weather across the western Corn Belt and into northwest Illinois. Much of the eastern Belt is expected to see normal precip. Warm temps are expected from Minnesota, Iowa and northern Missouri eastward. Normal temps are likely elsewhere across the Midwest.

Legislative agenda for remainder of FY 2017... Congress remains on its long summer recess but a big workload awaits them on their return after Labor Day. The House has only 12 working days before the end of September when a new fiscal year (FY) begins; the Senate has 16 days. The legislative agenda when lawmakers return includes: (1) a bill raising the debt ceiling; (2) spending bills to keep the government open; (3) Extensions for expiring programs on Sept. 30, including the Children’s Health Insurance Program, the coast Guard, and others; and (4) a budget resolution setting overall spending levels for FY 2018 and one which will allow the Senate to use a filibuster-busting mechanism that could allow a tax bill to pass with just 51 votes. Also of note, North American Free Trade Agreement talks will take place Aug. 16-30 in Washington.

Update on North Korea... U.S./North Korea anxiety continues, but the focus will be on whether the situation eases somewhat after President Donald Trump late Friday talked with China’s leader. Chinese President Xi Jinping urged Trump to exercise restraint over tensions with North Korea, Chinese state media reported. The two leaders vowed to remain in close touch over the situation, state media said. The Associated Press reports that Joseph Yun, the U.S. envoy for North Korea policy, has been in regular contact with Pak Song Il, a senior North Korean diplomat at the country’s mission at the United Nations. The AP report indicated the discussions had not eased fears of a military confrontation, but could prove a foundation for negotiations going forward.

Politico: Admin to announce probe into China’s alleged violation of IP rights today... An investigation into China over allegations it violated U.S. intellectual property (IP) rights and forced technology transfers will be unveiled Monday, Politico reported, citing an unidentified administration official. Of note, there will be no immediate action against China following the president’s signing of the memorandum, but the steps will authorize U.S. Trade Representative Robert Lighthizer to determine if an investigation of Beijing’s laws, practices or actions is warranted. Senior administration officials denied that the memorandum is part of a coordinated effort by the White House to pressure its largest trading partner to be more aggressive in getting North Korea to curb its threats of ballistic missile action against allies in the region and the U.S. territory of Guam. A Chinese state newspaper said this “could trigger a trade war.” Read more .

Sugar producer challenges U.S./Mexico trade deal... lCSC Sugar LLC has filed a court case challenging a U.S./Mexico trade suspension deal that prevented U.S. duties on Mexican sugar. The two countries signed a deal in June that limits the amount of refined sugar Mexico could ship to the U.S., sets minimum prices to prevent sugar imports from undercutting domestic prices, and stopped the U.S. from imposing anti-dumping or countervailing duties. The company, which has operations in Mexico and the U.S., has yet to file a complaint laying out its claims.

New corn-only ethanol plant in Brazil first of its kind... On Friday, Brazil’s FS Bioenergia launched the country’s first ethanol plant that solely processes corn. The Mato Grosso-based plant is expected to produce around 240 million liters (63.4 million gallons) of the biofuel each year, as well as 6,200 MT of corn oil and 60,000 megawatts of power. It emphasizes the country’s need to find outlets for its growing corn crop. The industry is dominated by sugar cane-based ethanol, with around 360 plants processing cane.

Momentum still favors market bears in cattle market... Cattle futures sustained technical damage last week and momentum still favors market bears. That said, pressure could be limited by the discount the August contract still holds to the cash market. But cash prices could also slide going forward as supplies are building. Dressed cattle weights narrowed their discount to year-ago in the latest reporting period, though they remain well under year-ago levels.

October lean hogs well below cash index... August lean hogs go off the board at noon today, so the October contract’s still wide (nearly $17) discount to the cash hog index will garner increased attention. That could lead to additional corrective gains this week.

Weekend demand news... Saudi Arabia bought 660,000 MT of animal feed barley in a tender where Europe, the Black Sea, North and South America and Australia presented offers.

Today’s reports:

10:00 a.m., Weekly Export Inspections -- AMS
11:00 a.m., Cotton & Wool Outlook: August 2017 -- ERS
11:00 a.m., Oil Crops Outlook: August 2017 -- ERS
2:00 p.m., Feed Outlook: August 2017 -- ERS
2:00 p.m., pm Wheat Outlook: August 2017 -- ERS
3:00 p.m., Crop Progress -- NASS

EPA Denies Ethanol Waiver Request

Fri, 20 Nov 2020 05:35:59 GMT

The Environmental Protection Agency (EPA) has denied requests for a waiver of the ethanol mandate component of the Renewable Fuels Standard (RFS) after record-setting drought this summer pushed up corn prices.

EPA says waiving the ethanol mandate would only reduce corn prices by 1% and therefore would provide livestock producers little relief from high feed costs little relief. EPA’s air chief, Gina McCarthy, said that “our extensive analysis makes clear that congressional requirements for a waiver have not been met and that waiving the RFS will have little, if any, impact.”

EPA had missed its deadline for delivering a decision on the mandate by three days, marking the second time EPA has considered and rejected an RFS waiver request. EPA made its decision in conjunction with the Obama administration.

The RFS mandate requires ethanol consumption of 13.2 billion gallons in 2012 and 13.8 billion gallons in 2013. Get more details on the waiver decision here .

For perspective on the decision, go to profarmer.com .

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Statements from various agriculture groups following the announcements:

The National Cattlemen’s Beef Association (NCBA) expressed disappointment after the announcement. “In light of the most widespread drought to face the country in more than 50 years, the refusal to grant this waiver is a blatant example of the flawed policy of the RFS,” said NCBA President J.D. Alexander, a cattle feeder from Pilger, Neb. “The artificial support for corn ethanol provided for by the RFS is only making the situation worse for cattlemen and women by driving up feed costs.”

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The National Corn Growers Association supports EPA’s decision. NCGA’s President Pam Johnson said: “We believe Administrator Jackson appropriately recognized petitioners did not properly prove severe nationwide economic harm had occurred thereby creating no justification for a waiver of the RFS.

“The ethanol industry plays a pivotal role in job creation throughout the country supporting over 400,000 jobs nationwide. This includes many in ethanol plants in rural America. The RFS advances the use of domestically produced renewable fuels, encourages new technologies and enhances U.S. energy independence.”

Nebraska Corn Board: 10 Ways Ethanol Helps Livestock Farmers During Drought

Fri, 20 Nov 2020 05:35:44 GMT

The following information was released by the Nebraska Corn Board:

While the drought is having a profound impact on crop production, thanks to ethanol production there is a larger and more flexible corn supply than was available during previous droughts of this magnitude.

Today’s USDA report confirms what we already knew that the drought’s impact on supply and price will be felt by corn consumers around the world, stated Iowa Renewable Fuels Association (IRFA) Executive Director Monte Shaw.

Yet, the ag sector has seen droughts before, and it will survive again. This is a time when all of agriculture should pull together. Unfortunately, national livestock trade associations have chosen to politicize the on-going drought as part of their multi-year effort to return corn prices to $2 per bushel.* (see below) At times like this, it is important to look past the rhetoric to the facts. And the fact is that ethanol production provides a benefit to Midwestern livestock producers in many ways.

The following list from the IRFA gives 10 ways that ethanol production helps livestock farmers during the 2012 drought.

1. The ethanol industry has driven the production of a larger corn crop. Simply put, there is more corn to go around. American farmers responded to the demand for more corn for ethanol processing by planting millions more acres. With no ethanol industry, farmers would have likely planted around 75 million acres of corn this year (just like they did in 2001), instead of 95 million acres. So, factoring in drought reduced yields, without ethanol production the 2012 corn crop would likely be more than two billion bushels smaller and there would be NO distillers grains to use as a cost-effective substitute for high-priced corn and soybean meal.

2. The ethanol industry will bear the brunt of any rationing stemming from the drought. Without ethanol, the smaller corn harvest (yield and acres) would have to be rationed solely by livestock producers (domestic or export customers). Ethanol producers have already cut back production by over 10% (several plants have shut down, putting people out of work), and that’s likely just the beginning.

3. Due to ethanol demand, seed companies spent much more than they would have otherwise on research and development over the last decade. As a result, farmers have access to seed varieties with greater yields that can withstand the drought much better than in prior years, like 1988. 4. Maintaining the RFS sends a market signal to world farmers (including those in South America who will be planting soon) and U.S. farmers not to reduce corn acres. Conversely, lowering the threshold for waiving the RFS would send a market signal that renewable fuels are not a reliable market and corn acres planted would be reduced ultimately hurting the livestock groups asking for such a waiver.

5. One-third of every bushel of corn processed into ethanol returns to the livestock feed supply in the form of distillers grains including all of the protein, fat, fiber and other nutrients. Only the starch portion of the kernel is used to produce ethanol. Last year the amount of distillers grains produced was more than the total amount of grain consumed by all the beef cattle in American feedlots.

6. As the nutritious feed portions of the corn kernel are concentrated, distillers grains are a more efficient source of energy and protein than the ingredients they are replacing in livestock diets. Distillers grains provide approximately 130-150% of the energy of an equivalent amount of corn when fed to beef cattle. This allows for the use of cheap roughage (corn stalks, soybean straw) to be used in livestock diets.

7. Without distillers grains, the cost of cattle and hog rations in the Midwest would go up as distillers grains and roughage are replaced with expensive corn and soybean meal. Bill Couser, of the Couser Cattle Company near Nevada, Iowa, stated: It’s amazing to see what ethanol has done for the cattle industry in the state. It used to take 75 bushels of corn to finish a 1300 pound steer. Today, with distillers grains, we use only 16 to 30 bushels of corn and that number keeps dropping. 8. The drought has negatively impacted much pasture land. Without ample grass, cows may be unable to nurse their calves for the traditional 200-day period. According to Purdue University research, by incorporating distillers grains at 30 or 60 percent of the ration and weaning calves after 100 days, cattle feeders can save money on feed costs with no negative impacts on average daily gain, feed intake and marbling score. 9. Distillers grains improve weight gains despite external factors, such as hot, dry weather. Andy Jenson of Jenson Farms in Nebraska stated that since cattle like the taste of distillers, they eat on a steady basis and gain weight more uniformly, despite changes in weather.

10. Distillers grains provide an economic source of energy, amino acids and phosphorus for hog diets. According to University of Minnesota research, distillers grains improves the digestive health of grower-finisher pigs and may increase the size of litters when sows are fed high levels of distillers grains (30-50% inclusion rate). Roger Zylstra, of Zylstra Hillside Pork near Kellogg, Iowa, adds 30% distillers grains to his hog rations and notes that animal performance is the same while costs are reduced.

* For 22 out of the 25 years prior to enactment of the RFS, large livestock producers were able to purchase corn for a price below the cost of production. This was sustainable only because of multi-billion dollar crop support programs in the Farm Bill. This situation gave a competitive advantage to livestock producers (like those in Texas, North Carolina, and Arkansas that control the national livestock groups) who purchase all their corn. Since 2006, the market economics have reversed, thereby benefiting the farmer-feeder over the large livestock producers. When you also factor in the cost advantages of ethanol’s feed co-product (distillers grains) it is clear that ethanol production is not bad for livestock producers, although ethanol production has played a role in returning corn prices to levels sustainable by market forces, not price support programs.

Ethanol production is so important to Nebraska’s “Golden Triangle” of corn, cattle and ethanol. Just one Nebraska plant in 1985 has grown to 24 ethanol plants in 2012. Spread throughout much of the state, these plants have a capacity of nearly 2.0 billion gallons making Nebraska the second-largest ethanol producing state in the country. Combined, these plants use more than 700 million bushels of corn per year and produce more than 6 million tons of distillers grains to feed the number one ranked red meat production state in the country!

By Kelsey Pope

Calls to Lower Ethanol Quota rRse

Fri, 20 Nov 2020 05:35:44 GMT

Lawmakers and activist groups are calling on the U.S. government to lower the ethanol quota in the face of a possible domestic and international food crisis.

Currently, the U.S. renewable fuel standard uses about 40 percent of the nation’s corn crop for ethanol production, the Los Angeles Times reported.

However, the widespread drought has killed more than 50 percent of the corn crop this year, driving prices to record levels.

The International Food Policy Research Institute has recommended the United States immediately stop using corn to make ethanol for fuel “to prevent a potential global food price crisis.”

“Poor and vulnerable groups in developing countries are hard hit by high and volatile prices of the agricultural commodities they depend on for their primary daily caloric intake,” said Shenggen Fan, director general of the think tank, which is based in Washington.

Some 156 members of the House of Representatives and 26 senators wrote letters to the Environmental Protection Agency requesting a temporary waiver of the ethanol quota.

“As stressful weather conditions continue to push corn yields lower and prices upward,” the senators wrote, “we ask you to adjust the corn grain-ethanol mandate ... to reflect this natural disaster and these new market conditions. Doing so will help to ease supply concerns and provide relief from high corn prices.”

Some people, however, say lowering the corn quota for ethanol production could cause disasters down the road.

“Waiving the federal renewable fuel standard even for one year will produce instability in the program for several years, causing uncertainty for companies investing in advanced biofuels and for farmers growing next-generation energy crops,” said Jim Greenwood, chief executive of the Biotechnology Industry Organization.

Water Problems Creep Across the U.S.

Fri, 20 Nov 2020 05:31:41 GMT

More than ever, water is the tension bar between agriculture and society. Urban centers desperately need more of it to satisfy an increasing population. Farmers require it to produce the food for all those people.

With the Earth’s water supply finite but demands for it ever escalating, conflicts about water are becoming commonplace. Farm Journal is committed to covering agriculture’s role in this clash. The story below about water problems on farms in eastern Colorado is the first in what will be an ongoing series that promises to touch every corner of the nation.

Caught in a devastating three-year drought, state and federal water agencies in California say they will cut deliveries to farmers in much of the San Joaquin Valley by at least 85% this year. That will idle land and result in 40,000 lost jobs and $1.5 billion in income, says Richard Howitt, chair of the Agriculture and Resource Economics Department at University of California–Davis. In addition, the nation’s food security could be compromised because that region produces half our fruits, nuts and vegetables, along with other crops, such as cotton, wheat and potatoes.

The Ogallala Aquifer, which supports millions of acres of crops in eight Plains states, continues to decline. From the late 1940s, when farmers began irrigating in the Texas Panhandle, until 1980, portions of the aquifer dropped 100' and will fall another 100' by 2020, says Jim Goeke, University of Nebraska hydrogeologist. In Nebraska, the Department of Natural Resources recently issued a preliminary ruling that the Lower Platte River Basin appears “fully appropriated.” That could lead to a moratorium on new irrigation wells.

Texas, now in the midst of a long-term drought killing both crops and cattle, faces big problems. Nearly the entire state is in some stage of drought, according to the most recent U.S. Drought Monitor maps. A new report by Susan Combs, Texas state comptroller, projects the state’s popu-lation will double to more than 46 million by 2060, boosting water demand by about 27%. The water shortage could cost Texans about $9 billion next year and more than $98 billion by 2060, the report says. Combs calls for new water management strategies to deal with the crisis.

The Southeast, after several dry years, is no longer assured of consistent rainfall. That puts the city of Atlanta and its fast-growing suburbs in conflict with farmers as well as surrounding states. Even oystermen on Florida’s Gulf Coast complained as fresh water supply dwindled in Apalachicola Bay, which produces 90% of the state’s renowned oysters. In February, Georgia’s Gov. Sonny Perdue appointed 300 people, including farmers, to 10 regional water planning boards to monitor the situation.

Shortage of water isn’t the only difficulty facing agriculture. Quality is an issue in many watersheds and streams across the country. North Carolinians, among others, deal with ongoing battles regarding hog lagoons. Farmers in the Chesapeake Bay watershed have had to change management practices to rehabilitate its water, long important for fishing and recreation. Florida’s farmers and ranchers are dealing with stringent environmental regulations designed to protect sensitive wildlife habitat. In many other areas, farmers and ranchers are devising ways to protect watersheds and lakes with innovative fencing for livestock and conservation tillage for crops.

With our new series, we at Farm Journal will not only outline the problems but pledge to also look for answers that can help farmers and ranchers overcome this threat to their livelihoods and legacies. Technology already offers some possibilities: irrigation refinements that reduce water usage and drought-tolerant hybrids, to name just two.

Water is the overriding concern for farmers, ranchers and society as a whole. Without workable solutions, everyone loses. Share your thoughts and let us know about water
issues in your area. We want to hear from you.

Colorado’s Water War

For Darrell and Cindy Johnston, 2002 was the turning point. The worst drought in memory shattered hopes of a profit on their farm in Erie, Colo.

“We didn’t get any moisture. Snowpack was way down. We planted bone-dry. Crops sat waiting for rain. Water was allo-cated, and we had to decide which crops to irrigate. We burned our water up getting the crop up, then we were out of water. So we didn’t have a crop,” Darrell says.

The future didn’t look much better, either. Located on the Front Range just north of the Denver metropolitan area near I-25, with water supply both short and at a premium due to booming development, the Johnstons decided moving was their best option.

“When the drought hit, farms went from irrigated to dryland overnight. The problem in Erie is that the cities have control of the water and dictate how much we get. It’s been going on for 10 years now,” Darrell says.

Though they had both grown up in the area, the Johnstons sold some of their more valuable land near the interstate. They bought land with a more assured water supply 70 miles away in Fort Morgan, Colo., using an Internal Revenue Service Section 1031 Exchange to postpone capital gains taxes. They grow corn and sugar beets on the 700 acres in Fort Morgan and wheat, barley and hay crops requiring less water on the original 2,700-acre farm, which is now managed by their 23-year-old son, Brandon.

“Buying land in Fort Morgan is the hardest decision we ever made. But if we’re going to farm, we have to have water. When the 2002 drought hit, it was eye-opening to know we did not have water to irrigate,” Cindy says.

Lots of other Colorado farmers are seeing their worlds rocked in much the same fashion. In addition to the competition for water with cities on the Front Range, eastern Colorado farmers in the Republican River Basin and the South Platte River Basin have their own serious problems.

Four hundred irrigation wells in the Republican River Basin were recently shut down to comply with a settlement involving a Kansas lawsuit that requires certain flow levels. In the South Platte River Basin, pumping from as many as 4,000 wells has been limited or curtailed due to a plan to recharge the river’s water and comply with the Endangered Species Act, says James Pritchett, a Colorado State University ag economist working on water issues.

“Crop acreage has gone from 3 million to 2½ million. We’re likely to lose 250,000 acres in the South Platte, where we’re at 1 million acres now,” Pritchett says. “We’ve been depleting the aquifer at an unsustainable rate. Within one generation, we’ll have to find a way to continue agriculture in that area with less water.”

So far, farmers losing wells have gotten little compensation. “On the South Platte, they are not compensated. They are literally high and dry. On the Republican, these are voluntary measures through CREP [Conservation Reserve Enhancement Program] and EQIP [Environmental Quality Incentives Program], a token compensation nowhere close to what they could make from full production,” says Mark Sponsler, executive director of the Colorado Corn Growers Association.

Those economics won’t pencil out long-term for farmers caught in the 21st century water wars. The Johnstons enjoy farming their new Fort Morgan land but warily eye what’s happening to other producers.

“I just cannot comprehend that government can say, ‘Sorry, you’re done, too bad.’ A judge held the fate of all those people’s lives,” Cindy says.

You can e-mail Charles Johnson at cjohnson@farmjournal.com .

Gas to Gas: Dairy Manure Powers California Ethanol Plant

Fri, 20 Nov 2020 02:51:50 GMT

In a first for the Golden State, a dairy, a digester and an ethanol plant partner to create renewable energy.

California’s first biogas project connecting a dairy to an ethanol plant officially crossed the finish line last week with a public inauguration at its San Joaquin Valley site.

Nearly six years in the making, the $9.5 million renewable energy project relies on manure piped from a dairy a mile away to an anaerobic digester at the Calgren Renewable Fuels ethanol production facility in Pixley, Calif.

Calgren’s digester captures manure-generated methane gas and burns it as clean biogas to power the ethanol plant. In turn, the plant yields nearly 60 million gallons of ethanol a year that, blended with gasoline, creates a low-carbon fuel for many of California’s 27 million cars.

Officials said the Pixley biogas project is the first California digester to use agricultural waste to create renewable natural gas to power another renewable energy facility. It’s also the first digester in the Golden State to be 100% American made and constructed. The plant now becomes California’s lowest-carbon commercial ethanol producer.

“This project is a model for biorefineries in California and throughout the U.S.,” Jim Mckinney, program manager for the California Energy Commission , said at the digester’s Feb. 10 grand opening. The state agency contributed $4.6 million in grant funds to the project.

The project produces several benefits, officials said.

The dried manure solids that are discharged at the back end of the digester cycle are trucked back to Four-J Dairy every day to be used as bedding for the herd.

“We turn waste into fuel,” said Calgren Renewable Fuels president Lyle Schyler, adding that ethanol comprises 10% of fuel at California’s gasoline pumps. Moreover, the project’s carbon output “is quite low,” because of the digester and other emission-controlling equipment at the plant. “This project is exceptionally green,” Schlyer said.

“Electricity and hydrogen are getting a lot of media attention these days as the fuels of the future,” said Mckinney. “But it is the workhorse plants like this Calgren facility that reduce the carbon content of our fuel supply. At 58 million gallons per year, that’s enough low-carbon fuel for 145,000 cars every year.”

The new biogas system will reduce the amount of natural gas used to fire Calgren’s boilers by 6% and reduce the carbon footprint of the plant’s fuel product by 67 grams of carbon per megajoule, added Mckinney. “That’s one third less carbon than gasoline and one third less carbon than most of the corn ethanol from the Midwest that we import,” he said.

The project’s benefits don’t stop with Calgren and the California environment. Frank Junio and his family also have profited from the project. It’s their Four-J Dairy that’s supplying the manure to Calgren’s plant .

For their role in providing the manure, the Junios got a new manure management infrastructure for their 1,800-cow dairy operation. That includes a double-lined lagoon.

Frank Junio’s dairy supplies the manure to the ethanol plant, seen in the distance.

The dairy also gets the dried manure solids that are discharged at the back end of the digester cycle. Those manure solids are trucked daily from the Calgren plant to Four-J Dairy, where they’re used as bedding for the Junios’ dairy herd. The digester’s remaining effluent is piped back to the dairy each day to be applied to field crops.

The Pixley biogas digester is a two-stage, plug-flow complete mix system. It has a 1-million gallon capacity, said Steve Dvorak, whose Wisconsin-based DVO company engineered the digester. (Calgren’s Daryl Maas conceived and guided the project; Regenis built the digester.) While 90% of the waste going into the digester comes from the dairy, the digester has received permitting to use all feed stocks, including municipal waste and food processing waste.

Located 12 miles south of Tulare and adjacent to Freeway 99, the Calgren facility was built in 2008. It’s one of only four commercial ethanol production plants in California. Corn feed stock for Calgren’s plant arrives by train from the Midwest at the neighboring JD Heiskell facility . It’s then transferred via elevators and conveyors to Calgren’s plant for processing. In addition to ethanol, the Calgren plant produces wet distillers grains and corn oil.

A Whole New Twist

Fri, 20 Nov 2020 02:51:27 GMT

A California ethanol plant and a dairy team up to build a methane digester

When officials from a nearby ethanol plant approached him last year about a methane digester project, dairy producer Frank Junio was skeptical.

“My first thought was, ‘Why would I want to get hooked up with them?’” recalls Junio, who milks 1,600 Jerseys at his family’s dairy near Pixley, Calif.

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Calgren Renewable Fuels could cite a couple of good reasons. The plant wanted the biomethane from Junio’s dairy manure to help power its ethanol-making operation. Located less than a mile north of the Junios’ Four-J Dairy, Calgren proposed building an underground pipeline to transport raw manure to a digester it would construct on its ethanol-producing site. Would Four-J be interested in a new manure management infrastructure and dried solids for freestall bedding, at no cost?

Junio’s hesitation wasn’t so much that the ethanol industry had become something of a villain to livestock producers, who blame soaring feed prices on ethanol’s growing demand for corn. The issue was more pragmatic for the third-generation dairy producer. “A lot of ethanol plants were going out of business in the Midwest,” Junio says. “It didn’t seem like the right thing for us to do.”

But for Calgren and project manager Daryl Maas, the Pixley biogas project made total sense. “I wouldn’t be here if I didn’t think this would work,” says Maas, whose Farm Power Northwest company owns five dairy digesters in Washington and Oregon.

“The biogas industry has been plagued by delusions of grandeur,” acknowledges Maas. “But this is a good, practical project. It involves neighbors who are working together with knowledgeable people. They’re taking on a project of manageable size that provides a direct benefit for both the dairy and the ethanol plant.”

Junio’s doubts eased after meeting with Maas and Calgren’s president, Lyle Schlyer. “Lyle assured us they are here for the long haul,” he says.

The dairy producer now sees the project as “a big plus for us.”

Calgren first fired up its ethanol plant in 2008. One of California’s three operational ethanol plants, it produces 58 million gallons of ethanol a year, as well as wet distillers’ grains and corn oil. Nearly all of the plant’s corn comes from the Midwest.

From the beginning, Calgren saw opportunity in powering its plant with biomethane, not just fossil-fuel based natural gas. The company wanted to reduce its pollutant emissions and meet new federal guidelines under the Renewable Fuels Standard. And it sat in Tulare County, one of the nation’s top dairy areas. “If we could substitute a waste product to power our plant, we would make a more environmentally friendly ethanol product,” Schlyer says.

Calgren had another need. Because it generates its own electricity and steam, it produces hot stack gases and ends up with excess heat. That heat surplus could keep a methane digester at consistently high temperatures—perfect for the anaerobic process and producing methane. “We would improve efficiency and consume less fuel,” Schyler says.

The company turned to Maas, who helped write a grant proposal for the digester-pipeline project. In April 2010, the California Energy Commission awarded Calgren a $4.68 million matching grant to pay for half of the project.

Calgren is still deep in the permitting process for the project, which operates under the name Pixley Biogas Company. It hopes to begin construction by early next spring. Under Maas’ direction, the company will install a GHD-modified, plug-flow digester system about 100 yards north of the ethanol plant, which sits beside busy Freeway 99. Schlyer hopes the biomethane will reduce the plant’s natural gas usage by 8%.

At Junio’s dairy, raw manure will no longer flow into a lagoon. Instead, it will enter an underground pipeline and head to the digester. Junio will receive a valuable digester byproduct: pathogen-free manure solids, known as biofibers, which he’ll use as bedding in his freestalls. Another benefit will be the digester’s liquid wastewater, returned to the Junios via pipeline. They’ll apply that to their 800 acres of crops.

Beyond those benefits, Junio sees expansion possibilities. “We need this new infrastructure to allow us to expand and build a new milk barn,” he says. “Because it will be environmentally correct, we think it can help us get permitted to do that.

“If this all comes to fruition, it will mean $500,000 to $1 million in benefits for us,” adds Junio, who’s signed a long-term contract with Calgren. “Nothing’s a sure thing. Technology could change, something could happen. But it’s all positive at this point.”

Local Opposition Slows the Project

Calgren’s methane digester pipeline project with Frank Junio’s dairy is a scaled-down version of an earlier plan. Originally, Calgren wanted a bigger digester. The ethanol company planned to supplement the manure it received from the dairy with waste trucked in from dairies in a two-mile radius.

“It was the county planning staff’s position that the digester at that location would meet all relevant local codes and ordinances, and we recommended approval of the project,” says Benjamin Kimball, chief planner for Tulare County.

But opposition from local residents, farms, businesses and the Pixley town council over perceived transportation and odor issues, as well as a sense that the public had not been adequately informed about the project, forced a change in plans.

“We’re not looking for a fight,” says Calgren’s president, Lyle Schyler.

To appease those concerns, Calgren downsized the project to 60% of its original size. The revised plans include a smaller digester, supplied by the manure and liquid from Junio’s dairy alone. Kimball believes Tulare County’s Planning Commission and Board of Supervisors will eventually approve the project.

“The scaled-down project will be easier to achieve,” says project manager Daryl Maas. “We’re eager to get it going.”

Nowhere to Turn for Dairies

Fri, 20 Nov 2020 02:35:22 GMT

Drought, soaring feed costs, shrinking credit lines and red ink box in dairies.

**Extended story highlighted in blue.

Every day of the past year, Texas dairy producer John Traweek has asked himself the same question: “Will my family and our Jam-Dot Dairy be the next to go under?”

Like many U.S. dairy families, the Traweeks and their 500-cow operation near Stephenville have been battered by an army of obstacles: volatile milk prices, soaring feed and fuel costs, shrinking credit lines, increasing animal health costs, stringent environmental regulations and farm labor concerns.

Add to those the Lone Star State’s 2011 punishing drought, which forced Texas dairies to reach as far as North Dakota for their feed, eating up the profits that last year’s strong milk prices might otherwise have delivered.

The latest of Traweek’s troubles has been 2012’s record drought, which has gripped much of the nation, shrinking crops and sending corn prices through the roof at $8 per bushel. The outlook is dire for Traweek’s declining dairy, which only last year was home to 1,500 cows.

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Traweek has plenty of company in worrying about his family dairy’s survival. In many parts of dairy country, stories of record feed costs, drought-damaged crops, red ink, special-asset lending status, bankruptcies and dairy liquidations underscore 2012’s financial stress. While declining milk production recently helped lift dairy prices, many industry observers still expect this year’s dairy farm troubles to approach the severity of 2009’s crash-and-burn ordeal.

With livestock producers, ethanol plants, food manufacturers and exporters all vying to get their share of the smallest corn crop since 1996, prices have soared. Other commodities have followed suit. That’s put U.S. dairies in a bind, since nearly all rely on purchased feed to some extent.

“I don’t know of anyone who can grow all his own feed,” says Florida dairy producer Joe Wright, who switched his operation to modified grazing to reduce feed costs after 2009’s dairy recession.

“Getting feed is one thing, affording it is another,” says Jay Gordon, executive director of the Washington State Dairy Federation.

California dairies, for example, are paying $350 per ton for rolled corn, $310 per ton for premium alfalfa hay and $418 per ton for cottonseed. Texas producers are paying $335 per ton for delivered ground corn and $300 per ton for alfalfa hay. In the Midwest, dairies are dealing with $600 per-ton soybean meal. All prices are well above average—some have doubled.

Across the nation, those expenses are taking a big chunk out of dairy margins. Midwest dairies are in serious financial trouble, says Robert Tigner, a University of Nebraska Extension dairy specialist.

John (left) and Ricky Traweek stand in front of the original milking barn with their father, James, (seated), who founded the Texas dairy in 1964. (Photo: Richard Rodriguez)

“July’s lowest break-even price was $23.41 per cwt.,” Tigner says. July’s mailbox milk price was $16.48.

“Many Minnesota dairies are barely making cash flow,” says Bob Lefebvre, executive director of the Minnesota Milk Producers Association.

Texas dairy losses total $2 to $3 per cow per day, almost as severe as in the 2009 downturn, says Mitchell Harris, CEO of AgTexas Farm Credit Services.

In New Mexico, where margins have dropped $2 per cwt. below break-even, dairy producers saw equity levels erode about $200 per cow between January and June, according to Greg Carrasco, a vice president of lending with Farm Credit of New Mexico.

For those fortunate dairies that have received adequate rain and are producing good feed crops, conditions are bright. Dan Siemers is one of the lucky ones. His Newton, Wis., dairy farm received good rains this summer and his cows are milking well.

“This year, it’s all about the crops,” Siemers says. “If you have a good crop or good crop insurance to get over the hump, you will be looking golden once everything straightens out.”

But for many other producers, the situation remains grim despite $20-plus milk prices. Many California dairy producers can’t acquire feed unless they pay in advance or on delivery or agree to sign over a second deed of trust on their property to the feed supplier, according to Western United Dairymen, a California-based trade organization.

In the state’s Central Valley—the nation’s No. 1 milk shed—at least a third of dairies reportedly have been moved to lenders’ “special assets” departments, are in bankruptcy, close to liquidation or have shut down.

“No one is lending to California’s dairies right now, based on our experience with clients,” says Doug Tucker, a partner in the law firm of Moss Tucker in Fresno, Calif.

John’s father, James Traweek, remains alone with his thoughts in the family’s milking barn, which once bustled with activity. (Photo: Richard Rodriguez)

He and Amanda Hebesha, another partner in the firm, are working with at least 10 Central California dairies, some with multiple sites. The dairies all have in common a special-asset status with the same lender. (That status is where a bank transfers a loan to its “workout” department for closer scrutiny, which sometimes leads to pulling the loan or liquidating collateral.) The precariously positioned dairies have sought legal counsel to work with lenders and buy more time to stay in business.

“The rules of the game have changed,” Hebesha says. “Instead of a banking relationship where people work together and loans will be renewed, it now appears the bank is interested in maximizing its collection.”

To help their clients, Hebesha and Tucker have been negotiating with the bank on loan principal payments. The attorneys are seeking to extend the bank’s demands for a 45-day loan repayment period. They’re asking for two months or more to buy time for their dairy clients to catch up and seek new financing. The legal team says it had some success until about mid-July, when the drought’s repercussions hit the market and lenders abruptly shut their doors to dairies.

In Idaho, dairies representing more than 50% of the state’s milk production are in special-asset status with lenders, says Rick Naerebout of the Idaho Dairymen’s Association.

Is there a way out? One solution is more financing options for dairies, says Darren Turley, executive director of the Texas Association of Dairymen.

“Too many don’t have access to capital,” he says. “There are hard feelings toward lenders.”

In particular, he adds, medium-sized dairies don’t have financing options. “Only when you cross over the 1,000- to 1,200-cow size do you get the bank’s attention,” he says.

Some say ending or modifying government support for corn-based ethanol would be a big step in aiding livestock producers. “We need to quit feeding corn into ethanol plants,” says Washington’s Gordon. “That’s stupidity.”

Others believe that getting Congress to approve a new farm bill would also help dairies, bringing stability and disaster relief.

Florida’s Wright says skyrocketing corn prices might ultimately help milk prices. “It’s selfish to think so, but maybe $8 corn prices will suppress milk production enough to get some price recovery in the dairy industry,” he says.

Still others stress that producers must play a greater role in their own price protection. Financial experts have been urging dairies to use futures contracts to hedge milk and feed prices. But, according to global lender Rabobank, that’s still fairly limited among U.S. dairy producers, with liquidity limiting even those who do participate to just three to six months’ coverage. “As such, most producers will be exposed to market pricing in coming months,” Rabobank says.

As another step, dairy producers must improve their financial savvy, says Bob Matlick, a partner with the accounting firm of Frazer LLP, which has dairy clients nationwide. “Many of them need to upgrade their internal accounting departments to plan and forecast,” he says.

For some dairies, though, any help will come too late. In Texas, Traweek and his family reached the end of the line in August, selling off their entire top-rated herd after more than 50 years of dairying.

“We had to stop the losses somewhere,” Traweek says. “We’d been losing money every day since 2009.”

Some of his cows went to slaughter, some to Iowa dairies. None went to other Texas operations.

As he closes up shop at Jam-Dot Dairy, Traweek, 48, says his mood is bittersweet. His festering anxiety of the past three years is finally over, but he’s saddened and angry at the turn of events in the dairy industry. He knows of a dozen other Texas dairies that have also reached the end of the line. Lenders, he says, have not been supportive enough. “The land banks have failed agriculture miserably,” he says.

“The dairy industry is broken,” Traweek adds. “We’re continuing to lose dairy producers and generations of knowledge. We can’t compete with the corn market, the government, ethanol policies, slow-reacting cheese markets and a banking industry that won’t help us out. Someone should understand this is not working.”

LAST STRAW WITH LENDERS?

Nationally, dairy customers are the most stressed of all the Farm Credit System’s agricultural customers, says Bill York, CEO of AgriBank, based in St. Paul, Minn.

Corn and soybean farmers have crop insurance to fall back on if crops fail. But dairy producers will struggle to find enough feed to get through the next year, and will pay dearly for it if they find it. “We’re looking at 12 months of uncertainty,” he says.

“There will be a lot of creativity in putting together rations in the coming months,” York says. “And there will be need for increased operating loans to cover those costs.”

In California, Texas and Idaho dairy country, anti-lender sentiment is high amid shrinking credit lines. Some producers claim that lenders have withdrawn support for the dairy business and are too quick to move troubled dairies into special-asset status.

“Lone Star Land Bank courted a lot of dairy loans in 2006, but they’ve decided to exit the dairy industry,” says Darren Turley of the Texas Association of Dairymen.

Wells Fargo, one of the nation’s largest dairy lenders, disputes claims that it has withdrawn its support from the dairy industry.

“Wells Fargo has banking relationships with individual people and businesses, not industry groups,” says bank spokesman Gabriel Boehmer. “Wells Fargo remains committed to dairy producers throughout the U.S., including California, whose businesses and strategies appear to be viable over the long term. Wells Fargo believes that successful dairy producers will recognize that the risk profi le of this industry has changed and will make appropriate adjustments to succeed.”

Herd liquidations and dairy closures aren’t always because the lender didn’t do its job, says Mitchell Harris, CEO of AgTexas Farm Credit Services. “A lot of lending and dairy business models were not designed to handle the level of challenge we’re seeing in the dairy industry,” he says.

But Harris also urges producers not to paint all financial institutions with the same broad brush. “We haven’t foreclosed on a dairy since AgTexas was formed in 1999,” he says.

AgTexas operates on a much smaller scale than Wells Fargo, Bank of America and other large banks. The $600 million Texas bank has about $25 million in dairy loans, with less than 25 dairy borrowers. That’s down from 125 dairies several years ago.

While AgTexas is still making loans to dairies, it’s busy counseling worried dairy producers, Harris says. The lender has used USDA loan guarantees to help some of its dairy borrowers work through the tough times.

“If you’re working with a borrower who has a challenged situation, the worst thing you can do is pull the operating line,” Harris says. “There are a lot of reasons why you want to keep that line of credit in place. It’s not just about compassion. As a lender, you need to consider the impact of caring for and preserving the cattle while helping the borrower to preserve as much equity as possible. If the herd husbandry is not adequate, the value of the dairy herd can deteriorate by 50% in a matter of hours or days.”

Idaho Dairy Farmers Applaud State's Unanimous Delegation Support for Waiver of Ethanol Mandate

Fri, 20 Nov 2020 02:34:52 GMT

State’s senators and congressman join request for EPA to scale back Renewable Fuels Standard in wake of the drought.

Source: Idaho Dairymen’s Association news release

The Idaho Dairymen’s Association today saluted Idaho’s key legislators for their efforts to modify government support for ethanol.

Both of the state’s U.S. Representatives, Mike Simpson and Raul Labrador, and both U.S. Senators, Mike Crapo and Jim Risch, signed onto recent letters from Congress requesting that EPA Administrator Lisa Jackson use her administrative authority to grant a waiver of the Renewable Fuel Standard (RFS) in light of this year’s drought.

“Idaho Dairymen’s Association supports the ethanol mandate waiver and we thank Mike Crapo, Jim Risch, Mike Simpson and Raul Labrador for going to bat for us on runaway feed costs,” said Jerome dairy producer and IDA President Mike Roth. “Profit margins for dairy producers are already in the red in many cases, and the short corn crop resulting from the Midwest drought will only make that situation worse. Surely this is a year to step back from the ‘food vs. fuel’ debate and give our dairy farmers a break.”

The RFS allows the EPA Administrator to reduce the amount of renewable fuels that must be blended into gasoline if the economy or environment could be harmed by the requirement. The mandate calls for 16.55 billion gallons of renewable fuel to be blended into gasoline in 2013. About 80% of renewable fuel for blending is typically ethanol made from corn.

The Idaho Dairymen’s Association, based in Twin Falls, Idaho, was established in 1944 to continue to develop and sustain an economically viable Idaho dairy industry that works together to achieve success in the domestic and global marketplace in meeting the needs of the Idaho dairy farm families.

Canada: Is Your car Eating Your Lunch? 30% of Ontario's Corn Crop Used for Ethanol, Driving Up the Price of Animal Feed

Fri, 20 Nov 2020 02:31:12 GMT

Canadian cars are stealing from the mouths of pigs and cattle, according to a new study on the impact of blending ethanol with gasoline.The competition between food and fuel is squeezing the size of the province’s livestock sector, says the study - a squeeze that could get even worse if the amount of ethanol used in gasoline increases.

About 30 per cent of Ontario’s corn crop is now used to make ethanol, a type of alcohol that also works as vehicle fuel. That’s up from less than 10 per cent a decade ago, the study says.

The increase results from federal regulations requiring 5 per cent renewable fuel in Canadian gasoline. In the U.S., the requirement is 10 per cent.

In Ontario, ethanol is made from corn, which is also the main ingredient in most livestock feed.

Competition from the fuel industry is pushing up feed prices for pork and beef producers, says the study by the George Morris Centre, a Guelph-based agriculture and food research organization.

And the losers are beef and pork producers, who face higher costs as a result. “Ethanol is adding about $65 million in total costs to eastern Canadian hog marketers annually,” the study says.

Put another way, the higher cost of grain is costing hog farmers about $5 an animal in profit. Since the farmer’s profit per hog was about $10 last year and $5 in 2010, it’s a significant hit. Losses to eastern cattle producers are estimated at $23 million.

A similar, though less pronounced, effect is occurring in western Canada, where about 4 per cent of the wheat crop is now used for ethanol, diverting grain that might otherwise have been used for animal feed - mostly cattle.

Kevin Grier, a co-author of the report, told the Star that U.S. grain prices and the Canada-U.S. exchange rate have a big impact on the setting of Canadian grain prices.

But the increasing amount of corn being used for ethanol in eastern Canada is pushing up the local price as well, Grier says.

“By our calculation, it impacts the Ontario price by $15 to $20 a tonne,” he said. That’s a significant effect, given a typical corn price of about $200 a tonne.

The study was funded by the Canadian Cattlemen’s Association, the Canadian Pork Council and the Canadian Meat Council.

Grier said researchers at the George Morris Centre had already been doing research on the impact of ethanol production on the livestock sector prior to receiving the funding for the latest study.

“We’re not talking about putting the genie back in the bottle. It’s already out,” Grier said.

But policy-makers must be aware that growing vehicle fuel instead of drilling for it has consequences to other sectors.

“They have to recognize what it has done, and what it will do,” Grier said.

Boosting the amount of alcohol in Canadian gasoline to the U.S. level of 10 per cent would devour even more of the corn crop and result in about a 40 per cent contraction of hog and cattle production in eastern Canada, Grier said.

That would lead to job losses in the meat processing industry. The resulting higher corn prices would also push up the cost of dairy, poultry and eggs, as producers would be able to pass their higher feed costs on to consumers through a pricing formula, he said.

Land Idling Program Shrinks as Prices Soar

Fri, 20 Nov 2020 02:30:20 GMT

By PHILIP BRASHER, Gannett Washington Bureau

The town of Seymour, Iowa, has lost one-third of its population over the past three decades, and John Flood, who manages a local grain elevator, figures that one of the causes was a federal program that took large swaths of Wayne County cropland out of production.

“You had all that land idled and no one doing anything with it,” he said.

Soaring crop prices are now coaxing landowners in Wayne County and across the Midwest and Great Plains to put some of that acreage back under the plow, and now Congress is considering reducing even further the program responsible for idling that acreage.

A farm bill that leaders of the congressional agriculture committees drafted this fall would cap the $2 billion-a-year Conservation Reserve Program at 25 million acres nationwide, down from the current limit of 32 million acres. When the program was first created at 1985, the government was allowed to enroll as many as 45 million acres.

Grain processors and livestock farms have been pushing lawmakers to roll back the program as a way of increasing production of corn and other crops. The National Grain and Feed Association, which represents processors, elevators, livestock producers and other grain users, argues that millions of acres of land now in CRP could be broken and seeded to corn, soybeans, wheat and other crops without damaging the environment.

The cut in CRP acreage “didn’t go as far as we wished they had, but it was certainly moving in the right direction,” said Randy Gordon, vice president of the grain users association.

The agriculture committees wanted to enact the farm bill as part of a deficit-reduction plan that a congressional supercommittee was charged with writing. The supercommittee ultimately failed to agree on a plan, which means the agriculture committees will have to start over next year writing a new farm bill through the regular process of committee and floor votes in the House and Senate. But the draft the lawmakers produced this fall shows the direction they are likely to go.

The program was created in 1985 at a time when crop and land prices had collapsed and the country was awash in grain surpluses. Landowners were offered annual payments in return for signing contracts to stop farming erosion-prone tracts for at least 10 years. The land was then seeded to grass or planted with trees.

The program wound up not only helping to reduce grain reserves but also generating large increases in pheasants and other wildlife because of the new grasslands in which they could thrive. The program is also credited with reducing wind and water erosion because the enrollment was targeted to hilly lands and areas near streams and ponds.

The program’s supporters worry that shrinking the acreage significantly is going to reduce wildlife habitat while increasing soil erosion, increasing pollution of streams and rivers.

“There is so much land, so much grassland, being broken to go for corn for ethanol that we simply can’t afford to lose anymore,” said Bill Antonides, a wildlife biologist who is president of the South Dakota Wildlife Federation. “It’s not just an issue of wildlife, it’s an issue of conservation and water quality. It affects everyone, not just sportsmen.”

To limit the harm to wildlife habitat and maintain political support for the new farm bill, the draft proposal called for lowering the acreage cap gradually and earmarked subsidies through a separate program to help landowners pay the cost of creating habitat. That would help offset the impact on wildlife habitat of the reduction in CRP acreage, said Dave Nomsen of the advocacy group Pheasants Forever.

According to a summary of the draft bill, the legislation also would have extended a program that offers incentives to landowners to turn over expiring CRP acreage to beginning farmers rather than renting it to large-scale operations that want to expand.

The program already has been losing acreage as the 10-year contracts have expired and crop prices have been at historic highs. About 29.6 million acres are enrolled currently after landowners pulled 2 million acres out of the program as contracts expired at the end of the 2011 budget year, Sept. 30.

Wayne County, where farmers harvested about 109,000 acres of corn and soybeans last year, still has one of the highest levels of CRP acreage in Iowa at 41,613 acres, but that area is down from the peak of 61,471 in 2004.

Contracts for another 6.5 million acres nationwide expire at the end of fiscal 2012 and an additional 3. 3 million acres expire in 2013. Some of that land could be re-enrolled but landowners are likely to put much of the acreage under cultivation because of the returns they can now get from corn, said Chad Hart, an economist at Iowa State University.

Contracts on nearly 12,000 acres of CRP land in Wayne County expire in 2012.

Because the future reductions in CRP acreage will likely take place over several years, the impact on the price of corn and other commodities is likely to be muted, said Hart.

--

Contact Philip Brasher at pbrasher@gannett.com

--

“Conservation Reserve Program Facts@

IOWA

1.7 million acres under 105,552 contracts

Average annual payment: $131 per acre

Acreage under contracts expiring in 2012 and 2013: 415,640

SOUTH DAKOTA

1.1 million acres under 31,016 contracts

Average annual payment: $59 per acre

Acreage under contracts expiring in 2012 and 2013: 332,242

First Thing Today: China's Big Plans for Ethanol to Hike Its Corn Needs

Thu, 12 Nov 2020 04:42:13 GMT

Good morning!

Firmer tone overnight... Corn futures enjoyed gains overnight and as of 6:35 a.m. CT most contracts are 2 to 3 cents higher. Soybean futures also favored the upside overnight and are currently up 5 cents. Wheat futures are 3 cents higher, while spring wheat is fractionally lower. The U.S. dollar index is posting modest losses, while crude oil futures are higher.

Export sales report expectations...

Commodity	2016-17 (MT)	2017-18 (MT)
Corn	NA	800,000 to 550,000
Wheat	NA	350,000 to 550,000
Soybeans	NA	1,000,000 to 1,300,000
Soymeal	0 to 150,000	50,000 to 250,000
Soyoil	0 to 20,0000	0 to 20,000

North Korea is threatening to “sink” Japan with nuclear weapons... North Korea threatened to use a nuclear weapon against Japan and turn the U.S. into “ashes and darkness” for passing fresh United Nations sanctions earlier this week. “Japan is no longer needed to exist near us,” the state-run Korean Central News Agency said today, citing a statement by the Korea Asia-Pacific Peace Committee. “The four islands of the archipelago should be sunken into the sea by the nuclear bomb of Juche,” it said, a reference to the regime’s ideology of self-reliance. Japanese Chief Cabinet Secretary Yoshihide Suga called the comments “extremely provocative.” Treasury Secretary Steven Mnuchin warned the U.S. may impose additional sanctions on China -- potentially cutting off access to the U.S. financial system -- if it doesn’t follow through on a fresh round of United Nations restrictions against North Korea.

China’s big plans for the ethanol industry hike its corn needs... China’s plans to roll out the use of gasoline containing 10% ethanol (E10) by the year 2020 could help the country to work through its 200 MMT corn stockpile in in just four years, according to Reuters calculations. It estimates that as much as 15 MMT of ethanol may be needed annually to meet this new source of demand, meaning that as many as 36 new ethanol plants may be needed. These factories would need 45 MMT of feed corn each year. Currently, 10 new ethanol plants in the northeast Corn Belt are planned, with many of them expected to be operational next year, according to JC Intelligence. It adds that this this should boost ethanol capacity by 3 MMT.

Strategy Grains lowers EU wheat export forecast... The European Union will likely export 23.1 MMT of soft wheat in 2017-18, says Strategy Grains, which is down 1.3 MMT from its previous forecast and 900,000 MT under year-ago levels. The consultancy explains that rain compromised the quality of Germany’s crop, plus the region is facing stepped-up export competition from Russia and Ukraine. The lower export forecast comes despite a 1.5 MMT increase in its soft wheat production peg for the bloc to 142.5 MMT.

Argentine exchange still calling for higher corn and wheat plantings in 2017-18... The Rosario Grains Exchange expects Argentine farmers to plant 6.2 million hectares to corn and 5.4 million hectares to wheat in 2017-18, which would be an increase from corn and wheat plantings of 5.85 million hectares and 5.3 million hectares, respectively, in 2016-17. But the exchange’s wheat plantings estimate was down slightly from its previous estimate as excessive moisture has caused problems.

Traders watching Egypt’s decision on poppy-tainted wheat cargoes closely... The poppy seeds detected in two wheat shipments from France and Romania to Egypt are “not very dangerous,” Egypt’s Ag Minister Abdel Moneim Al-Banna told Reuters. He says both shipments will be sieved before the country decides whether to allow them into the country. The French supplier argued that poppy in the shipment was a harmless variety not used in opium production that is common in wheat fields. Meanwhile, suppliers are monitoring the situation closely and say they may boycott the Egyptian market if the shipments are ultimately rejected. With last year’s wheat fungus debacle still fresh in their minds, they say the country’s excessive inspections make doing business with Egypt risky.

Trump, Democrats shape agreement to protect ‘Dreamers’... President Donald Trump and congressional Democrats closed in on a deal to give legal status to undocumented immigrants who were brought to the U.S. as children. The president’s move is partly out of frustration with GOP lawmakers, rather than a bid to shift to the center.

Tax reform timeline... Trump made clear Wednesday in tweets that he wants Congress to begin work now on major tax reform. Republican leaders are now giving themselves until mid-October to come up with tax-cutting legislation and a fiscal 2018 budget resolution -- GOP leaders, who are hoping to overhaul the nation’s tax code by year’s end, signaled they will release a more detailed framework for the high-priority initiative the week of Sept. 25.

Trump administration infrastructure plans waiting on tax overhaul... More-detailed plans on infrastructure legislation are being readied by the White House for Congress to use in putting together such a package, but an administration official told Politico the package will not come until after there is progress on tax overhaul. “Our position is to be ready to go when the president decides to transition” to infrastructure, the official said. Congress will take the lead in the effort, the official said, noting lawmakers have asked for more specific on how the administration envisions bringing state and private money into the mix. “We’ll do the principles, they’ll do the drafting,” the official said. Savings via cuts to other programs is where the $200 billion in federal money will come from for the infrastructure effort.

Americans’ grocery shopping habits have changed... Rather than going to a single store once a week, most U.S. consumers now buy their groceries in several ways, multiple times a week and from a number of different places, a new survey by the International Council of Shopping Centers shows. It also shows consumers still pick their groceries up at brick and mortar stores, even if they have made their purchases online. Ninety-nine percent of adults buy all or some of their groceries in person because they want the food immediately, want to choose their own meat, dairy, produce, etc., or they want to see their product options in person, according tot he survey. But Millenials, in particular, choose a more varied path in terms of how, where and when they shop.

More hopes for a cash cattle low... Futures are signaling more optimism about the potential for the cash market to put in a low this week, with the October contract nearly $2.60 above last week’s average cash price near $105. Friday’s online Fed Cattle Exchange auction saw cattle trade at prices near steady with week-ago, but sales volume was again light. So far, there have been just a few sales in Kansas and Iowa around $105.

Futures still have a pretty big cash market drop factored into prices... Weight data showing marketings are backing up on farms despite aggressive kill runs signals that more cash market declines are likely ahead, especially with farmers more likely to get busy with harvest in the weeks ahead. But futures already have a fairly big cash drop factored in -- the October contract was $7.80 1/2 below the cash hog index as of Wednesday’s close.

Overnight demand news... Jordan made no purchase in its international tender to buy 100,000 MT of milling wheat, but it has issued another tender to purchase the same amount of hard milling wheat from optional origins. An Israeli group of private buyers purchased at least 30,000 MT of corn, likely from the Black Sea region. Japan bought 55,645 MT of food-quality wheat from the U.S., as well as 50,142 MT from Canada and 33,595 MT from Australia.

Today’s reports:

7:30 a.m., Drought Monitor -- USDA/NWS
7:30 a.m., Weekly Export Sales -- FAS
11:00 a.m., Cotton & Wool Outlook: September 2017 -- ERS
11:00 a.m., Meat Price Spreads -- ERS
11:00 a.m., Oil Crops Outlook: September 2017 -- ERS
2:00 p.m., Feed Outlook: September 2017 -- ERS
2:00 p.m., Wheat Outlook: September 2017 -- ERS
2:00 p.m., Livestock Historical Track Records -- NASS
2:00 p.m., Turkey Hatchery -- NASS

First Thing Today: Brazil to Tax Ethanol Imports to Slow U.S. Shipments

Thu, 12 Nov 2020 04:42:10 GMT

Good morning!

Slight gains overnight... Corn futures are steady to fractionally higher as traders note disappointing yield results from the No. 2 producing state of Illinois on the Farm Journal Midwest Crop Tour. Soybeans are also enjoying gains of around 3 cents. Winter wheat futures are around a penny higher, while spring wheat is up 3 to 5 cents. The greenback is up slightly, while crude oil futures are posting slight losses.

Day 3 Midwest Crop Tour results... The Farm Journal Midwest Crop Tour released official results from Illinois last night. Scouts found an average corn yield of 180.72 bu. per acre, compared to the three-year average of 187.37 bu. per acre, and a soybean pod count in a 3 foot by 3 foot square of 1,230.77, compared to the three-year average of 1,269.24 pods. Click here for western Iowa Tour results.

Scouts on the eastern leg of the Tour began their day in Coralville, Iowa, and scouts on the western leg started their day in Spencer, Iowa. Both legs will meet tonight in Rochester, Minnesota. This evening we will release official Tour results from Iowa and Minnesota.

Export Sales Report Expectations for the week ending Aug. 17:

Commodity	2016-17 (MT)	2017-18 (MT)
Corn	50,000 to 250,000	400,000 to 700,000
Wheat	NA	300,000 to 600,000
Soybeans	250,000 to 450,000	400,000 to 600,000
Soymeal	25,000 to 100,000	50,000 to 150,000
Soyoil	8,000 to 30,0000	0 to 10,000

Brazil to tax ethanol imports to slow the flood of the biofuel from the United States... Camex, Brazil’s foreign trade chamber, on Wednesday approved a 20% tax on any ethanol imports in excess of a 600 million liter tax free quota, its ag minister, Blairo Maggi, confirmed via Twitter. The move is meant to protect domestic producers against rising shipments from the United States. For the first half of 2017, Brazil imported 1.29 billion liters of ethanol (1.045 billion liters from the U.S.), a 330% surge from the year prior. Brazil’s action ends an agreement with the U.S. to keep global ethanol trade free of taxes. The tax will remain in place for two years, at which point it will be re-evaluated. The measure will take effect once it’s published in the official gazette. This should happen in a matter of days. Get more details .

Argentine biodiesel loses big market in U.S.... A major impact is being felt by Argentine biodiesel producers following Tuesday’s U.S. Commerce Department slapping preliminary duties on the country’s biodiesel exports. Argentina exported $1.2 billion of biodiesel to the U.S. last year, the destination for about 90% of Argentine biodiesel last year. The U.S. ruling followed similar moves from the EU in 2013 and Peru last year. However, the World Trade Organization ruled against the EU and said it had to remove its tariffs. According to Argentina’s head of Carbio, that market should open in “a few weeks.” The U.S. Commerce decision is preliminary, and the department will decide on Nov. 7 whether to finalize it. Read more .

SovEcon raises Russian wheat crop... Russia’s will likely produce a 78.9 MMT wheat crop, according to the ag consultancy SovEcon. This is up 1 MMT from its previous crop peg. The increase contributed to a 2.4-MMT boost to its grain crop forecast for 2017-18, which now stands at 127.6 MMT. The consultancy raised both its grain and wheat export forecasts by 400,000 MT to 44.0 MMT and 32.4 MMT, respectively.

Central banker focus begins today in Wyoming confab... The annual Jackson Hole conference hosted by the Kansas City Fed begins in Wyoming today, with the main focus for traders coming Thursday when both Fed Chairwoman Janet Yellen and European Central Bank President Mario Draghi will speak. Draghi’s address will be monitored as the European Central Bank is due to discuss the future of its monetary policy at its September meeting amid persistently low inflation and a strengthening currency.

China’s appetite for beef on the rise... Beef is now the fastest growing meat in China, with consumer food safety fears subsiding amid strict inspections and Chinese people looking to move away from pork to reduce fat in their diets. Domestic demand has been unable to keep up, plus it’s getting more expensive to raise cattle in China. Therefore, Beijing has opened its market to beef from the U.S., South Africa and Ireland this year and it is considering bringing in beef from Namibia. Last year China imported 800,000 MT of beef, making it the second largest importer of beef after the United States. China’s beef and veal consumption has climbed more than 10% over the past five years, while consumption of chicken and pork have declined.

Light test of cash market at lower prices... Some cash cattle changed hands at $106 in the Iowa/Minnesota market and at $107 in Colorado, Kansas and Nebraska yesterday, but so far volume has been quite light. These prices are down $2 to $4 from last week’s action, but the low end is roughly in line with where futures are trading. That could blunt the impact of any reaction to these lower prices today.

Pork bellies continue to lead the cutout value lower... Cash hog bids ticked up a penny in the Iowa/Minnesota market on Wednesday, but bids were down slightly across the western Corn Belt and they dropped $3.65 in the eastern Belt, according to USDA’s daily summary. Meanwhile, pork prices continue to slide, with the cutout value down $3.66 from last Thursday. Pork belly prices have dropped a dramatic $29.22 over that period, as buying for BLT season has come to an end.

Overnight demand news... Jordan purchased 50,000 MT of hard milling wheat from optional origins, but it made no purchase in its tender to buy 100,000 MT of feed barley. Iran issued an international tender to buy around 200,000 MT of soymeal. South Korea purchased around 60,000 MT of corn from optional origins. Ethiopia issued an international tender to buy around 70,000 MT of milling wheat. Japan purchased 98,574 MT of food-quality wheat from the U.S., as well as 35,217 MT from Canada in its regular tender. Iraq purchased 50,000 MT of wheat from the U.S. as well as 50,000 MT of wheat from Australia. Tunisia tendered to buy 167,000 MT of milling wheat.

Today’s reports:

7:30 a.m., Drought Monitor -- USDA/NWS
7:30 a.m., Weekly Export Sales -- FAS
2:00 p.m., Livestock Slaughter -- NASS
Tonight, Midwest Crop Tour results from Iowa and Minnesota -- Farm Journal

Imagine corn exceeding your imagination

Sun, 08 Nov 2020 17:22:55 GMT

Back in 2006 when I wrote the $12 Corn Special Report , I sensed a global change occurring in our U.S. crop markets. We were moving into a global economy with worldwide buying interest in our commodities, rapidly increasing ethanol demand, and a financial structure indicating that elevators would quickly run out of margin money if prices turned bullish. It looked as if all we needed was a perfect storm of these factors coming together to vault commodity prices to record highs. As you know, we got it. Now here we are four years later. Do you see what’s happening?

The ethanol plants we killed—just as forecasted in the $12 Corn Special Report report—have come back strong and are burning through better than 4 billion bushels of corn a year. International use of ethanol is growing. According to the International Ethanol Report 2010 , foreign countries are developing mandates requiring biofuel use.

The buy-and-hope commodity investors are back in the game, and China and others continue to buy our crops to feed their people. Once again, we are in a position where it looks like we could just flat out run out of key commodities, such as corn and soybeans. And just as I warned back in 2006, the elevators can run out of money, margin liquidation can cause massive market disruptions, and our commodity prices can go to new record highs. The record corn highs now will be beyond $8 for corn and much higher for other commodities.

When commodities rally, they typically stop at previous highs or blow through those highs, leaving them far behind. History has shown us that when commodities go to all-time highs, they usually reach 130 to 140 percent of their previous levels. That is on the conservative side. In extreme instances, commodities such as sugar, lumber, and others have gone up as much as 300 to 400 percent. Wheat did it just a few years ago. There are many factors that can drive prices to extremes. It could be something as simple as a weak U.S. dollar driving exports. Or it might be something as severe as a widespread drought (heat or lack of moisture). Back in the ‘70s and ‘80s, significant parts of the Corn Belt experienced droughty conditions about every 3 to 5 years. We were producing much more crop than we needed most years, and the occasional drought came along to wipe out the excess supplies and put the world back in balance. These days, the supply-demand balance is almost already out of balance, leaning towards almost no carryover supplies in major commodities. Should we have a widespread drought (remember – it can either be high heat or lack of moisture, or both), the bullish fuel this would add to the fire is almost beyond comprehension.

So what kind of prices can you expect to see in the next record bull move? Well, again, for a conservative number in corn, history tells us it will reach 130 to 140 percent of previous highs. Given our previous high of $8, the low side would be $10.40. More optimistic projections would forecast the $11.20 level for nearby futures. Remember, these are the conservative and low estimates. On the high side, history tells us that during extreme bull moves, prices can reach 300 to 400 percent of previous levels. That would indicate $24 to $32 corn!

Let’s look at soybeans and other commodities:
· The previous high on beans was $16.63 in 2008 – 130 percent of that is $21.60 . . . 400 percent is $66.50.
· The previous record high for Class III milk was $21.38 in 2007. A record rally could bring $30 to $32 milk on the conservative side, and 300 to 400 percent rallies would put prices into the $69 to $92 range.
· The previous record high in crude oil was $145 per barrel. A 130- to 140- percent run past those levels is $188 to $203 – a 300- to 400-percent rally would equal $435 to $580 per barrel.

I have no doubt that these record high price levels are possible. The ramifications can be broad and extreme. We saw the beginnings and hints of this when corn, soybeans and wheat reached record highs. Fertilizer prices went sky high, land rents shot up, and land prices marched higher. All of the sudden, producers who had two or three years worth of crop prices locked in at what looked like very profitable levels were in shock over their red ink.

Just ask any dairy producer. Record profitability in the dairy industry for a number of years led to continually increasing production levels, and ultimately, massive price declines and red ink that most producers and their bankers never imagined could occur. Producers hurt the most were those who had locked in feed prices at high levels. There were dairies losing $1 for every $1 they brought through the door. In 2009, the milk price plunge wiped out many dairy operations.

I think it is very safe to say that future volatility will cause widespread pain and put many producers out of business. When that happens, it can open the door to unwanted company –for example, corporate America investing in, and taking control of, grain farming operations as we know them ( see previous blog ).

Continued, ever-greater volatility is the reason you should approach marketing with your eyes wide open to the possibilities. You have to imagine corn doing what’s hard to imagine—because the world will change, while economic themes repeat.

Don’t focus on the prices I’ve mention, and don’t become complacent with prices that look good in the moment. Rather, adapt your marketing to the point where you position yourself to maximize opportunity—within a reasonable risk parameter—as events that cause major volatility begin to unfold. Always take as much profit off the table as reasonably possible by doing your marketing well.

Scott Stewart is president and CEO of Stewart-Peterson, a commodity marketing consulting firm based in West Bend, Wis. You may reach Scott at 800-334-9779, email him at scotts@stewart-peterson.com .

The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures trading involves risk of loss and should be carefully considered before investing. Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2010 Stewart-Peterson Inc. All rights reserved.

Ethanol, a finite idea.

Sun, 08 Nov 2020 17:22:55 GMT

As I write, exports are a big news item. China has been buying up soybeans at a rate that makes people wonder if we are going to run out of beans. The strong global buying interest for our commodities has everyone excited. However, if you want to look at an impactful trend for the last decade, it really boils down to ethanol.

Corn exports have been roughly 2 billion bushels for almost a decade. Sometimes they run up to 2.6 billion, and sometimes they drop down to around 1.5 billion. All in all, there isn’t much of a trend to the export data. Corn exports move mostly sideways, with an average of about 2 billion bushels.

On the other hand, ethanol has come on in the last five years or so, amounting to nearly 5 billion bushels of demand. That is, on average, double what we are exporting. And, it’s the equivalent to us having doubled our livestock herd. In other words, ethanol demand equals feed demand. It used to be that we produced about an 8-billion-bushel crop, and half of it would go to feed. Now we have a 12-billion-bushel crop, and one-third goes to feed, one-third goes to ethanol and one-third goes everywhere else.

Ethanol has the potential to be explosive, economically speaking. Ethanol demand is gigantic, and it is driving our supply-demand balance for corn. Despite this, our government could change the rules overnight, and ethanol production could be put out of business. Consequently, corn prices could collapse in the blink of an eye. If our government doesn’t put the squeeze on ethanol production, high corn prices could shut down the plants, as we witnessed in 2008. We could go from projecting no carryover to projecting billions of bushels of carryover with just the swipe of a pen in Washington.

While I love agriculture, America, and profitability for agriculture in America, I also believe that in the long-run, ethanol is not likely to be a lasting demand source. Science is beginning to prove what I believe: It doesn’t make sense to be using our resources and tilling our fields to produce energy when there are so many other ways to produce energy that are renewable, and, in the long-run, likely less costly.

Consider wind, wave, geothermal and nuclear energy sources. There are many choices. Whether we are making ethanol from corn or some other crop, we are taking acreage away from producing food—food our people and the world’s people need. The challenge of feeding the world is an undertaking that likely will never cease to exist. As long as people live on Earth, there is going to be demand for food.

Food demand is a topic unto itself for another day. For now, I’m simply pointing out the significant economic impact ethanol has had and will continue to have—negative or positive. It’s only a matter of time before change comes—whether in the form of our government putting the squeeze on ethanol production or global triggering events such as technology advancements or governmental mandates—prompting a shift in the way we produce energy.

The great uncertainty that surrounds ethanol underscores how little confidence you can have in a price outlook approach. If you can’t consistently predict market-altering events—and nobody can—then you need to be prepared for the possibilities. As you have read often in this blog—and will continue to see!—I encourage you to take a scenario planning approach to your marketing. Rather than focus on where price may go, prepare for whatever the market may do.

Scott Stewart is president and CEO of Stewart-Peterson, a commodity marketing consulting firm based in West Bend, Wis. You may reach Scott at 800-334-9779, email him at scotts@stewart-peterson.com .

The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures trading involves risk of loss and should be carefully considered before investing. Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2010 Stewart-Peterson Inc. All rights reserved.

The Ripple Effects of the Shrinking U.S. Corn Crop

Sun, 08 Nov 2020 17:15:56 GMT

A closer look at the global dynamics of drought-driven corn and soybean prices, the ethanol industry and the concept of rationing supplies to meet demand.

By Ron Mortensen, Dairy Gross Margin, LLC

The drought of 2012 has become so serious that the corn and soybean markets must confront the concept of rationing—allowing prices to rise high enough to reduce demand. Chances are there will not be enough crop around to meet everyone’s needs.

For corn, there are three main components to demand: feed/residual, ethanol and exports. Currently, the most attention has been devoted to ethanol production.

It could take reductions of nearly 20% of the industry, which means 25 large plants may need to shut down. A few plants have already shut down or gone to hot idle. Reductions of about 900 million bushels of corn use may be needed to get the supply and demand tables to balance. There may well be excess renewable identification numbers (RINs) to allow this reduction to occur.

Rumors continue to swirl regarding the Renewable Fuels Standard (RFS) and whether or not (or when) a waiver will be requested. If an official waiver is requested, EPA will take comments from the public for 90 days. The last time a waiver was requested was in 2008 by Texas Governor Rick Perry. It was denied. The rules are such that getting a waiver is very difficult.

What if the EPA does reduce ethanol requirements? Refiners have become more dependent on ethanol for the octane boost to get low-grade gasoline to meet the requirements at the pumps. Ethanol is the cheapest octane booster around, so refiners could bid up the price of ethanol, making it profitable to produce. So, how much does ethanol demand really decline?

From a feed standpoint, if ethanol production is reduced, more corn or soybean meal will be needed to replace the DDGs. This is relevant for both the domestic feed situation and exports. Exports of DDGs have been strong, especially to China, so these would need to be replaced with corn or soybean meal.

For feed demand, USDA did provide some data in the grain stocks report on June 29. It showed corn stocks at 3.148 billion bushels. This was close to expectations and implies feed use during the third quarter of the marketing year was close to last year’s number. There is less corn available for feed for the fourth quarter, so presumably there will be more wheat feeding. Remember there was a time when wheat feeding penciled out, so cattle and hog feeders did book wheat.

The stocks report showed lighter stocks (on a proportional basis) in Illinois, Minnesota and Nebraska compared to last year. There are implications of tighter basis levels for Illinois and surrounding states because of the sizable processor demand centered in Decatur, Ill. These tight basis levels could continue if the Eastern Corn Belt crop size keeps shrinking.

A small U.S. crop could mean liquidation, slaughtering sows and cows, besides feeding animals to lighter weights.

For exports, the U.S. may be saying, “Thank goodness, Brazil grew a huge corn crop.” While price has recently reduced the pace of U.S. exports, there is a large, cheaper crop available from Brazil. This will be a welcome supply for foreign buyers seeking a source of supply in the face of the potentially smaller U.S. crop. Brazilian corn may find its way into the US. as some southeast chicken feeders are already talking about having made purchases.

Foreign buyers can simply try to scrape by with smaller purchases. And China figures in here, too. The Chinese may cancel or re-sell the new crop corn they had purchased earlier.

Over on the soybean side of things, there is a potential new wrinkle regarding soybean meal. Due to the sub-par monsoon, India last week announced it would drop the import tax on soybean meal. This would allow for soybean meal imports for the first time in history. This is dramatic when a traditional soybean meal exporter turns into an importer. The meal would most likely come from China (likely crushed from U.S. soybeans), which has excess soybean processing capacity. Indian meal prices have doubled since the spring, while U.S. prices are only up 30% to 40& in the same timeframe.

Reduced soy production in Argentina and Brazil is also rippling through the markets up in the U.S. Reduced supplies down south means increased demand up here for both whole bean exports and crush. Many think soybeans and meal will be tight until March 2013 as the U.S. will need to supply the world. This makes the current U.S. crop in the field very important. However, it will take very large South American production before the soybean market is truly comfortable with supplies.

Ron Mortensen is a founder of Dairy Gross Margin, LLC, which was formed in 2006 to sell Livestock Gross Margin Insurance to dairy producers. Mortensen’s firm is now licensed in 23 states. He is also president of Advantage Agricultural Strategies, Ltd., which he founded in 1985, to provide individual risk management advice for farmers and agribusiness using futures, options and cash trading strategies. Contact him at 515-570-5265 or ron@dairygrossmargin.com .

Trusteed IRAs: why they are popular, who should consider them, what benefits they offer

Fri, 23 Sep 2022 20:01:45 GMT

Q: I’ve heard a lot about trusteed IRAs. How do they differ from traditional IRAs?

A: Simply put, trusteed IRAs offer potential tax benefits of traditional or Roth IRAs with the protection and control of a trust. They provide tax advantages that stretch into the future and offer the ability to control how, when and in what amounts assets are distributed. Trusteed IRAs have become more popular given some of the inherent limits of traditional IRAs and the growing prevalence of self-directed retirement accounts combined with the decline of pension plans. They also are more cost-effective than setting up a trust and are generally more compliant with tax laws.

Q: Who should consider a trusteed IRA?

A: There are several reasons why someone should consider a trusteed IRA, the most consequential of which is if an owner has an interest in controlling assets and realizing tax benefits beyond their lifetime. This can mean an owner is concerned with the financial discipline or sophistication of heirs.

Other reasons include if an owner remarries and wants to provide for a current spouse as well as children from a previous relationship and/or is concerned about IRA management in the event of incapacitation.

Q: I’m in the middle of estate planning. How can a trusteed IRA help with the process?

A: They can help process if only to preserve the potential tax-advantaged accumulation of IRA benefits to pass on to heirs. Under traditional or custodial IRAs, a beneficiary is required to withdraw at least the Required Minimum Distribution (RMD) each year. However, a beneficiary may withdraw additional amounts, for any reason, at any time—and incur possible fees or tax penalties.

Additionally, owners can restrict payouts to a beneficiary to the RMD, enabling it to operate as a spendthrift trust. At the owner’s death, the trusteed IRA would be automatically split into separate accounts for individual beneficiaries, with distribution terms defined for each account.

Another benefit is that estate plans don’t need to be rewritten or updated; trusteed IRAs can be added independent of an estate plan to protect IRA assets which legally pass outside of wills.

Q: Is a trusteed IRA better suited to farmers or owners of farm assets?

A: Not expressly, but a trusteed IRA can play an important role in legacy planning and preservation of farm assets over multiple generations. Given the growing generation gap among farming families, trusteed IRAs could be a way help preserve farm family values over generations from beyond the grave. Moreover, as farm economics continues to change, farmers may find value in the highly customizable nature of trusteed IRAs. In the event of a divorce in the family, for example, assets can be made to not leave the family’s bloodlines.

Q: Are there any downsides to trusteed IRAs?

A: Given that a trusteed IRA requires a corporate trustee, it’s harder to change ownership and family members cannot be named as trustees. Not all financial institutions offer trusteed IRAs so they may not be widely available to interested clients. Additionally, while they offer greater customization and more control, trusteed IRAs carry some limits. To have the highest level of customization and control, a trust would need to be created.

Please send questions, comments or requests to address a topic or issue to Rees Mason at rees.mason@ml.com.