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Biofuels; Trade Issues; Climate Change Policy; Food Safety and International Ag Developments
Biofuels
Reuters writer Ayesha Rascoe reported yesterday that, “The U.S. government will eventually allow higher levels of ethanol to be blended into gasoline, Renewable Fuels Association President Bob Dinneen said on Tuesday.
“Ethanol is currently approved to make up 10 percent of gasoline, but producers have lobbied the government to increase the blend level.
“‘I absolutely believe that when all the science is in, the efficacy of using greater than 10 percent blends will be validated,’ Dinneen told reporters at an Energy Information Administration summer energy outlook conference.”
The article indicated that, “Growth Energy and 52 ethanol manufacturers petitioned the Environmental Protection Agency last month to raise the maximum blend level for ethanol in gasoline to as much as 15 percent.”
Yesterday’s article explained that, “The Renewable Fuel Standard enacted by Congress required 9 billion gallons of renewable fuels such as ethanol to be blended into the nation’s gasoline supply last year. The mandate, rising annually, will reach 36 billion gallons in 2022.
“With a 10 percent blend rate, the Energy Department estimates that as early as 2013 the amount of ethanol required to be produced will exceed the amount the U.S. vehicle fleet could consume. If the slowing economy continues to cut into gasoline demand, the so-called 10 percent blend wall could be reached a year earlier.”
Meanwhile, a separate issue regarding biofuels and the EPA has also garnered attention and concern from some in the agricultural community.
Yesterday’s Commodity News for Tomorrow report, a publication provided by the CME Group and Dow Jones News, reported that, “An anticipated federal rule could brand a popular fuel regarded as ‘clean’ as a dirty emitter of greenhouse gases.
“Production of corn-based ethanol took off in 2005, prompting an outcry over rising food prices and conversion of virgin lands for corn planting.
“Now, the U.S. Environmental Protection Agency plans to quantify greenhouse-gas emissions associated with renewable fuels. Ethanol producers have already been hit hard by high corn prices and weak demand for gasoline, into which ethanol is blended. New accounting by the EPA could add to the struggling industry’s woes and discourage new producers from entering the market.”
The news item explained that, “A stringent standard for calculating emissions from the fuel could include the impact from clearing land to make room for corn production, which absorbs less greenhouse gases than forests or grasslands. Such a regulation could force some ethanol producers to report large emissions, which would disqualify their fuel from federal biofuel targets.”
The news item added that, “The EPA sent a draft of the rule for calculating emissions to the federal Office of Management and Budget for an interagency review in February. The EPA hasn’t yet said when the regulation will be made public, said Dale Kennery, an EPA spokesman.”
For more background on this issue, see “Prepared Floor Statement of Senator Chuck Grassley- Lifecycle Greenhouse Gas Emissions and Indirect Land Use Changes from Biofuels,” which Sen. Grassley delivered on March 23; see also this Senate Agriculture Committee news release from March 16, which stated in part that, “A bipartisan group of 12 U.S. Senators led by Tom Harkin (D-IA) and Chuck Grassley (R-IA) called on the Environmental Protection Agency (EPA) not to propose regulations assuming that greater U.S. biofuels use would increase carbon dioxide emissions. The senators argued the data and methods for calculating such ‘indirect land use changes’ such as from forest or grassland to crops are not adequately developed, and thus should not be used in ways making it harder for ethanol and biodiesel to meet requirements of the Energy Independence and Security Act of 2007 for reduced carbon emissions from advanced biofuels under the Renewable Fuel Standard (RFS).”
Following on the recent unpopular executive branch decision regarding the EPA and pesticide related issues under the Clean Water Act, agricultural stakeholders will be monitoring this EPA development closely as administration perspectives on important agricultural issues continues to emerge.
Also yesterday, Reuters news reported that, “U.S. growth in ethanol capacity will slow this year on softer fuel prices and as financing for new plants evaporates, the government’s top energy forecasting agency said Tuesday.
“The explosive growth in ethanol plant capacity over the last few years will ‘slow dramatically in 2009’ as lower gasoline prices hurt ethanol margins, and the credit crunch halts construction plans, the Energy Information Administration [EIA] said in its monthly short-term forecast.”
Also with respect to yesterday’s EIA short-term forecast, Ana Campoy reported in today’s Wall Street Journal that, “Drivers are likely to pay a little more for gasoline in coming weeks as the summer vacation season kicks off, according to a new report from the federal government, but the lackluster economy will keep prices from reaching last year’s record levels.
“The U.S. Energy Information Administration estimates gasoline prices will average $2.23 for a gallon of regular grade during this year’s driving season, which runs from April to September. That is about 9% higher than the current national average of $2.05 a regular gallon, according to the auto club AAA — but still well short of last summer’s $3.81 average.
“Gasoline prices are expected to peak at a monthly average of $2.30 a gallon in late summer, the agency said.”
Trade Issues- Cuba
DTN Political Correspondent Jerry Hagstrom reported yesterday that, “Amid signs that Cuban purchases of U.S. agricultural products continue to grow, congressional, farm and trade leaders say President Barack Obama’s decision to make it easier for Cuban-Americans to travel to Cuba and send money to relatives should be followed by policy changes to make it easier for farmers and agribusiness executives to travel to Cuba to sell products and for Cubans to buy them.”
The DTN article added that, “‘This is a good first step, but we can and should do more,’ Senate Finance Committee Chairman Max Baucus, D-Mont., said in a news release. ‘I urge the president to relax restrictions on the sale of U.S. agriculture products to Cuba. We need to make it easier for America’s farmers and ranchers to sell their high-quality products, including Montana’s world-class wheat and barley, to one of our closest markets.’”
Yesterday’s article noted that, “Meanwhile, the New York-based U.S.-Cuba Trade and Economic Council released a report showing that U.S. agricultural sales to Cuba have totaled $2.8 billion since 2001, that Cuba has been among the top 30 importers of U.S. farm products for the past seven years and that in January it ranked 19th.”
American Farm Bureau Federation (AFBF) President Bob Stallman issued a statement yesterday regarding U.S. policy towards Cuba, which noted in part that, “The White House’s decision this week to ease travel for Cuban Americans and relax financial restrictions to Cuba is one step closer to easing all trade restrictions with the country. We are very encouraged by President Obama’s actions and appreciate the administration’s prompt action on the issue. In this step-by-step process, the Farm Bureau would also like the administration to consider agriculture provisions.
“U.S. agricultural sales to Cuba have been on average $400 million annually since 2000, with top commodity sales including poultry, wheat, soybeans, rice and dairy. With expanded trade to the country, we expect agriculture sales to increase to more than $1 billion annually.
“Current language in the omnibus appropriations bill aids U.S. agriculture by allowing travel on a general license for those making agricultural sales to Cuba rather than the specific license currently needed. This would ease delays that significantly impact the ability to transact commercial sales with Cuba, which in some cases, have been lost to U.S. competitors because of the restriction.”
Trade Issues- Cap and Trade
Recall that back on March 26, the House Energy and Commerce Committee Republicans issued a news release, which stated that, “Republican members of the House Energy and Commerce Committee and House Science and Technology Committee today wrote to U.S. Trade Representative Ron Kirk asking him to clarify the Obama administration’s position on emissions-related trade policy [letter available here].
“Energy Secretary Steven Chu said that the United States was considering adjusting trade duties to protect domestic manufacturers if China did not change its position on reducing emissions. If created poorly, trade wars could put tens of thousands of American workers out of work.
“In testimony before the Science and Technology Committee, Chu laid out the fundamentals of what will happen under a cap-and-trade proposal, including the concept that the United States will have to impose duties on imported goods from some countries.
“‘To our knowledge, Secretary Chu’s comments represented the first public statement by an Obama administration official that the United States is contemplating duties or tariffs on imported goods manufactured in countries that do not participate in emissions reduction schemes,’ the lawmakers wrote. ‘Given the direct role you and your staff would have in any administration policy making on trade matters, we would appreciate your assistance in clarifying administration policy.’”
In a letter yesterday, Ambassador Kirk responded to the lawmakers concerns. In part, the USTR letter stated that, “The Administration is seeking to address many of the issues you raised in your letter, particularly in ensuring that the design and implementation of domestic energy and climate policy are compatible with our international trade obligations and minimize incentives for our trading partners to pursue counter measures that could negatively impact U.S. exports.”
Climate Change Policy
In other news regarding U.S. climate change policy, Chris Clayton reported yesterday at DTN (link requires subscription) that, “Congress should not pass cap-and-trade legislation mandating reductions in greenhouse-gas emissions, but should instead promote a market-based incentive program to address climate change, the American Farm Bureau Federation said Tuesday.
“The Farm Bureau detailed its opposition to a mandated cap-and-trade program in a response to a survey recently sent out by the House Agriculture Committee. The committee sent the questionnaire to more than 400 groups to prepare for possible hearings on climate-change legislation being considered in the House.
“Bob Stallman, president of the AFBF, stated in the survey that agriculture and the forestry business should not be regulated or capped under any carbon-reduction program. Further, any legislation designed to reduce carbon emissions must make sure the costs don’t outweigh the benefits.”
Yesterday’s DTN article added that, “‘Over the past decade, improved agricultural practices such as no-till cropping, targeted chemical applications through global positioning satellite technology and methane digesters have reduced emissions from the agricultural sector,’ Stallman said. ‘This demonstrates that if the agriculture and forestry sector are provided proper incentives, they will reduce their emissions even further.’
“Some members of the House are expected to push a cap-and-trade program more aggressively after Congress returns from its Easter break. Preparing for possible legislation, a coalition of agricultural groups has been working to come to agreement on how agriculture should be treated under any legislation to restrict greenhouse-gas emissions, though the AFBF did not sign on to the coalition’s white paper released last month. Administration officials indicated earlier this week at a climate-change conference that they would like to see Congress complete legislation, or at least define a policy direction before a United Nations conference on climate change set for December.”
Food Safety
The New York Times editorial board stated today that, “The Department of Agriculture, which shares oversight of food safety with the F.D.A., has waged a more vigorous and successful campaign to reduce contamination in meat and poultry. In contrast, the F.D.A., which monitors produce, seafood and other foods, has too few inspectors and too little clout to deal with an increasingly global food supply.
“The latest outbreak of salmonella in peanut products, which left hundreds sick and contributed to nine deaths, illustrates the problem. Inspections delegated to state officials missed critical safety failures at a Georgia peanut plant. And the F.D.A. had trouble getting detailed records in a timely fashion.
“Even though the Obama F.D.A. appears to be doing a better job, Congress needs to beef up the agency’s staff and broaden its recall authority. Longer term, Congress and the White House need to keep promises to take a deeper look at food safety. It is time to think seriously about establishing one federal agency to coordinate and enforce food-safety regulations — and give consumers the protections they need and deserve.”
International Ag Developments
Andrew England and Javier Blas reported yesterday at The Financial Times Online that, “Saudi Arabia is putting $800m into a new public company that will invest in overseas agricultural projects.
“The move signals a large step-up in Riyadh’s efforts to outsource supply for the kingdom’s food needs.
“The provision of public money, on top of private-sector efforts to secure supplies, follows last year’s food crisis and Riyadh’s decision to phase out production of domestic wheat to conserve water resources.”
The FT article added that, “The oil-rich kingdom, which imports almost all its food, set out a programme last summer to invest overseas in agriculture after key food exporting countries implemented trade restrictions. [Abdullah al-Obaid, the deputy agriculture minister] said Riyadh aimed to build up strategic reserves of rice and wheat equal to at least three to six months of consumption.”
The Associated Press reported yesterday that, “A year ago, Brazil’s breadbasket saw what resembled a gold rush as farmers scrambled to increase acreage amid record demand for soy. Today, much of the region is on its knees, victim of a double whammy of a financial crisis and a punishing drought.”
The article noted that, “Early last year, high oil prices, low food reserves and growing consumer demand in developing nations sent food prices soaring, causing riots from Haiti to Pakistan. As in other agricultural regions, Brazilian farmers and ranchers drove to increase production, raking in huge profits as soy and other commodity prices skyrocketed.
“Today, grain and beef prices have plummeted. And with sharply reduced foreign orders for Brazilian iron ore, steel and automobiles, Latin America’s largest economy could fall into recession this year.”
Yesterday’s AP article explained that, “Farmers in the U.S., Canada and Europe are hurting as well from sharply lower prices for soy, corn and beef. But experts say they generally don’t hold as much debt as their Brazilian counterparts, giving them greater leeway to ride out the crisis. And many benefit from government subsidies the Brazilians don’t get.
“‘American farmers are perceiving Brazil to be less of a competitive threat than they used to,’ said Mike Woolverton, a professor of agricultural economics at Kansas State University.
“No one expected such a sudden drop from the agribusiness boom that sent Brazilian land prices skyrocketing and drew busloads of American and Argentine investors looking to snap up farmland just before the meltdown last fall.”
And James Kanter reported in today’s New York Times that, “Germany announced plans on Tuesday to ban the only genetically modified strain of corn grown in the European Union, dealing a new blow to the American manufacturer, Monsanto, and raising the specter of trade tensions with the United States.
“The German agriculture minister, Ilse Aigner, said that the move was intended to protect the safety of consumers and the environment. But she underlined that it would not represent a blanket ban on genetically modified crops.
“‘My decision is not a political decision, it’s a decision based on the facts,’ Ms. Aigner said. ‘I have come to the conclusion that there is a justifiable reason to believe that genetically modified maize of the type MON 810 presents a danger to the environment.’”
Keith Good
