Friday, September 21, 2018

Ethanol producers urge Trump to change Renewable Fuel Standard

Washington--In a letter to President Trump today, the American Farm Bureau Federation, National Corn Growers Association, National Farmers Union, National Sorghum Producers, American Coalition for Ethanol, Growth Energy, and Renewable Fuels Association urged the administration to act immediately to restore the integrity of the Renewable Fuel Standard (RFS) and allow year-round sales of E15 and other mid-level ethanol blends. The groups also expressed concern that any benefit from year-round E15 sales and proper implementation of the RFS could be nullified if refiners are given further regulatory bailouts that undercut the spirit and intent of the law.

The letter follows comments made by Secretary of Agriculture Sonny Perdue on Aug. 29 that an announcement on the RFS and E15 would be coming soon.

“With ethanol prices hitting a 13-year low and net farm income plummeting to half of the record $123 billion achieved in 2013, such an announcement could not come at a more critical juncture for rural America,” the groups wrote.

“Mr. President, the circumstances have changed since you first began considering these issues, and biofuel producers and farmers are suffering. Thousands of biofuel manufacturing and farming jobs in America’s Heartland are now at risk due to the EPA’s recent mismanagement of the RFS and inexplicable delay in removing the de facto summertime ban on E15,” according to the letter.

The letter notes that ethanol prices, RIN credit prices, and ethanol profit margins are falling, as small refiner exemptions issued by EPA have reduced ethanol demand and inflated stocks.

“The situation is even more dire in the grain markets, where prices received by farmers are sagging below the cost of production. With a near-record corn crop expected this fall and tariffs putting a damper on trade opportunities, farmers desperately need expanded access to markets and new sources of demand,” the groups explained.

“Former EPA Administrator Scott Pruitt already gave refiners far more than their end of a deal in the form of 2.25 billion gallons of biofuels demand destruction, and they are reaping the rewards of that windfall today,” the letter continued. “Now, with the corn and ethanol industries hurting, it’s rural America’s turn to get its end of the deal.”

Thursday, September 20, 2018

Farm Bureau Details Trade, Tariff Impacts on Agriculture

Washington--For the growth and renewed prosperity of agriculture, particularly with farm income on a downward slope, current trading relationships must be preserved and new opportunities for agricultural trade must be secured, the American Farm Bureau Federation said in a recent statement to the Senate Agriculture Committee.

“Farm Bureau urges our trade officials to engage in discussions with our trade partners to resolve trade concerns before resorting to tariffs. Tariffs targeting our largest agricultural export markets have resulted in retaliation against U.S. farmers, ranchers and agricultural and food businesses across the country,” Farm Bureau said in the statement.

U.S. agriculture exported more than $140 billion in 2017, sending more than 25 percent of farm and ranch products to international markets. With many sectors of the agricultural economy dependent upon exports, farmers and ranchers are negatively impacted by the retaliatory tariffs many of the United States’ top trading partners have put in place in response to tariffs imposed by the U.S.

In the statement, Farm Bureau detailed how the U.S.-imposed tariffs and the retaliatory action from the international community are affecting particular sectors of the agricultural community.

In 2017, the U.S. exported more than $19.6 billion worth of agricultural products to China, making it the second-largest export market for U.S. farmers and ranchers. The Chinese market has increased exponentially for U.S. farm and ranch goods since 2000, becoming especially critical for U.S. soybean growers, who sent nearly 60 percent of their 2017 crop there.

In response to U.S. tariffs on steel and aluminum, as well as those imposed on only China for violations related to U.S. intellectual property, China has imposed hefty tariffs on more than 90 percent of U.S. agricultural exports to that country. As a result, China is expected to drop from being the second-largest market for U.S. agricultural goods now to the fifth largest in 2019.

With plummeting Chinese demand for U.S. soybeans tagged with a 25 percent tariff, USDA in August projected the average soybean price would range from $7.65 to $10.15 per bushel, down from a month earlier, when the projected average price was $8.00 to $10.50 per bushel. In one month, the estimated price declined 3-to-4 percent.

A tariff of 25 percent on U.S. corn is expected to have a slightly smaller, yet still negative effect. USDA in August projected the average corn price would range from $3.10 to $4.10 per bushel. This is down from July, when USDA projected corn prices at $3.30 to $4.30 per bushel. In one month, the estimated price declined 5-to-6 percent.

Livestock producers are feeling pinched too. U.S. pork exports by volume to China are 58 percent lower than they were at this time in 2017 and 80 percent lower than this point in 2016.

Though few new products are likely to be added to China’s retaliatory list, “the impact on American farmers and ranchers, and associated businesses in processing, transportation, finance and retailing must be considered when pursuing trade actions,” Farm Bureau emphasized.

The European Union, Canada, and Mexico all have implemented retaliatory tariffs in response to the U.S. steel and aluminum tariffs. Mexico’s retaliation list for 20 percent tariffs includes pork, cheeses, apples, and whiskey. The list from the European Union, at 25 percent, includes rice, cranberries, peanut butter, kidney beans, and whiskey. The list from Canada, also at 25 percent, includes pizza, yogurt, chocolate, orange juice, and whiskey.

Farm Bureau also addressed the North American Free Trade Agreement, noting the progress made on a deal with Mexico. The final text of the agreement with Mexico, and possibly Canada as Canadian officials have rejoined the NAFTA discussions, are due to Congress by Sept. 30.

“Since 1993, U.S. agricultural exports to Canada and Mexico have increased from $8.9 billion to $39 billion in 2017. We want NAFTA to continue as a trilateral agreement including the U.S., Canada, and Mexico,” Farm Bureau said.

With Japan actively negotiating trade agreements with many of our biggest competitors, Farm Bureau urged the administration to enter into a free trade agreement with Japan, either on a bilateral basis or by entering into discussions to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, previously known as the Trans-Pacific Partnership.

Wednesday, September 19, 2018

Ways and Means Committee wants permanent tax cuts

Washington--The House Ways and Means Committee on Thursday approved a Farm Bureau-supported bill that would make permanent several important tax reform provisions that are set to expire after 2025. The Protecting Family and Small Business Tax Cuts Act of 2018 (H.R. 6760) addresses bonus depreciation and the estate tax, among other tax provisions.

The Tax Cuts and Jobs Act, passed in 2017, reduced taxes for all businesses, but only the tax cuts for incorporated businesses operated as C corporations are permanent. The vast majority of farms and ranches, however, file their taxes as sole-proprietors, partnerships or S corporations.

“Failure to [make these provisions permanent] will result in a huge tax increase. In addition, the uncertainty caused by temporary tax provisions makes the already tough business of running a farm or ranch even harder,” American Farm Bureau Federation President Zippy Duvall wrote in a letter urging committee members to support the bill.

The legislation would make permanent the following provisions that are particularly important to farm and ranch businesses:
Reduced pass-through tax rates and expanded brackets
The Section 199A new 20 percent business income deduction
Unlimited bonus depreciation (expensing)
The doubled estate tax exemption ($11 million person/$22 million couple)
The increased alternative minimum tax threshold for individuals

The Protecting Family and Small Business Tax Cuts Act of 2018 was introduced as part of a three-bill package dubbed “Tax Reform 2.0” by the House Ways and Means Committee. The other two bills, also approved by the committee on Thursday, are the Family Savings Act of 2018 (H.R. 6757) and the American Innovation Act of 2018 (H.R. 6756).

Monday, September 17, 2018

Interior’s Sue and Settle Order Exposes Secret Settlements with Activists

WASHINGTON – Activists have grown rich by suing the government and reaping billions of taxpayers’ dollars – and all in secret. The U.S. Department of Interior, however, has issued an order to curb this abuse of basic, democratic processes and to open backroom deals to public scrutiny. The American Farm Bureau Federation applauds this overdue action.

Interior alone paid out more than $4.4 billion in monetary awards under terms of 460 settlement agreements and consent decrees between Jan. 1, 2012, and Jan. 19, 2017. In other words, Interior paid out an average of more than $800 million a year while keeping key aspects of litigation secret.

It’s easy to see why so many outside observers fear an unaccountable bureaucracy cutting deals with activists.

“The Department of Interior is shining light on a corner of government most people don’t even know exists,” AFBF General Counsel Ellen Steen said. “Basic transparency demands that citizens know what their government is doing. When activists sue, they can tie up the government with dozens of frivolous claims but still recover attorneys’ fees if a judge upholds even one, solitary claim.

“Faced with a barrage of allegations that sap agency time and resources whether they have merit or not, the government is too often motivated to capitulate through secret settlements. Some agencies have even been known to invite litigation with the purpose of entering a settlement to provide political cover for controversial agency policies. And in settling, agencies often agree to pay legal fees, which further fuels the sue-and-settle machine. This action is a solid first step to fixing the problem. Every other federal agency should follow suit.”

Among other things, the department has committed to:

Establish a publicly accessible webpage that details ongoing litigation.
Post a searchable list and text of final judicial and administrative consent decrees and settlement agreements that govern departmental actions along with details of attorneys’ fees paid.
Post any proposed consent decree or settlement agreement that commits DOI to seek a particular appropriation or budget authorization from Congress or formally reprogram appropriated funds.
Publish notice of proposed consent decrees and settlements in the Federal Register, and provide a public comment period of at least 30 days.

Trade relief helps, but export markets are the solution

Washington--Agriculture Secretary Sonny Perdue announced last week the details of the administration’s $12 billion retaliatory tariff relief plan. While the package is a welcome relief from the battering farmers and ranchers are taking in the ongoing trade war, the real solution is more export markets for U.S. agricultural goods, according to American Farm Bureau Federation President Zippy Duvall.

The tumbling livestock and crop prices that have followed tariffs imposed by China and other countries come on top of nearly five years of falling commodity prices that have led to lower revenues and higher debt levels for farmers and ranchers, Duvall noted in a statement.

“The additional burden of tariffs on the goods we sell to China, Canada, Mexico, and the European Union has been more than many farmers can bear. The aid announcement gives us some breathing room, but it will keep many of us going only a few months more. The real solution to this trade war is to take a tough stance at the negotiating table and quickly find a resolution with our trading partners,” Duvall said.

Nationwide, farm income is at a 12-year low. More than 150,000 farms were lost to consolidation and financial failure in the U.S. during the decade that ended in 2017.

USDA plans to tap into a number of its programs to help agricultural producers to meet the costs of disrupted markets.

The Farm Service Agency will administer the Market Facilitation Program to provide payments to corn, cotton, dairy, hog, sorghum, soybean, and wheat farmers that started Sept. 4.

The Agricultural Marketing Service will administer a Food Purchase and Distribution Program to purchase up to $1.2 billion in commodities unfairly targeted by unjustified retaliation. The Food and Nutrition Service will distribute these commodities through nutrition assistance programs.

Through the Foreign Agricultural Service’s Agricultural Trade Promotion Program, $200 million will be made available to develop foreign markets for U.S. agricultural products.

Thursday, September 13, 2018

Big Crops Could Get Bigger

New Records for Corn and Soybean YieldsJohn Newton, Ph.D.
Washington--The September 12 World Agricultural Supply and Demand Estimates projected the 2018 U.S. average corn yield at a record-high 181.3 bushels per acre. That exceeds the previous record of 176.6 bushels per acre in 2016 by 4.7 bushels, or 3 percent, and is 11.3 bushels above the 1960-to-2017 unconditional trend yield of 169 bushels per acre. The September projection was also 2.9 bushels per acre above the August estimate and well above the average industry expectation of 177.8 bushels per acre. The U.S. corn crop is now projected to be second highest on record at 14.827 billion bushels.

The September WASDE also projected 2018 U.S. average soybean yields to be a record-high 52.8 bushels per acre. If realized, this would exceed the previous record of 52 bushels per acre in 2016 and would be 4.2 bushels per acre above the unconditional trend yield of 46.6 bushels per acre. The September projection was 1.2 bushels above the August projection but was in line with the average trade guess of 52.2 bushels per acre. The U.S. soybean crop is now projected to be at a record high 4.69 billion bushels. Figure 1 highlights the U.S. average corn and soybean yields.  

Do Big Crops Get Bigger?

There’s an old saying in the grain business that big crops tend to get bigger. This saying refers to USDA’s crop yield estimates and suggests that once USDA increases projections for crop yields, subsequent estimates will also get bigger, i.e., USDA is conservative throughout the growing season.

Figures 2 and 3 plot the percentage in crop yields for corn and soybeans, respectively, for the August to September and September to January changes in yields over the last 30 years. In the case of both corn and soybeans, the scatterplot shows poor model fit between the changes in crop yields from August to September and September to January, with an R-squared of 0.07 for corn and 0.003 for 

While the scatterplots show poor model fit, they comingle years when the crop initially gets smaller with years when the crop gets bigger. If we examine only years when the crop gets bigger from August to September a more convincing case can be made that big crops do get bigger.

In 14 out of the last 30 years, USDA has raised yield projections for corn from August to September. In 10 of those years, the crop has gotten bigger, while in four of those years the crop has gotten smaller. Though this is backward looking, more than 70 percent of the time, once a crop has gotten big, it continues to get bigger, Figure 4.

Like corn, in 15 out of the last 30 years, USDA has raised the soybean yield forecast from August to September. In 10 of those years USDA has gone on to raise the yield estimate by January and in five years USDA has reduced the yield estimate. Again, this is a backward-looking analysis, but it does provide some historical evidence that supports the notion that the soybean crop could indeed get even 

A series of Market Intel Minutes have documented the favorable growing conditions this crop year (As Conditions Improve, Corn Harvest Begins, Corn and Soybean Crop Conditions Hold Steady and Crop Conditions Hold Steady as Harvest Approaches).

These favorable growing conditions are above prior-year and five-year average levels across much of the U.S. and have led to record crop yields. USDA will continue to revise corn and soybean yield projections throughout the growing season and into harvest. However, with June to August weather now behind us, odds are favorable that this big crop will indeed get bigger once the combines start rolling.

Tuesday, September 11, 2018

Farm Income Projected to be Higher Than Anticipated

John Newton, Ph.D
American Farm Bureau

Washington--Prior to USDA’s August 2018 Farm Income Forecast, net farm income, a broad measure of farm profitability, was projected in 2018 to be at the lowest level in more than a decade at $59.5 billion. This forecast, published in February, represented a drop in farm income of more than 50 percent, or $64 billion, from 2013’s high. It would have been the largest ever five-year decline in farm income.

Now, following USDA’s August update, net farm income is projected at $65.7 billion—the third-lowest level over the last decade, behind 2016 and 2009. While net farm income is still projected to be 13 percent lower than 2017 levels, it is no longer expected to sink to decade-low levels. Instead, higher projections of gross farm income more than offset higher gross expenses.

Net farm income is watched so closely because it is a comprehensive indicator of U.S. farm profitability – for all crops and livestock – and includes cash receipts from farming as well as farm-related income, including government payments and noncash items like changes in inventories, economic depreciation and gross imputed rental income, minus cash expenses.

These most recent projections for net farm income do not include the recently announced market facilitation program payments of $4.7 billion to $9.4 billion (Trade Aid Round One: A State Perspective). When including these program payments, net farm income rises to $75 billion and would be in line with the 2017 net farm income level.

If the August projections of net farm income are realized, and all $9.4 billion in trade-related market facilitation program payments are delivered, 2018 net farm income would remain approximately 39 percent, or $49 billion, below 2013’s record-high and 12 percent below the 10-year average of $85 billion. If only half of the market facilitation program payments are delivered, net farm income would be 43 percent, or $53 billion, below 2013 levels. Figure 1 highlights the February and August net farm income projections as well as program payments from the market facilitation program.

Farm Debt and Debt-to-Asset Ratios Climb

While the outlook for farm income improved, the outlook on farm debt worsened. USDA’s February forecast projected total farm debt in 2018 at a record $389 billion. Now, total farm debt is projected at a record $406.9 billion, up sharply from the February projection and up 3 percent, or $13.8 billion, from 2017 levels.

One important indicator of the financial health of the farm economy is the debt-to-asset ratio. In February, USDA had projected the debt-to-asset ratio to fall to 12.6 percent in 2018. However, now USDA projects the debt-to-asset ratio to climb in 2018 to 13.4 percent – the highest level since 2009 and the sixth consecutive year of climbing debt-to-asset ratios. Figure 2 highlights farm debt and debt-to-asset ratio projections.

In addition to climbing debt and debt-to-asset ratios, the debt-service ratio, which measures the proportion of farm production needed to service debt, is projected to increase to 27.8 percent – the highest level in 30 years. The current ratio, which measures the ability of agriculture to pay short- and long-term debt, i.e., assets divided by liabilities, is projected at 1.44, the lowest level since the series was first recorded in 2009. While farm assets remain greater than total liabilities, a rapidly declining working capital ratio suggest some farms may be unable to service debt and accounts payable with existing assets. 
Inflation-Adjusted Farm Economy Indicators

In 2018 inflation-adjusted dollars, net farm income is projected to be 14.8 percent, or $11.4 billion, below prior-year levels. If realized, this inflation-adjusted net farm income would be the fourth-lowest over the last three decades – behind only 2002, 1995 and 2016. This does not include the market facilitation program payments.

Net cash farm income is less comprehensive and does not include noncash items. Net cash income in 2018 is projected at $91.5 billion, down 12 percent and $12 billion from 2017 levels. If realized, this would be the lowest level since 2009’s $74 billion. In 2018 inflation-adjusted dollars, net cash income is projected to be 14 percent, or $14.6 billion, lower than in 2017 – and again the lowest level since 2009.

After adjusting for inflation, the 2018 projection for farm debt is the highest in over 30 years, when farm debt was $412.6 billion in 1982. At that time however, the debt-to-asset ratio was 19.1 percent – much higher than the 13.4 percent projected for 2018. Figure 3 highlights inflation-adjusted net farm
income, net cash income and total farm debt.


While the current outlook for U.S. net farm income is more optimistic than the February 2018 projection, farm income remains below prior-year levels and below the 10-year average. The one-time, trade-related market facilitation program payments will boost farm income in 2018 and help farmers service debt and other obligations. However, these are expected to be one-time payments and as a result farmers and ranchers need more market and financial certainty post-2018.

The University of Missouri Food and Agricultural Policy Research Institute’s August 2018 baseline projects beef, cotton, pork and poultry prices will face downward pressure in the coming years. Corn, dairy and soybeans are expected to experience higher prices while wheat and rice prices are expected to remain flat. These price changes in major crops are accompanied by expectations for acreage reallocations out of soybeans due to declining export sales over the next five years. For livestock, competition in the meat case and tariffs will put pressure on prices until supplies adjust.

The uncertain financial outlook in for the next few years, climbing debt and debt-to-asset ratios, as well as expectations for higher interest rates, highlight the need to complete the farm bill on time, prove the U.S. is a reliable and consistent supplier in export markets, get meaningful farm labor reform and continue reducing regulatory burdens on farmers and ranchers. The policy goals will go a long way toward improving the outlook for U.S. agriculture.

Monday, September 10, 2018

University of Idaho Field Day a success

PARMA--Tables lined with amber-ripe peaches, purple grapes, red, yellow and green apples was proof positive of a bountiful harvest at the University of Idaho’s Parma Research and Extension Center.
On September 7th the Center hosted its annual fruit field day in lush orchards to a large and appreciative crowd.

“It’s extraordinary and the fruit is wonderful. It shows us all the great opportunities we have here in Idaho, but also all the things University of Idaho Researchers can do,” said Gordy Terrell of Boise who drove 35 miles to the event just to sample fruit.
In a lush orchard west of the Research Center, crews laid out tables upon tables of harvested fruit. The number and varieties of fruit surprised those in attendance everything from grapes, peaches, nectarines to apples, quinces, Asian pears, persimmons, and even jujube, all sampled by school children, farmers and state ag officials.
The pomology program at Parma headed by professor Essie Fallahi, and each year the event not only draws hundreds of locals but also northwest fruit producers from all over the United States to see what research dollars have produced. They also check out the latest trials of apples, peaches, and other commercial crops. They’re interested in new production techniques, especially the use of growth bioregulators, and the latest irrigation techniques.

Essie Fallahi with a microphone in hand, told producers touring the apple orchards with him that by using the new techniques they can get immediate returns on capital investments through greater efficiency. 

"The important thing is the trees start producing in their second year and farmers can pay off their loans a lot faster than using traditional techniques. By spacing trees closer together, we can use every inch of ground and drop of water efficiently with this technique," said Fallahi.
When the State economy slowed a few years back, lawmakers cut higher education budgets, The University of Idaho took the cuts in stride but worked hard at keeping the research budgets at operable levels and keeping the doors open. With private donations and favorable funding, the Center has never looked back and with the upturn in the State economy, budgets were restored.

The investment in research is paying dividends as Idaho continues to make inroads into the nation’s fruit market. Fruit grown in Idaho is in high demand at farmer’s markets across the nation and its because of two simple things according to Fallahi.
“The quality of the fruit, including table grapes, that we produce in Idaho is outstanding. It has high flavor because of the long days and cool nights that we have in this region and also because of the outstanding color,” said Fallahi.
Hundreds of horticulturists, farmers and foodies gathered to listen to the researchers, tour the facilities and sample the fruit, many filled plastic bags and took the prized fruit home.

The Parma center serves as a testing ground for a national apple rootstock study in cooperation with Cornell University and other top institutions. The center also focuses on Fuji apple irrigation, nutrition, chemical thinning and pesticide trials.

Ethanol producers urge Trump to change Renewable Fuel Standard

Washington--In a letter to President Trump today, the American Farm Bureau Federation, National Corn Growers Association, National Farmers...