At the end of February, ag producers were looking forward to making decisions on spring planting and March crop insurance, as well as hearing final decisions on the farm bill, which would provide some policy stability for the years ahead. But in the span of two days, they also had to absorb news and policy uncertainty surrounding biofuels and trade that could substantially impact their outlook and decisions for the future.

The farm bill debate was expected to begin in earnest in committee now that the major hurdles of cotton and dairy program reforms and budget costs had been at least largely addressed through the budget act passed by Congress in February. That act provided for changes to cotton and dairy programs, as pushed by producers, beginning with the 2018 production year (with any payments starting in fiscal 2019).

Had the two issues remained on the table for the agricultural committees to address, the cost of any changes would have counted against the budget constraints of the new farm bill and would have put substantial pressure on other programs and spending priorities. Addressing the issues outside of the farm bill establishes the programs and baseline budget going into the formal farm bill debate, and avoids the challenges for the committee.

Farm bill status
As of early March, the committee was still waiting on official baseline budget numbers from the Congressional Budget Office to count in the farm bill debate and was awaiting congressional action on other major challenges, including final appropriations for fiscal year 2018 (that was only extended by the budget act in February). The deliberations and drafting of farm bill language appears to be quite active already, but the formal public deliberations and committee work was still waiting to begin.

Once that effort begins, the process could move fairly quickly through both the House and Senate agricultural committees, although there could be more significant challenges on the floor in either chamber. The process would likely need to move quickly to ensure that it can be done in a timely fashion before the midterm elections and campaigns take the attention of legislators.

While the path ahead for the farm bill seems to be somewhat predictable, the path ahead on two major issues affecting agriculture appears to be anything but predictable. There have been major conflicts over the future of biofuels policy, culminating in White House meetings of major legislative and industry players. The oil industry and supporters have long argued for repealing, or at least reducing, the biofuels usage requirements as imposed by the Renewable Fuels Standard.

More recently, they have proposed capping the price of Renewable Identification Numbers that accompany biofuel production and usage in fuel blends to reduce costs for users that purchase the RINs for compliance, as opposed to actually blending in biofuels at required levels and to address perceived volatility in the trading of RINs in the financial market.

The biofuels sector has said that the RFS is set up to mandate compliance, and eliminating the financial penalty for noncompliance would shortchange the fundamental purpose of the policy as legislated. One potential alternative backed by biofuels supporters has been an expansion to year-round usage of E15, which would increase the total biofuels usage in the standard gasoline blends sold through existing channels and infrastructure. Pushing out the perceived “blend wall” from 10% to 15% would provide room to meet current conventional biofuel compliance requirements without costly changes to existing fuel marketing practices or channels, eliminating much of the cost bid into current RIN prices.

Retaliatory tariffs
At the same time as the biofuels policy debate is occurring, the Trump administration announced plans to impose tariffs on steel and aluminum imports. This action set of discussions of pending “trade wars” between the United States and many of our trading partners.

While the focus of the tariffs is nominally on steel and aluminum production in the United States, the impact could be felt by the broader economy, particularly the manufacturing and consumer segments relying on goods produced with steel and aluminum that could face reduced supplies or increased costs.

The impact is also projected to hit agriculture if foreign countries react with retaliatory tariffs of their own that might target agricultural imports from the United States. The grain sorghum sector has already seen concerns of reduced trade with China and other commodities, particularly soybeans.

If the U.S. announcement of tariffs sets off a protectionist wave of tariffs and reduced trade flows, then U.S. agriculture will certainly feel the impact. Further announcements from the administration seemed to suggest a connection between the tariffs and the ongoing renegotiation of NAFTA, the North American Free Trade Agreement, among the United States, Canada and Mexico.

If the move spurs further negotiation and consensus among the three countries, then perhaps the tariffs would have only short-term ramifications. If the move makes the difficult negotiations even more difficult, then they could spill over into virtually every trade negotiation and agreement.

The mention of biofuels policy and trade policy is a reminder that the ag sector is not just impacted and cannot just focus on the farm bill every five years or so. Everything going on in Washington and beyond can have an impact on agriculture, and the ag outlook and the uncertainties of the next farm bill may actually pale in comparison to what could happen in biofuels or trade policy.

For corn, current projections for the 2017 crop marketing year show more than 50% of production going to export markets or ethanol production. For soybeans, exports projections alone account for nearly 50% of production, and biodiesel accounts for a third of the expected soybean oil utilization out of the processing sector. The importance of strong demand and at least stable policy in both sectors cannot be overstated. For all of the focus on how farm programs may work over the next five years, any demand shocks in either the biofuels or trade sector could fundamentally affect the performance and support producers expect from farm programs. Engaging in the farm bill debate will be important, but so will engaging in every policy issue and discussion that affects agriculture.

Lubben is an Extension policy specialist at the University of Nebraska-Lincoln.