Anaheim, CA – Major commodity organizations expressed worries over trade, the Renewable Fuels Standard and the next farm bill as the 2018 Commodity Classic got underway this week. The American Soybean Association, National Corn Growers Association, National Association of Wheat Growers and National Sorghum Producers all gathered to lay out the policies they believed would best help their grower constituents.
Protecting ethanol demand
Corn leaders voiced concerns over this week’s White House meeting where President Trump and key senators from oil and corn states discussed the Renewable Fuels Standard, specifically RINs (Renewable Identification Numbers). USDA Secretary of Agriculture Sonny Perdue, who appeared in the conference general session Wednesday, insisted no deal was made that would harm ethanol demand. Even so, more high levels talks have allegedly been scheduled for this week.
“Our farmers cannot afford any deal that undermines demand for ethanol,” said NCGA president Kevin Skunes, a North Dakota farmer. “We continue to believe the elusive 'win-win' solution involves regulatory parity for E15 and higher blends of ethanol, essentially allowing year-round sales of E-15, and improved transparency in the RIN marketplace.
A cap on RIN values hurts farmers because it reduces ethanol consumption below current levels. This reduction in corn use will push already low corn prices even lower.
“Giving RIN credits for ethanol exports could trigger a trade war that the U.S. does not need right now,” Skunes added. “Our ethanol exports are already growing and hit a record in 2017 due to global demand and the value we offer. This idea would destroy our export gains.”
Nervous over NAFTA
Wheat, corn and soy leaders urged the President to support the North American Free Trade Agreement (NAFTA).
“Mexico is now the top market for U.S. soybean meal and oil, and number two for whole beans,” says Iowa farmer and ASA president John Heissdorfer. “Canada is the number three market for meal, and number 10 for oil. We are relieved the administration has walked back its initial threat to withdraw, but we’re still worried that withdrawal is even an option on the table. That would be catastrophic for soybean farmers.”
Likewise, NCGA believes NAFTA “has transformed our industry, with record setting corn exports to Mexico, our number 1 market, and Canada valued at $2.68 billion last year,” added Skunes. The corn growers claim that withdrawing from NAFTA would potentially result in market loss and reduced corn production of 150 million bushels annually. This would erase $800 million in value, or about $6 per acre, with total U.S. grain production falling by $1.2 billion. Farm program payments would increase by an annual average of $1.2 billion to compensate farmers for lost revenue.
Wheat growers voiced similar concerns.
“Are we a little anxious? Certainly,” said NAWG past president Gordon Stoner. “But, we remain hopeful. As for TPP (Trans Pacific Partnership), the wheat situation is dire because much of our wheat goes to Asian countries. We’re currently at 50% market share, but every indication is we would lose half of that upon full implementation of TPP.”
Despite disappointment over TPP withdrawal and fears over NAFTA, the farmer leaders continue to back the Trump administration.
“We still support the administration. We have to,” said Heissdorfer. “He’s our president. No matter what you hear, or whether you like certain things, he’s still the President of the United States, so yes, we do support him.”
China trade war?
The farmer leaders also worried that U.S. farm exports would become a sacrificial lamb in a growing trade war with China. Last August President Trump asked U.S. Trade Representative Robert Lighthizer to investigate China regarding intellectual property rights and technology transfer under Section 301 of the Trade Act of 1974. Section 301 gives the president the authority to order the U.S. Trade Representative to take any necessary measures to stop any foreign government from actions which violate international trade agreements or restrict U.S. commerce. Past administrations have been reluctant to use Section 301 for fear of trade retaliation. According to CNBC, the Commerce Department is using a provision of the 1962 Trade Expansion Act, Section 232, to make a case that dumping cheap steel and aluminum from China and other countries puts U.S. competitors out of business.
“We are extremely concerned that Section 301 and 232 investigations will put the interests of other domestic industries over farmers,” said Heissdorfer. “If the U.S. imposes tariffs against China in either area, China has indicated that it may retaliate against U.S. soybean imports, which would significantly endanger the current trade relationship between our countries.
“Every soybean farmer knows what China means for our demand. We send more beans to China than to the rest of the world combined. That relationship demands a light and diplomatic touch.”
An analyst at JCI Intelligence said China is trying to mend trade relations with the U.S. even as it also prepares for a trade war. JCI said China would target airplane manufacturing or U.S. soybeans — "the ballast stone of Sino-U.S. trade" — if the tariffs' cost to China exceeded $10 billion.
Tim Lust, CEO of the National Sorghum Producers, voiced a similar concern over a Chinese anti-dumping and anti-subsidy investigation into imports of sorghum from the United States.
“We are working together with industry friends on the process,” he said. “The Chinese market is our largest market and a win-win opportunity for our growers and our customers in China. From a process standpoint, this is new to our industry, we’ve never been involved in an international trade case before.
“A tariff would be a challenge,” he added. “We’re not dumping sorghum on the international market. We have a longstanding tradition as a company of following WTO laws and we are not unfairly subsidizing U.S. sorghum growers.”
Farm Bill safety net
The farm groups called for a ‘fully funded’ Farm Bill that includes crop insurance.
“We’re hoping the Farm Bill is on time,” says NAWG’s Stoner. “Crop insurance is number one when it comes to the Farm Bill. A lot of our wheat acres are grown in highly variable weather, so without crop insurance it would be a tough row for some of our farmers.”
ASA chairman and Illinois farmer Ron Moore agreed. “The rocky farm economy underscores the need for a strong farm safety net, including both Title 1 and crop insurance,” he said. “It highlights the importance of investing in conservation and research and the bio-economy. It emphasizes our need for robust export markets and good trade agreements.
“Expanding our international markets through investments in Market Access Program (MAP) and Foreign Market Development Program (FMD) is a time-tested way to improve both farm prices and our trade balance,” he added. “It’s no accident that ASA has made doubling of funding for export promotion our top ask in the farm bill.
“We can’t afford dramatic cuts anywhere in the bill,” Moore concluded. “Cuts only make it harder to pass a bill and that’s no good to us.”