Farm Progress is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Serving: NE
Detail of the Capitol Building dome, Washington, DC mdgn/Shutterstock
HURDLES AHEAD: As if all of the trade, biofuels and regulatory issues weren't complex enough, keep in mind that the path ahead includes considerations during an election year.

Managing through uncertainty in 2020

Policy Report: The outlook for the coming year remains cloudy on issues such as trade and bioenergy.

After surviving a challenging year in 2019 with weather extremes and disasters, production and trade losses, and farm income and financial pressure, producers may be looking ahead to 2020 with hopes for more stability and opportunities for growth.

But while the numbers in the year 2020 imply perfect vision, the outlook ahead remains cloudy and will put a premium on a producer’s ability to manage through uncertainty.

The reduced crop production in 2019 and some increased export opportunities have driven market price prospects somewhat higher for now, but new projections from USDA point to relatively flat price levels for key grains and livestock over the longer run.

While these baseline price projections that are a part of USDA’s annual ag outlook don’t suggest any excitement in commodity markets, they by nature also don’t predict any shocks. Thus, the market outlook likely will remain uncertain well into the new year as long as there are questions about actual 2019 production and 2020 potential.

Policy developments on trade or biofuels also could be the shock that ultimately moves markets. And other policy developments and political activities also will affect producers and management decisions for 2020 and the years ahead.

Trade outlook

The trade outlook involves a complex portfolio of issues, countries and trade relations. A new trade agreement with Japan that appeared to be headed for final passage in the Japan Diet as of late November promises increased U.S. ag trade prospects with Japan in 2020.

The initial agreement may not be everything that the U.S. walked away from in the Trans-Pacific Partnership agreement in 2017, but it definitely is progress with the U.S.'s largest ag customer in the Pacific region.

The United States-Mexico-Canada Agreement also appears to be making progress on its slow path through consideration by Congress. Battling for time and attention aside impeachment hearings and continued concerns about enforcement of Mexican labor reforms, the path toward ratification seemed uncertain. Recent reports, however, suggest the remaining issues have largely been resolved, although a tight congressional schedule was likely to push consideration of the USMCA into 2020.

Progress with Japan and the USMCA, along with promises of increased U.S. exports of nonhormone-fed beef to the European Union, all offer improved trade prospects for 2020. However, the continued uncertainty of ongoing discussions between the U.S. and China still put a damper on the trade outlook for now.

Since the trade conflict began in early 2018, there have been various meetings and discussions about pulling back on tariffs and expanding trade, particularly for ag exports to China. The talks often have been accompanied by increased Chinese purchases or commitments to buy U.S. ag products, but an agreement to resolve the ongoing conflict remains elusive and will continue to weigh over the market until it is realized.

Trade assistance from USDA has helped offset some of the export losses thus far, but the question remains as to how long the conflict will last and how long trade assistance can be counted on to help fill the gap.

Bioenergy interests

The bioenergy sector is caught between a mix of policy choices, mandates, economics and competing interests. Biofuel interests and producers point to the renewable fuels standard passed in 2005 and 2007 as a policy mandate to increase the nation’s utilization of biofuels in the motor vehicle fuel market through 2022.

Whether through enforcement of the mandate or expanded availability and utilization of higher blends of ethanol such as E15 and E85, the push has been to use the RFS to build markets and grow utilization.

At the same time, other interests, particularly the petroleum sector, have been pushing for a repeal or at least a reduction of the mandated usage levels through waivers of the mandate or, more recently, through small refinery exemptions.

Some of the waivers represent the reality that the U.S. is nowhere near capable of meeting the cellulosic fuel mandate. On the other hand, the exemptions were designed to be targeted to small refineries facing economic hardships because of the biofuel blending requirements, but they have been widely granted and, in aggregate, have effectively reduced the overall mandate substantially.

With ongoing issues surrounding proposed levels of the mandate, the year-round approval of E15, the ongoing small refinery exemptions, and even the future of the mandate past 2022, the outlook for biofuels and biofuels policy remains uncertain.

Ultimately, the policy debate could come around to a penultimate battle between whether the RFS mandate is needed to specifically force higher biofuel usage and blending levels than the market alone would produce or whether that argument itself is evidence that the policy is economically painful and in need of waiver or repeal.

Regulatory hurdles

Beyond the market-affecting potential of trade and biofuel policies, there are several regulatory issues that could affect producers and landowners in the year ahead.

Food labeling policies and regulations for the disclosure of biotech-engineered food products, or alternative protein or cell-cultured meat products, or just about any particular food attribute can be a complex mix of market preferences and signals, as well as interest group and political pressure.

While the policy debate in the legislative and regulatory arena often is complex, the policies also are likely to be challenged in the judicial arena as well. And the ultimate policy decision may not even rest in the public policy sphere, but rather be determined by the marketplace where consumers and interest groups push retailers and food manufacturers to provide various labeling information or production standards regardless of the policy framework.

Environmental policies also have been on the radar for agriculture, particularly the formal definition of Waters of the United States or WOTUS. The definition of WOTUS is fundamental to the determination of which water bodies (and surrounding land activities) are subject to federal jurisdiction and which ones are not.

Late in 2019, the Trump administration enacted a rule repealing the Obama-era rule that revised the long-standing federal definition of WOTUS developed by the Environmental Protection Agency and the U.S. Army Corps of Engineers in the 1980s. That old definition was challenged and refined by Supreme Court cases in the 2000s, but was left unclear because of competing definitions written in the court’s opinion.

The Obama-era rule sought to further define WOTUS, but was stalled by a court injunction in a majority of states, meaning there was confusing mix of Obama-era and pre-Obama-era WOTUS guidelines in effect before the late 2019 repeal of the Obama-era rule.

The repeal of the Obama-era rule didn’t resolve the underlying issue, however, as the WOTUS definition simply returned to the previous 1980s definition found lacking by the courts. A new rule defining WOTUS is expected from the Trump administration in 2020, but for the moment, producers, landowners and stakeholder groups await the rule and the likely legal challenges to follow.

Even a short list of policy and regulatory issues affecting agriculture can’t leave off the ongoing immigration debate — where issues of ag labor needs and year-round availability of immigrant labor through an expanded H2A program, for example, are considered along with the issues of enforcement, security, citizenship and potential amnesty.

This has been a generational issue that has been nearly impossible to resolve even as numerous bipartisan proposals have been offered. Any prospect for immigration reform beyond a limited expansion of H2A policies seems difficult to predict.

Political challenges

As if all of the policy issues from trade to biofuels to regulatory issues were not complex enough, it is important to remember that the path ahead includes discussions and considerations during an election year.

The presidential primary process will formally start early in 2020, although campaigns and debates of the Democratic challengers already have been in full swing. While many of the issues above don’t involve direct legislative action, the overall political debate and agenda will add some challenges to addressing policy issues throughout the year.

In the meantime, producers, landowners, and agricultural businesses and stakeholders all will have to adjust and manage though the uncertainty ahead. Having a vision for management goals and objectives for 2020 can be critical, even if the policy world isn’t very clear.

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

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish