As of this week, eight governors – North Carolina, Arkansas, Delaware, Texas, Georgia, New Mexico, Virginia and Maryland – had petitioned the Environmental Protection Agency (EPA) to waive the ethanol Renewable Fuel Standard (RFS), and EPA is starting to grumble about how difficult its review will be. At the same time, the first governor – Gov. Terry Branstad of Iowa – sent a letter to EPA Administrator Lisa Jackson telling her to deny the RFS waiver request, saying to do otherwise “would signal that U.S. renewable fuels policy is risky.” The EPA executive in charge of Clean Air Act (CAA) enforcement told a meeting of state energy regulators in Colorado this week that defining “economic hardship” – the issue that must be proved by the states and regions calling for the waiver – will be tough for the agency because the Clean Air Act (CAA) amendments creating the RFS do not define “economic hardship,” according to reports. While she told the state regulators it will likely be a “high hurdle” to clear, the agency lacks the economic data and said that in the request for public comment EPA needs to see impact data. In addition to the governors’ petitions, EPA must also decide on how to deal with an administrative petition from nearly two dozen livestock/poultry/feed/processing industry groups, as well as calls from 150 House members and 26 Senators from both sides of the aisle for EPA to waive the RFS. In its public notice, EPA asks for input on whether the current RFS is causing regional or state economic harm and/or how it affects the price of corn, feed, food and/or ethanol. The agency also wants data supporting the notion that waiving the RFS will solve the supply/price problems alleged by the livestock, feed, food and processing industries. EPA is also looking at the economic impact on the ethanol industry, wanting to know if or how a waiver would change demand for ethanol; the amount of ethanol likely to be consumed during the waiver period based on its value to refiners for octane and other characteristics, and if a waiver is appropriate, what’s the amount of required renewable fuel volume appropriate to waive, the date on which the waiver should begin and end, and to which compliance years under the RFS should it apply.
Lawmakers warned the Environmental Protection Agency (EPA) this week if it doesn’t move to waive the ethanol Renewable Fuel Standard (RFS) as formally requested by eight governors, industry and several U.S. and international hunger groups, Congress will move to legislatively change the federal ethanol blending mandate. Rep. Bob Goodlatte (R-VA), former chairman of the House Agriculture Committee and author of legislation to require EPA and the U.S. Department of Agriculture (USDA) to consider suspension of the RFS when domestic corn stocks fall too low, said his supporters on both sides of the House aisle will push legislation if EPA doesn’t waive the fuel blending mandate. Timing is critical, Goodlatte said, explaining it’s important for EPA to signal its intent on the waiver requests by the end of September even though a decision on the governors’ waiver requests isn’t expected before the November election. Opposing Goodlatte’s efforts will be the corn and biofuels industries, but he said the coalition of groups supporting his efforts has grown beyond cattle, dairy, poultry and feed groups. “It’s grocery manufacturers and restaurants. It’s also consumer and environmental groups … and hunger organizations are worried about the detrimental impact on the price of food,” Goodlatte said.
In a move to neutralize the impact of eight state governors formally requesting the Environmental Protection Agency (EPA) to waive the ethanol Renewable Fuel Standard (RFS), the nation’s eight largest alternative fuel associations, calling their coalition “The Biofuels Production Coordinating Council, sent a letter this week to President Obama asking him to support the RFS and reject the petitions for an RFS waiver. “A number of groups and some governors seem to believe that the RFS is a substantial part of the equation when it comes to grain prices, and waiving the program this year or next will ease the impact of the drought on consumers,” the council wrote. “There is substantial evidence to the contrary.” The biofuel groups contend because there are more than two billion excess biofuels credits, refiners are meeting RFS obligations by buying credits, not corn-based ethanol. “Any additional waiver would have only a marginal effect on the marketplace,” the council said. The groups also called the waiver a “weakening of the U.S. commitment to renewable fuels,” alleging this will lead to higher gasoline prices. Further, the biofuels groups said that “altering or waiving the RFS will chill investment in advanced biofuels,” and will “destabilize a cornerstone of U.S. economic recovery.” The groups said their members have cut back production or temporarily shut down given they, too, are affected by high corn prices. “The recent four-week average for ethanol production is the lowest in more than two years and down more than 15 percent from the beginning of this year,” the council wrote. In a related development, the Food & Agricultural Policy Research Institute (FAPRI) at the University of Missouri this week released a study predicting ethanol production will drop 10 percent in the coming year based on high corn prices. The groups signing the letter were the Algae Biomass Association, the American Coalition for Ethanol, the Biotechnology Industry Organization, Growth Energy, National Biodiesel Board and the Renewable Fuels Association.
Senators to USDA: More Poultry Industry Drought Relief – Secretary of Agriculture Tom Vilsack this week got a letter from five Democrat Senators telling him he needs to do more to provide drought relief for affected poultry producers. “We urge you to use your existing authority to explore as many options as possible, including reprogramming funds, providing additional loan options, providing compensation for economic losses, enhancing corn supplies, compensating for feed and poultry transportation costs, and a bonus purchase of turkey products in order to assist poultry producers and companies,” the Senators wrote. The five also said they “recognize there may be a need to create a temporary emergency disaster program” to help out the industry.
Vilsack Extends Emergency Grazing on CRP – The U.S. Department of Agriculture (USDA) this week announced a two-month extension for emergency grazing on Conservation Reserve Program (CRP) acres, a move Secretary of Agriculture Tom Vilsack said will free up feed and forage for ranchers. Vilsack also designated another 147 counties in 14 states as natural disaster areas, with 128 of the new counties affected by drought. This brings the total number of counties to 1,892 in 38 states, with 1,820 of those county designations due to drought. Last week, Vilsack filed special provisions with the Risk Management Agency (RMA), which oversees federal crop insurance, to allow haying or grazing of cover crops without impacting the insurability of 2013 spring crops, and said he’s modifying USDA emergency loan programs so loans can be made earlier in the season to benefit livestock producers faced with rising feed costs and herd liquidation. For a complete list of USDA drought/natural disaster actions, go to www.usda.gov/drought.
DOD’s Defense Logistics Agency to Buy $100 Million in Meat – On the heels of the U.S. Department of Agriculture’s (USDA) announcement last week it would purchase $170 million in meat, fish and poultry products for department feeding and nutrition programs, the Department of Defense’s Defense Logistics Agency (DLA) said this week it will buy a six-month advance supply of meat, a purchase estimated to be worth more than $100 million. DLA asked its top three vendors to purchase, store and distribute beef, pork, lamb, chicken and catfish items.
This week the Commodity Futures Trading Commission (CFTC) published the long-awaited final rules covering swap dealer management and swap participant oversight. The new regulations dictate swap dealer and swap participant documentation requirements, swap confirmation, reconciliation and “compression” of swap portfolios. These requirements are so-called “bilateral swap, post-trading mechanisms” for reducing risk and improving operational efficiencies, and the rules will be high risk management concerns at a much earlier stage in operations, the CFTC said. The rules are effective in about 60 days.
Five national organizations representing feed, ingredient and pet food companies, led by the American Feed Industry Association (AFIA) and the National Grain & Feed Association (NGFA), this week commended the Food & Drug Administration (FDA) for signing a one-year extension of its memo of understanding (MOU) with the Association of American Feed Control Officials (AAFCO) that continues the FDA/AAFCO ingredient review and approval process. At the same time, AFIA and NGFA are exploring a legislative option to ensure the continuation of the federal and state feed control officials’ ingredient approval relationship. The MOU was set to expire in September, and the one-year extension allows for industry and government to seek a fix to a language problem created by the Food & Drug Administration Amendments Act of 2007 (FDAAA). FDAAA carried a section requiring FDA to set processing and ingredient “standards” for pet food in the wake of the imported Chinese melamine contamination of pet foods in the U.S. While the processing standards requirement is included in the ongoing FDA Animal Feed Safety System (AFSS) program, agency lawyers said the creation of “standards” for pet food ingredients means the AAFCO review/FDA approval system may not suffice, and re-review of all feed ingredients listed in the AAFCO Official Publication (OP) may be required. The word “standards” does not appear in the federal Food, Drug & Cosmetic Act (FFDCA) in the context of animal feeds, and FDA lawyers want Congress to tell them what industry has contended for the last several years, namely “standard” means “definition,” and that Congress never intended to modify or eliminate the FDA-AAFCO cooperative program on ingredient reviews and approvals when it enacted FDAAA. The other groups participating in this effort include the Pet Food Institute (PFI), the National Renderers Association (NRA), and the Enzyme Technical Association (ETA).
Two activist food safety groups sued the Food & Drug Administration (FDA) this week for failure to meet its mandated deadlines for publishing rules to implement the Food Safety Modernization Act (FSMA). The suit wants the federal court to force FDA and the Office of Management & Budget (OMB) to begin enforcing the new food safety law, citing food disease outbreaks in just the last year. Pending at OMB are rules enforcing the sections of the new law on feed/animal foods, standards for analysis and preventative measures to ensure the safety of human foods and imported food and ingredients requirements. FDA submitted draft regulations to OMB in 2011, but the complexity and cost of the rules has snagged the drafts in the OMB review process. FDA officials have said they expect to publish the rules sequentially later this year, beginning with the preventative controls rule, moving to a rule on standard setting for contaminations, and end with the feed/animal foods rule.
Net on-farm income is expected to exceed $122 billion in 2012, up 3.7 percent from 2011, and net cash income should be more than $139 billion, both records, the U.S. Department of Agriculture (USDA) said this week. Most of the increase is attributed to dramatic run-ups in crop prices, particularly for corn and soybeans, as well as large crop insurance payments in the wake of the drought. Farm equity is seen hitting a record as well, hitting almost $2.3 trillion. The department said the increase in crop revenues and income “should be more than enough to offset” livestock farmers’ higher feed expenses and a decline in sales of wholesale milk.” Livestock producers do not receive federal crop insurance payments.
The federal government last week shut down an 11-mile stretch of the Mississippi River south of Memphis to all barge and commercial traffic because of low water levels blamed on the drought. This move was complicated by independent actions – taken in consultation with the U.S. Coast Guard – by shippers and barge companies as they moved to close operations in anticipation of Hurricane Isaac making landfall this week. All river traffic and most export terminals, elevators and other agriculture facilities which sit near the Mississippi River were closed, including four grain export elevators operated by ADM, according to reports. The suspension of river traffic and the closing of facilities costs about $300 million a day, said the Crescent River Pilots’ Association. The earlier formal 11-mile closure immediately impacted grain and soybean shippers trying to move barges to export facilities on the Gulf of Mexico. The Coast Guard reported about 1,000 barges and ships are now affected. Readings near Memphis show the river is more than 12 feet below normal August levels, and the impact of the closure affects not only ag shippers, but other industries moving products south for export. Experts report a one-inch drop in river level means a vessel’s capacity is reduced by 17 tons of cargo. The Army Corps of Engineers has sent dredges to the area to deepen and widen the river, but without rain, the Corps expects the river level to continue to drop.