As the harvest season draws to an end, the agricultural industry still faces problems with policy, prices and trade.
Jay Schutte, an Audrain County Farmer, attended a hearing Oct. 30 over the renewable fuel standard and small-refinery exemptions for crude oil. The exemptions for crude oil refineries with production at 75,000 barrels or less were greatly increased by the Trump Administration in August. The exemption increase has decreased ethanol production, which in turn affects the price of corn and its harvest.
It isn't all bad news for the agriculture industry, Rep. Vicky Hartzler, R-Mo., said Friday at the Pearls of Production Women in Agriculture Conference in Columbia. She focused on how trade negotiations are progressing, which could lead to an increase in U.S. agriculture products traveling overseas.
Even with the good news, there still are policy concerns relating to trade and ag product production, according to the Missouri Rural Crisis Center.
Renewable Fuel Standards and supply rule changes
The Environmental Protection Agency is working to project how production will be affected by small-refinery exemptions and how to adjust renewable fuel percentages by using Department of Energy production estimates. The renewable fuel standard requires 15 billion gallons of biofuel, ethanol or soy diesel, be mixed into fuel. The exemptions granted by the Trump administration in August allowed for about 4 billion fewer gallons in fuel mixes.
Schutte was at the hearing to tell his story as an Audrain County farmer and investor in POET Biorefining in Laddonia.
In the early 2000s, farmers would rely on loan deficiency payments when the market price of grain fell below United States Department of Agriculture loan rates, Schutte said. The renewable fuel standard and increased ethanol production all but did away that farmer safety-net program. The SREs are slowing ethanol production, though, he said.
A 2017 study from Iowa State found that biofuel production has helped with crop prices and that ethanol production should actually increase to meet mandated levels. Biofuel production mandates are supposed to reach final levels in 2022, the study noted.
The problem is that the agency is looking at three-year averages of energy department exemption estimates, rather than actual exemptions, Schutte said.
"We are arguing that the EPA needs to take the small-refinery exemptions, the actual amount that was exempted, and then redistribute that so we maintain the RFS at 15 billion gallons," he said.
Since estimates are not based on actual numbers, they likely will come up with fewer required gallons for fuel mixes, which would adjust the renewable fuel standard, Schutte said. He has first-hand knowledge of how this could affect the biofuel industry, as he is treasurer of East Central Agricultural Products, the farmer investment firm supporting POET Biorefining in Laddonia.
"It's impacting not only ethanol producers but farmers as well. They absolutely need to use real-world data of loss of demand and base it on that, rather than [estimates]," Schutte said.
Agriculture industry positives
It is not all doom and gloom however by Hartzler's estimation. While 2019 was an extremely difficult year for Missouri farmers, and commodity prices can't make up for production losses, there still are programs available to them lessen their impact.
Around 1.1 million acres were not planted in Missouri this year according to the National Agricultural Statistics Service.
Hartzler highlighted assistance programs for those affected by flooding and other concerns, such as livestock. The U.S. has created a $150 million preventative foot and mouth vaccine bank to be used over the next five years. USDA already is taking applications for its Agriculture Risk Coverage and Price Loss Coverage through the Farm Service Agency. Those with livestock also can apply for programs like emergency assistance for livestock, livestock indemnity, livestock forage disaster, and livestock insurance policies for cattle, swine and lamb, Hartzler said.
Hartzler’s main focus was on the ongoing trade concerns. The Trump administration Oct. 8 finalized a tariff-specific trade deal with Japan on agricultural products. Tariffs were reduced or eliminated on around $7 billion of American goods exported to Japan, and the U.S. has lowered tariffs on Japanese industrial products.
"That will mean that 90% of our food and ag exports to Japan will be duty free. Prior to that it was 37%," Hartzler said, adding there are staggered tariff reductions on fresh and frozen beef and pork, and there was immediate tariff removals on grains, nuts, berries, corn and other vegetables. "That's good news."
China still is the big concern, but the U.S. and China are nearing an agreement, Hartzler said.
"I got to meet with the president on [Oct. 30]. I was with a group he had invited. He thought we should know if China would be serious with moving forward with the trade agreement, [that it will happen] within the next couple weeks," she said.
Based on estimations from the president, China could buy $40 billion to $50 billion more in ag products, Hartzler said, adding the most the U.S. has sold $16 billion. This isn’t final, though, she said. China is less sure about the $40 billion to $50 billion price tag, however, according to Washington Post reporting. Purchases are planned on market needs, not a blanket sum, according to the Chinese Ministry of Commerce.
The opening of markets likely will happen in three phases, she said, without offering specifics on what products will start to sell again in China through those phases.
Prices, policy, multinational corporate influence concerns
Farmers still face historic low prices on commodities and policy decisions at the national level are compounding these issues, said Tim Gibbons, Missouri Rural Crisis Center communications director.
"We need to fight for a democracy that fights for our farmers and consumers," he said. "We just want to ensure producers have the ability to stay in business."
The per bushel price on corn in Missouri as of Sept. 30 was $3.74. The 2011 base price was $6.02. Soybeans are at $8.32 per bushel as of Sept. 30, down from the 2011 base of $12.50. Prices are $3.80 per bushel and $8.35 for corn and soybeans, respectively in the U.S.
These prices are below total production costs, Gibbons said.
"The ability for [farmers] to operate their farms at a profit and then corresponding, the ability for their kids to come back to the farm and see a future in farming is dire. It's bleak right now," Gibbons said.
Missouri had 121,955 farms 41 years ago but is down to 95,320 farms as of 2017, according to the USDA Census of Agriculture. Farm bills and trade agreements at the federal level have the greatest impact on Missouri farmers, Gibbons said. "Policy is what got us here, and it's policy that can get us out," he said.
Multinational corporate agriculture influence on policy is a grave concern for the crisis center. Ag industries have seen a major concentration in the market. Despite fewer number of farms, the amount of farmland isn't reducing at the same rate, indicating a consolidation of land and operations.
"Through concentration, you get a lack of competition. In order to have capitalism, you have to have competition," Gibbons said.
There only are four main beef packers in the U.S. — Tyson Foods, Cargill Meat Solutions, JBS USA and National Beef — as an example.
Hartzler is concerned about price-fixing in the beef industry. Agriculture Secretary Sonny Perdue launched an investigation in August by into beef pricing margins after a fire at a Tyson packing plant in Holcomb, Kansas.
"It really exposed a vulnerability that we have in our country. We need more packers and that packing plant held 6% of all beef packing production," Hartzler said.
Prices paid to cattlemen dropped dramatically, but the packers still were getting high payments and prices on end products, she said.
"Was there any price-fixing there, or was it a supply-and-demand situation? I don't know. We are looking into that," Hartzler said.
The crisis center is pushing for country-of-origin labeling through the United States, Mexico, Canada Agreement, which has stalled in congress. Trade agreements allow Mexican cattle to be slaughtered and processed at U.S. packing plants and vice-versa. U.S. consumers may buy Mexican beef thinking it is sourced from the U.S. because it is processed in the country, Gibbons said.
"The transparency for consumers is nonexistent," Gibbons said. "If you choose [actual] U.S. beef, that will help the price paid to beef producers. It's not something red-or-blue."
Farmers are becoming increasingly dependent on insurance programs through the farm bill, he said.
"That deep sense of hopelessness comes from years of getting squeezed out of the market and having your paycheck dependent on a government insurance check instead of being able to get your check from the market," said Dina van der Zalm, crisis center rural health care planner.
The low commodity prices, consolidations of the industry and trade negotiations are impacting the financial future of farmers. Foreclosures are up, van der Zalm said. Farm real-estate loan payment delinquency is at 2.5%, according to FDIC data reported by Forbes. This is a six-year high and is above the average historical average from 2001 to 2018 of 2.1%. Chapter 12 bankruptcy filings also are up 12% in the Midwest from July 2018 through this June.
Farmers need country-of-origin labeling and a moratorium on mergers to halt and reverse the current financial picture, van der Zalm said.
"The way we have insurance right now is it is supposed to be for disasters, but it's turned into revenue insurance,” she said. “That's not what farmers want. They want a living wage, not a handout.”