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    Keith Good: U.S. Ethanol Prices on Rise Due to Transportation Issues

    Biofuels

    Nicole Friedman reported in today’s Wall Street Journal that, “U.S. ethanol prices are surging, as supplies shrink amid transportation constraints.

    “Ethanol for delivery in April rose 6.9% last week to $2.467 a gallon, the highest settlement since Dec. 4 on the Chicago Board of Trade. Prices are up 40% from a low of $1.757 a gallon reached Jan. 27.”

    The article noted that, “Corn futures on the CBOT are down about 35% from a year ago, trading around $4.86 a bushel. One bushel of corn yields about 2.8 gallons of ethanol, according to the American Coalition for Ethanol.”

    Reuters writers Michael Hirtzer and Cezary Podkul reported on Friday that, “East Coast stocks of fuel ethanol fell to their lowest level on record last week, down to 4.6 million barrels from 6.4 million at the same time last year, data from the U.S. Energy Information Administration showed on Wednesday.

    “Midwest ethanol producers – who often can store no more than 10 days’ worth of production on site – are finding their tanks full as railroad pick-ups slow.

    “As a result, some plants are reducing production. Wednesday’s EIA data showed the second-lowest weekly production for ethanol in the Midwest so far this year, at 802,000 barrels per day.”

    University of Illinois agricultural economist Scott Irwin indicated on Friday at the farmdocDaily blog (“Recent Trends in the Profitability of Ethanol Production“) that, “With all the attention on EPA rulemaking for the RFS in recent months, trends in the actual profitability of biofuels production have not received much notice.   There seems to be a perception on the part of some observers that the EPA’s proposed renewable volume obligations (RVOs) for 2014 represented the death knell for biofuel production profits.  Today’s post on ethanol production profits is the first in a two-part series that will examine biofuels production profits.”

    Farm Bill- Policy Issues

    On Friday, Secretary of Agriculture Tom Vilsack testified at a House Agriculture Appropriations Subcommittee hearing on budget related matters.

    A summary of key highlights of the hearing has been posted here at FarmPolicy.com Online.

    In an article posted yesterday at National Journal Online, Jerry Hagstrom reported that, “The [Appropriations Ag] subcommittee’s chairman, GOP Rep. Robert Aderholt of Alabama, told Agriculture Secretary Tom Vilsack that he is receiving complaints from schools and from the School Nutrition Association, which represents school food-service directors, that some schools are facing both a financial and logistical burden in implementing the new school-meals programs and are requesting a delay.

    “Vilsack said that the Agriculture Department’s general counsel has determined that the Richard B. Russell National School Lunch Act ‘specifically prohibits me from granting a waiver that relates to the nutritional content of program meals served or the sale of competitive foods.'”

    The National Journal article added that, “Vilsack acknowledged that Congress had asked in report language that USDA consider a waiver, but added, ‘Since report language is nonbinding in nature, and statutory prohibitions are binding, USDA is respectfully unable to comply with the directive to establish a waiver process.’

    “Vilsack noted that about 90 percent of the schools have already complied with the new school meal menu patterns required under the Healthy Hunger-Free Kids Act, and that USDA is trying to help schools comply with the new rules. But a food-industry official told National Journal that that the real issue is that many more schools are concerned about implementing the healthy school snacks program by July.”

    news release Friday from Rep. Rosa DeLauro (D., Conn.) indicated that, “[Rep. DeLauro] engaged with [Sec. Vilsack] on a number of key issues facing the [USDA], including USDA’s controversial proposed poultry inspection rule and management of the Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps.  The discussion took place at an Appropriations Subcommittee hearing on USDA’s fiscal year 2015 budget request…[D]eLauro raised her concern that if USDA were to implement their proposed poultry processing rule, it would have serious detrimental effects on both food and worker safety. She pointed out to Secretary Vilsack that the Government Accountability Office (GAO) has twice found the HAACP programdata, which the proposed rule is based on, to have too many limitations to conclude food safety benefits. She also raised concerns over worker safety, questioning Secretary Vilsack on why it would be beneficial to have a system where companies are allowed to put their own inspectors on the line, effectively giving them oversight responsibilities over themselves.

    “Continuing to underscore her concern with food safety, DeLauro asked Secretary Vilsack what was preventing USDA from strengthening poultry salmonella standards. When he responded that USDA has limited authority in that area she told him point blank ‘ask us for the authority.’ Secretary Vilsack declined to respond.”

    An update Friday from USDA’s Radio News Service indicated that, “Greater efficiency in the poultry inspection process is behind a proposal to modernize inspection efforts, according to the Agriculture Secretary;” to listen to this one-minute USDA audio recap, just click here.

    And DTN Political Correspondent Jerry Hagstrom reported on Friday (link requires subscription) that, “Iowa partisan politics seemed to surface at a House Agriculture Appropriations Subcommittee hearing Friday as Rep. Tom Latham, a Republican, told Agriculture Secretary Tom Vilsack, the former Democratic governor of the state, that Iowa farmers are disappointed by the positions the department has taken under the Obama administration.”

    The DTN update indicated that, “‘Farmers no longer think USDA is on their side,’ Latham said, and then brought up what he considered to be Vilsack’s reaction to policies that other agencies attempted to advance.”

    Friday’s article added that, “‘We must be talking to different people,’ Vilsack said.

    “Latham replied that he believes he and the secretary are talking to the same people.

    “‘I don’t think we are,’ Vilsack shot back.

    “‘I know what I know,’ Latham concluded, adding that there is a sense in the countryside that USDA sides with the other agencies ‘and takes orders from above.'”

    Meanwhile, Bill Tomson reported on Friday at Politico that, “Republican leaders are threatening to take congressional action to stop state governors from flouting the food stamp cuts contained in the 2014 farm bill.”

    The article noted that, “Rep. Frank Lucas (R-Okla.), one of the 2014 farm bill’s four principal architects, warned: ‘I suspect that this will create a call for action from members of the House and … these governors now will cause a new set of hearings, a new set of bills, a new set of appropriations amendments.'”

    Mr. Tomson explained that, “Rep. Kevin Yoder (R-Kan.) expressed anger Friday over the possibility that none of the cuts to the SNAP program would be realized and asked USDA Secretary Tom Vilsack during an appropriations hearing whether he had any inside knowledge that states would nullify the benefit reductions.

    “Vilsack said he didn’t know or suspect what the states would do, but defended their right to take action.

    “‘Frankly, as a former governor and former state senator, I respect the role of governors and legislatures to make decisions that they think are in their state’s best interests,’ Vilsack said.”

    In other news, Robert Harding reported on Friday that, “[Sen. Kirsten Gillibrand (D., N.Y.)] is urging leaders of a Senate Appropriations subcommittee to include a provision in the 2015 agriculture appropriations bill to block the U.S. Department of Agriculture from closing 250 Farm Service Agency offices throughout the country, including as many as 10 in New York.”

    Agricultural Economy

    David Pierson reported on the front page of yesterday’s Los Angeles Times that, “In a few weeks, every drop of milk collected from the surrounding farms will be brought to the plant [in Fallon, Nev.] and converted into fine powder inside a towering heating chamber specially made for the $85-million facility.

    “But instead of being delivered to U.S. stores, the milk powder will be trucked nearly five hours away to the Port of Oakland and then loaded onto ships to China in bags emblazoned with the American flag.

    “It’s all part of a plan to claim a foothold in a country whose growing thirst for milk is shaking up almost every corner of the global dairy industry — even remote communities such as Fallon, 60 miles east of Reno.”

    Mr. Pierson explained that, “Rising incomes and a burgeoning appetite for richer protein has led to a boom in Chinese milk demand that can be quenched only with more foreign supplies.

    “China is the world’s top dairy importer. Revenue in the country’s dairy market reached $40 billion last year, a fivefold increase from a decade ago, according to market research firm Euromonitor.

    “Some of the biggest demand is for milk powder such as the kind to be produced in Fallon, starting next month.”

    The L.A. Times article noted that, “Overseas demand is driving up milk prices in U.S. supermarkets. The average retail price for a gallon of whole milk was $3.55 in January, the highest in more than a year. Wholesale prices for milk used to make cheese hit a record high in February at $23.35 per hundred pounds. That trend could continue as dairy farms struggle to increase production amid one of the nation’s worst droughts.”

    As a side note on China, Bob Davis and Richard Silk reported in Friday’s Wall Street Journal that, “China’s economy weakened sharply during the first two months of the year, deepening concerns that growth in the world’s second-largest economy would decelerate further.”

    And Steve Zind reported late last week at Vermont Public Radio Online that, “[Diane Bothfeld, the deputy secretary for dairy policy at the Vermont Agency of Agriculture] says there’s been increased demand for dairy products, especially from overseas. She says the higher prices are also due to flat U.S. milk production largely because of drought conditions in the West and Midwest.”

    Donnelle Eller reported on the front page of yesterday’s Des Moines Register that, “Prices for ribs, chops, hams and other pork products in the grocery store are expected to climb as much as 15 percent this summer as supplies are slashed by a new swine virus that’s sweeping the country [see related graph from the Register article].

    “That’s tough news for consumers, also facing rapidly rising prices for beef. Shrinking hog supplies also could cause reduced hours at some meat processing plants across Iowa and the country. The disease hits just as pork producers are recovering from high corn prices.”

    “Consumers were already facing record high prices for beef. Overall, beef prices are expected to climb 7 percent in 2014, pushed mostly by increasing costs for ground beef,” the article said.

    The March edition of the Livestock, Dairy, and Poultry Outlook released on Friday from USDA’s Economic Research Service noted that, “Despite recent heavy rains in some western States and amid some signs that it could abate, the drought in the Southwestern United States has persisted. Cow prices have increased as cow slaughter declined.”

    Meanwhile, Reuters writers Theopolis Waters and Barani Krishnan reported on Friday that, “Fund managers and traders have chased hog prices on the Chicago Mercantile Exchange to record highs on fear of a deadly pig virus, but a market reversal is likely if government data in the next two weeks shows no major damage from the disease.”

    And a separate Reuters article from Saturday stated that, “South Korea has culled over 6 percent of poultry in the country to curb a bird flu outbreak that has hit farms and migratory birds nationwide, government officials said on Friday.

    “That brings the total number of farm birds slaughtered to 10.16 million, close to a record 10.2 million during an outbreak in 2008, according to data from the agriculture ministry.”

    In more specific news on water resources, Michael Wines reported on the front page of today’s New York Times that, “Across the parched American West, the long drought has set off a series of fierce legal and political battles over who controls an increasingly dear treasure — water.

    “Just outside this minuscule farm town [Mumford, Tex.], Frank DeStefano was feeding a 500-acre cotton crop with water from the Brazos River 16 months ago when state regulators told him and hundreds of others on the river to shut down their pumps. A sprawling petrochemical complex at the junction of the Brazos and the Gulf of Mexico held senior rights to the river’s water — and with the Brazos shriveled, it had run short.”

    Mr. Wines explained that, “State regulators ordered Mr. DeStefano and others with lesser rights to make up the deficit. But they gave cities and power plants along the Brazos a pass, concluding that public health and safety overrode the farmers’ own water rights.

    “Now Mr. DeStefano and other farmers are in court, arguing that the state is wrong — and so far, they are winning.

    “‘I understand cities need water, people need water, but it kind of gets to me how agriculture is pushed to the back of the line,’ he said. ‘We’re on pins and needles wondering when the next call is going to be made. It’s hard enough to make a living without things like this.'”

    Today’s article stated that, “Residents of the arid West have always scrapped over water. But years of persistent drought are now intensifying those struggles, and the explosive growth — and thirst — of Western cities and suburbs is raising their stakes to an entirely new level.”

    And Tony Perry reported yesterday at the Los Angeles Times Online that, “Thomas Cox, a third-generation Imperial Valley farmer, is driving his pickup along the gravel roads that separate large fields of lettuce, broccoli, onions and wheat.

    “The discussion turns, as it often does in the Imperial Valley, to water. ‘Without water,’ said Cox, 27, ‘our ground would be useless.’

    “But with copious amounts of water, the Cox family and others have turned half a million acres of desert into one of the most bountiful farming regions in the world — a fact unchanged by the drought gripping much of California.”

    Mr. Perry noted that, “The valley’s share is ensured by agreements among the seven states that depend on the river, starting with the 1922 Colorado River Compact.

    “In water law, one rule is supreme: ‘First in time, first in right.’

    “As a result, Imperial County, with a population of 175,000, gets 3.1 million acre-feet of water a year. The Metropolitan Water District of Southern California, serving 19 million people, gets about 1.1 million acre-feet.”

    In a related article, Bettina Boxall reported late last week at the L.A. Times Online that, “In a big win for a little fish, a federal appeals court Thursday upheld delta smelt protections that have cut deliveries of Northern California water to the Southland and the San Joaquin Valley.

    “A panel of the U.S. 9th Circuit Court of Appeals concluded in a 2-1 decision that a number of environmental provisions that federal and state water contractors have disputed as ill-founded were in fact justified. In effect, the court backed pumping limits.”

    In trade related news, Vicki Needham reported on Friday at The Hill’s On the Money Blog that, “U.S. and European Union trade negotiators said Friday that they made progress this week during their fourth round of talks, but acknowledged there is still no deadline to ink a final deal.

    “The latest round of talks wrapped up in Brussels as the world’s two largest trading partners continue their efforts to eliminate tariffs, smooth their regulatory environments and expand market access with the aim of creating jobs and growing their economies on both sides of the Atlantic.”

    Also on Friday, an update from the U.S. Trade Representative’s Office stated that, “Today the United States and the European Union issued a joint document on potential opportunities for Small and Medium-sized Enterprises under a Transatlantic Trade and Investment Partnership (T-TIP) agreement.  To view the report, please click here.”

    James Politi, Song Jung-a and Simon Mundy reported yesterday at The Financial Times Online that, “A free-trade agreement between the US and South Korea, which is seen as a model for a much larger Pacific trade deal , remains divisive in both countries almost two years after coming into force.

    “This weekend’s anniversary of the pact was touted by Michael Froman, US trade representative, as a huge upgrade in economic relations between the two allies that was already producing strong results.”

    The FT writers added that, “But critics of President Barack Obama’s trade agenda have pounced on a sharp increase in the US trade deficit in goods with South Korea – from $16.6bn in 2012 to $20.6bn in 2013, the highest ever recorded – as evidence that the deal is not living up to its goals for the US economy.”

    And a news release Friday from Sen. John Boozman (R., Ark.) stated that, “U.S. Senators Mark Pryor (D-AR) and [Boozman] work to protect the catfish industry from the dumping of foreign catfish on U.S. markets. Today the U.S. Department of Commerce says it will uphold a fair trade practice. The Department issued its decision that Vietnamese catfish will face fair anti-dumping duties when imported into the U.S.”

    Biotech

    Clive Cookson indicated on Friday at The Financial Times Online that, “Commercial growing of genetically modified crops should be approved by national governments rather than by the EU, the prime minister’s Council for Science and Technology says on Friday in a report urging Britain to exploit ‘the extraordinary potential of GM technologies’ more quickly.

    “The strongly pro-GM report is the council’s response to a request by David Cameron for advice on the latest evidence about the risks and benefits of the technology and on ways to improve regulation and decision making at the UK and European levels.”

    The FT article added that, “Sir Mark Walport, the government’s chief scientist, and Dame Nancy Rothwell, vice-chancellor of Manchester University, who jointly chair the council, tell the prime minister in a letter accompanying the report that European decision-making is a particular obstacle.

    “‘The longer the EU continues to oppose GM whilst the rest of the world adopts it, the greater the risk that EU agriculture will become uncompetitive, especially as more GM crops and traits are commercialised successfully elsewhere,’ they say.”

    Political Notes

    Jim Spencer reported on Saturday at the Minneapolis Star Tribune Online that, “Seventh District Congressman Collin Peterson is keeping up his game of cat and mouse with Republicans who dream that he won’t seek re-election.

    “Peterson, a Democrat and the dean of Minnesota’s congressional delegation, was contemplating retirement after a long, frustrating battle to pass a five-year farm bill. But he remains in the 2014 race until further notice.

    “‘I’m telling people that I’m running until I’m not,’ Peterson told the Star Tribune Wednesday. It was the same thing he told the paper several weeks ago.”

    The update noted that, “Speaking on background, one person who knows Peterson well told the Star Tribune that he expects the congressman to run.”

    An update Friday at The Forum Online (Fargo, N.D.) stated that, “Longtime U.S. Rep. Collin Peterson will be in Moorhead on Monday to announce his plans for the coming election.

    “Peterson, a Democrat representing Minnesota’s 7th District, which includes Moorhead and Clay County, will speak at the Moorhead Center Mall atrium at 10 a.m. Monday, according to a press release.”




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