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Grassley Says Farmers Are Nervous About Trade
U.S. Senator Charles Grassley of Iowa says there is “a lot of nervousness out there” about current U.S. trade policy. He made the remarks during his Capitol Hill Report this past Monday.
“Everyone is very nervous,” says Grassley, “nervous about what might be going on, and nervous about what might not be going on.”
That same day Successful Farming reported “China canceled contracts for 15.9 million bushels of soybeans, worth nearly $140 million at current prices, in the week ending June 28.”
The move is the latest in a tariff game between the U.S. and China, and prompted the American Soybean Association to say soybean exports “will feel the full effect” of the 25% tariff.
“If you sold beans at $7.90 a bushel instead of waiting to see the outcome of this, you’re paying the price already,” said Grassley.
The U.S. and China are the world’s largest economies, and China is the third-largest export market for the U.S. after Canada and Mexico – also caught up in the trade basket upset.
The Trump administration claims the trade war, started last March with U.S tariffs on imported steel and aluminum, is necessary to correct the U.S.– China trade imbalance. Other stiff action has been aimed at other trade partners, even going so far as threatening to withdraw the U.S. from the World Trade Organization, a move Grassley says is not likely to happen.
“There are people I talk to who wish the president could get a better deal and would go for it if he did,” said Grassley. “But they’re not seeing much assurance right now.”
The U.S. exported $12.36 billion worth of soybeans to China in 2017, but soybeans are not the only crop caught in the fray.
The U.S. pork industry exported $1.1 billion of product to China in 2017, making that country the second-largest market for U.S. pork. Nearly 40% of pork exports are affected by a retaliatory 25% tariff, according to the National Pork Producers Council.
Based on USDA FAS data, exports to China were down 6% in May, compared with 2017.
In addition, futures prices for several ag products, including wheat and corn, have been in decline since May in response to the tariffs and trade uncertainty.
Fighting for the RFS
Midwest farmers not only rely on exports for profitability, they require strong domestic markets. For corn growers, that means ethanol, and an ongoing battle to protect the Renewable Fuels Standard.
“They put out some numbers last week that look fairly good,” says Grassley, of the Environmental Protection Agency’s Renewable Fuel Standard Program: Standards for 2019 and Biomass-Based Diesel Volume for 2020 released June 26.
The RFS is a federal program requiring transportation fuel sold in the U.S. to contain a minimum volume of renewable fuels. It originated with the Energy Policy Act of 2005 and was expanded and extended by the Energy Independence and Security Act of 2007 (EISA).
The 2019 RFS targets increased the total renewable fuel requirement from 19.29 billion gallons to 19.88 billion, with the conventional biofuel (corn ethanol) requirement holding steady at 15 billion gallons, but Grassley is concerned current EPA practices, particularly the liberal granting of small refinery hardship exemptions that exempt refineries from the RFS in cases of economic hardship, are undermining the effort.
“The numbers look nice, but because the EPA has granted waivers to refineries, 15 billion gallons is a gross figure, and we need it to be a net,” said Grassley.
He claims the so-called hardship waivers have been misused and lack transparency. “One was given to a refinery with a $1.5 billion profit. There are some legitimate hardship cases out there, but that is not one. Because of this irresponsible granting of waivers, we don’t have true numbers in the RFS. It won’t be a reflection of the real world until we get these waivers under control.” The Iowa Department of Agriculture and Land Stewardship estimates the waivers have reduced demand for ethanol by more than 2 billion gallons.
2018 Farm Bill
Grassley is more optimistic about a swift passage of a Farm Bill. Both the House and Senate have passed their respective versions of a 2018 Farm Bill, with the final proposal to be laid out in conference.
“It could hit some snags, but hopefully not,” said Grassley. “It’s important to farmers to get this done.”
One possible issue of contention is a SNAP (food stamps) work requirement in the House version, but not the Senate’s.
“I’m personally in favor of such a thing,” said Grassley, “but the House may have to dump it in the name of compromise. We don’t want to hold up a five-year farm bill just because they don’t get what they want on food stamps. Farmers have enough uncertainty right now the way it is.”
Grassley is expecting the amendment he introduced in order to put a hard cap on farm subsidies will remain intact. The amendment limits subsidies to “real farmers” defined as a person actively engaged in farming.