Ag Economy Weakness Could Spill over to Other Parts of the Rural Economy

The Federal Reserve Bank of Kansas City says weakness in U.S. agriculture could spill over into other parts of rural economies. Nathan Kauffman says with the agriculture decline in income and farm jobs, there is a potential for declines in Main Street activity, according to Reuters. Kauffman says a strong U.S. dollar and softening demand from China will continue to pressure the agriculture sector this year. He spoke at last week’s USDA Agriculture Outlook Forum. He told attendees “there seems to be less uncertainty about where things are headed," as most forecasters expect the supply glut of crops to continue to weigh on prices. Kauffman added the struggles in the farm economy do not rival the collapse of the 1980s, saying he wants to be careful not to suggest that the sky is falling.

ChemChina Seeking $35 Billion in Loans for Syngenta Deal

The China National Chemical Corporation, or ChemChina, is seeking $35 billion in loans to fund its acquisition of Syngenta. Bloomberg reports the company has already hired a bank to arrange for a $15 billion loan and will meet this week with lenders about a separate $20 billion loan. ChemChina agreed to buy Syngenta this year for $43 billion. The deal will transform ChemChina into the world’s largest supplier of pesticides and agrochemicals. The deal also brings the potential of introducing Syngenta’s genetically engineered products to China. However, as Bloomberg points out, the planned loans add more debt to the nation's businesses and may stoke concerns about the businesses piling up debt in a push to buy foreign technology.

Equipment Manufactures Cut Jobs

Two agriculture equipment manufacturers announced they are cutting a combined 170 jobs amid slumping sales and a sluggish economy. Deere announced last week 100 employees represented by the United Auto Workers will be laid off indefinitely starting April first at two factories in Iowa that make construction and forestry machinery, according to Reuters. Deere expects an 11 percent decline in sales this year compared to 2015. Around 1,500 Deere manufacturing employees are currently on layoff due to the sluggish agriculture economy. Meanwhile, Caterpillar, the world's largest maker of construction and mining equipment, said it will halt production of its on-highway trucks, eliminating 70 jobs. Caterpillar’s employment numbers are down eight percent world wild as the company last year outlined a restructuring that could cut 10,000 employees by 2018 and shut down factories around the globe.

Washington This Week

Appropriations is the Word in Washington this week. The GMO labeling markup is up this week, as well as a roundtable discussion on the state of the farm economy in the country, the past, present, and future of SNAP, and the BLM’s budget are all on the agenda this week on Capitol Hill.

Millennials Eat Beef if it’s quick and easy, according to a report that found that 40% of consumers don’t decide what they’re making for dinner two hours before eating.  For this reason, value-added meats grew 6.4 percent, to $4 billion in sales last year.  

Quick and Easy Beef Picks Up Popularity at the grocery store, with companies launching new aged steaks and beef tips portioned to help consumers enjoy healthy meals on the fly.  Truly Simple brand portions, trims and ages Certified Angus Beef-brand products into 4-ounce servings. Center-cut ribeye, striploin and sirloin steaks are cut 1-1/2 inches thick and sold two steaks per package. Rib cap filet, flat iron filet and aged beef tips also offer two servings per 8-ounce package.

Latest On The TPP

TPP is Critical to the Future of Beef Exports because the Pacific Rim region is one of the biggest markets for U.S. beef.  Japan’s market amounted to $1.3 billion of the $6.3 billion in total beef exports sold overseas last year, but U.S. beef faces a 38.5 percent tariff in Japan that would be lowered to 9 percent over the next 16 years if TPP is implemented.  The United States is currently facing a 10 percent tariff rate disadvantage with major beef competitor Australia because of that nation's bilateral agreement with Tokyo.

TPP Will Help Level the Playing Field for US agricultural exports and help boost annual farm income.

America is expecting to see a $5.3 billion increase in agricultural exports, which translates into $4.4 billion in the pockets farmers.  No country will receive more benefit from TPP than the United States, through revenue increase and job creation.

Official Numbers Released Today Confirm Record U.S. Ethanol Production and Use

WASHINGTON — Data released today by the Energy Information Administration (EIA) officially confirmed that new records were set in 2015 for U.S. ethanol production and blending. According to the EIA data, U.S. ethanol producers churned out 14.81 billion gallons of ethanol in 2015, while refiners and blenders integrated an unprecedented 13.69 billion gallons into the U.S. gasoline supply. The industry’s monthly average output in December 2015 also crested the 1 million-barrel-per-day mark for the first time in history.

Meanwhile, recent U.S. Environmental Protection Agency (EPA) data show that historic output levels of corn ethanol were primarily responsible for the generation of a record 14.83 billion renewable fuel RIN credits, which are used to oil companies to demonstrate compliance with the Renewable Fuel Standard (RFS).

While these record numbers are impressive, Renewable Fuels Association (RFA) President and CEO Bob Dinneen stated that the American ethanol industry was prepared to do even more. Unfortunately, however, mismanagement of the RFS program and the oil industry’s intransigence to adopt higher-level ethanol blends like E15 kept the ethanol industry from realizing its full potential. EPA set the 2015 blending obligation for renewable fuel at just 14.05 billion gallons, rather than the 15 billion gallon level established by Congress.

“The U.S. ethanol industry had an incredible year in 2015, but the failure of the White House and EPA to enforce the RFS as designed by Congress means our nation missed a huge opportunity to provide consumers with even larger volumes of domestically produced, low-carbon, high-octane biofuels,” Dinneen said. “There is no doubt that the ethanol industry could have produced even more renewable fuel if the Administration had stood firm on implementation of the statutory RFS volumes, rather than caving to the oil industry’s ‘blend wall’ narrative.”

RFA noted that the record December output rate of 1.002 million barrels per day would result in 15.36 billion gallons if maintained for an entire year, well above the 15 billion gallon blending requirement originally stipulated by Congress for 2015 and beyond. “By eclipsing the 1 million-barrel-per-day mark in December, ethanol producers have proven once again that they are more than capable of delivering the volumes necessary to meet the RFS blending requirements established by Congress,” Dinneen said. “The industry just needs to be set free to achieve the laudable goals set forth by Congress, which are as important today as they were nearly a decade ago when the RFS was expanded.”

Even though RFS requirements for 2015 weren’t finalized until November, Dinneen said the data from EIA and EPA show the volume requirement established by Congress could have been easily met by oil companies. “When the 14.83 billion new renewable fuel RIN credits generated in 2015 are combined with the existing surplus of 1.8 billion RINs that resulted from past over-compliance with the RFS, it becomes quite obvious that we had more than enough supply to meet the 2015 statutory renewable fuel volume of 15 billion gallons,” he said.

Today’s EIA data also revealed that total U.S. gasoline consumption hit in 140.4 billion gallons in 2015, the third-highest on record and well above the projections used by EPA to establish 2015 blending obligations.

Corn Growers Disappointed in Supreme Court Declining to Review Chesapeake Decision

The National Corn Growers Association today expressed disappointment in the U.S. Supreme Court's decision not to review a lower court ruling allowing the Environmental Protection Agency to micromanage local land use and development decisions under the guise of the Clean Water Act.   While this action relates to the EPA's so-called "blueprint" for restoring the Chesapeake Bay, it has national implications related to the power and reach of the federal government. The TMDL, or total maximum daily load, is an unlawful overreach of federal regulatory power, NCGA notes.   "The EPA has consistently pushed the legal limits of the Clean Water Act, with the Chesapeake Bay blueprint and the Waters of the U.S. (WOTUS) rule being two of the most recent examples," said NCGA President Chip Bowling, who farms on the Chesapeake Bay watershed in southern Maryland.   "When Congress passed the Clean Water Act, their intention was to create balanced, practical policies to protect America's water resources with a clear division of power between states and the federal government. In both of these cases, the EPA's actions represent an unlawful expansion of their authority. That's why we joined this petition on the Chesapeake Bay TMDL, and we are party to a lawsuit challenging the WOTUS rule," said Bowling.   "We support the goals of the Clean Water Act, and we remain committed to working with the EPA and other stakeholders to protect our water resources."