OMAHA (DTN) — Following the expected signing of a phase one trade deal with China, President Donald Trump plans to speak Sunday at the American Farm Bureau Federation annual convention, the third straight year the president has addressed Farm Bureau’s convention.
A White House spokesman confirmed to DTN that Trump will speak at the convention on Sunday. “The president is expected to tout his administration’s work on behalf of American farmers, by strengthening our domestic energy policies and renegotiating trade deals to better benefit all Americans,” the spokesman said.
It will be a victory lap for the president’s trade agenda following his expected signing of a new agreement with China on Wednesday. Trump administration officials have stated the deal will lead to agricultural sales of $40 billion or more to China annually in the coming years.
The president also is on the cusp of seeing the successful renegotiation of the North American Free Trade Agreement (NAFTA) into the United States-Mexico-Canada Agreement (USMCA). The new trade deal, expected to boost agricultural exports by roughly $2.2 billion annually, is being held up by Senate committee hearings on the trade deal, and also the anticipated impeachment articles coming from the House to the Senate this week.
Agriculture also scored another trade win at the beginning of the year as Japan began lowering tariffs on agricultural products following an agreement signed last fall.
Trump spoke at the past two AFBF annual meetings where he has gotten strong support from the farmer audiences. When Trump first spoke at AFBF in 2018, it was the first time a president had addressed the group since George H.W. Bush in 1992.
“The American Farm Bureau is honored President Trump will return for a third consecutive year to speak with farmers and ranchers who work tirelessly to produce the quality food and fiber our country needs,” said AFBF President Zippy Duvall. “We are grateful that he has made agricultural issues a priority and look forward to welcoming him to Austin at a time when there is much to talk about, from trade progress to important regulatory reforms.”
Besides trade deals, the Trump administration also has revoked the 2015 EPA “waters of the U.S.” rule that caused controversy in rural America over the Obama administration’s interpretation of federal waterways. That rule dispute remains tied up in court, as at least 14 states have sued the Trump administration to protect the 2015 rule.
The president also established year-long E15 ethanol sales last year, though his administration has drawn criticism from biofuel supporters for its handling of small-refinery exemptions at EPA. Andrew Wheeler, EPA’s administrator, is expected to attend AFBF’s annual meeting as well, along with Secretary of Agriculture Sonny Perdue.
|MEXICO CITY — Last week, Growth Energy CEO Emily Skor joined the U.S. Grains Council (USGC) and 100 agricultural groups in a trade mission to Mexico City, Mexico, led by U.S. Department of Agriculture (USDA) Secretary Sonny Perdue and Under Secretary for Trade and Foreign Agricultural Affairs Ted McKinney. From Nov. 6-8, Skor and ethanol market development colleagues met with government officials and industry stakeholders to showcase the benefits of E10, a fuel blended with ten percent ethanol, as the government considers its adoption in Mexico’s three largest cities: Mexico City, Monterrey, and Guadalajara. Following the trade mission, Skor issued a statement:
“It was an honor to join USDA and USGC on this important mission to Mexico,” said Growth Energy CEO Emily Skor. “Opening the Mexican fuel market to E10 nationwide would provide significant benefits for the country’s fuel and ag economies, citizens, and the environment. During this trade mission, we were able to further engage in critical discussions with stakeholders to demonstrate the health and economic benefits of replacing toxic additives, such as MTBE, with cleaner-burning and more-affordable ethanol.”
Growth Energy has been a leader in promoting the use of ethanol-blended fuel in the Mexican fuel market, participating in and supporting bilateral trade missions in the U.S. and Mexico. This year, Growth Energy launched a workshop series, alongside USGC and the Mexican Association of Service Station Equipment Providers, to educate Mexico’s fuel retailers on ethanol-blended fuel and how to incorporate it into their fuel offerings.
Mexico is currently using methyl tert-butyl ether (MTBE) in their fuel. MTBE is an octane additive, however due to groundwater contamination concerns and its impact on human health, it’s been explicitly banned in 26 states in the U.S. and phased out of the U.S. fuel supply.
In 2017, the Mexican government announced that it would increase its blending goal to 10 percent ethanol (E10), from the previous 5.8 percent blend, across the country, excluding it’s three largest cities Mexico City, Monterrey, and Guadalajara. However, in a recent study on five major international cities facing significant air quality issues, Mexico City had the highest potential greenhouse gas emissions reductions at an E10 blend, with 5.1 percent cumulative emissions savings. Additionally, according to a 2018 study by Mexico’s Instituto Mexicano de Petroleo (IMP), ethanol is historically two pesos per liter less expensive than MTBE, while also providing benefits for engine performance and emissions reductions.
By Erin Voegele | October 11, 2019
Representatives of the Governors’ Biofuels Coalition sent a letter to President Trump Oct. 8 urging him to use existing executive authority take four specific actions aimed and helping to restore and grow the U.S. agriculture and biofuel industries.
The letter, authored by Minnesota Gov. Tim Walz, chair of the Governors’ Biofuels Coalition, and South Dakota Gov. Kristi Noem, vice chair of the coalition, references the proposed supplemental rule expected to be released by the U.S. EPA to address future small refinery exemptions (SREs). Walz and Noem call the supplemental rule “an important effort towards restoring confidence to producers and brining stability to the industry” but also request the administration “use existing executive authority to act immediately to help restore the nation’s agriculture and biofuels industries without Congress’s approval.”
The governors ask Trump to direct the EPA to enforce the Clean Air Act and reduce the aromatics in gasoline, which they say would open new market opportunities for ethanol to replace toxics and give refiners more options to meet octane demand with high octane ethanol. “Replacing hazardous aromatics in gasoline with biofuel will reduce carbon emissions and will provide incalculable health benefits, especially for those Americans living in urban areas,” they wrote.
Walz and Noem also urge Trump to direct EPA to extend the Reid vapor pressure (RVP) waiver to higher ethanol blends, including E30. “Efforts to revitalize rural growth must include a waiver for all ethanol blends above E15, including E30,” they wrote. “EPA’s regulations have unnecessarily limited the amount of ethanol used in the market, despite the economic and environmental benefits that come with increased ethanol consumption.”
Furthermore, the letter asks Trump to direct the EPA to update its lifecycle carbon findings. The governors note EPA’s estimate of lifecycle carbon emissions associated with ethanol have not been updated for a decade. The use of obsolete data, they said, distorts the public’s perception of the environmental benefits of biofuels.
Finally, Walz and Noem urge Trump to direct EPA to resume processing and approving registration applications for the production of cellulosic ethanol from corn kernel fiber under existing regulations. “Applications from companies seeking D3 RIN approval have been delayed in EPA’s regulatory process, resulting in millions of cellulosic biofuel gallons withheld from the marketplace because of regulatory delay,” they wrote.
A full copy of the letter can be downloaded from the Governors’ Biofuels Coalition website
The U.S. EPA has released renewable identification number (RIN) generation data for August, reporting that that nearly 1.65 billion RINs were generated during the month, including 37.37 million cellulosic RINs.
Nearly 37.33 million D3 cellulosic biofuel RINs were generated in August, including 29.69 million generated for compressed renewable natural gas (RNG) by domestic producers, 4.49 million generated for liquefied RNG by domestic producers, 2.04 million generated for liquefied RNG by importers, 836,272 generated for compressed RNG by importers, and 273,241 generated for cellulosic ethanol by domestic producers.
Nearly 242.4 million D3 RINs were generated during the first eight months of the year.
This includes 184.39 million generated for compressed RNG by domestic producers, 28.77 million generated for liquefied RNG by domestic producers, 14.61 million generated for liquefied RNG by importers; 2.96 million generated for compressed RNG by importers, 4.4 million generated for cellulosic ethanol by domestic producers and 4.26 million generated for cellulosic ethanol by importers.
According to the EPA 39,325 D7 cellulosic diesel RINs were generated in August, all generated for cellulosic heating oil by importers. During the first eight months of the year, nearly 1.32 million D7 RINs were generated, all by importers for cellulosic heating oil.
Approximately 21.91 million D5 advanced biofuel RINs were generated in August, including 13.57 million generated for ethanol by importers, 4.75 million generated for nonester renewable diesel by domestic producers, 1.99 million generated for ethanol by domestic producers, 1.23 million generated for naphtha by domestic producers, 336,305 generated for LPG by domestic producers, and 35,528 generated for renewable heating oil by domestic producers.
Nearly 164.52 million D5 RINs were generated during the first eight months of 2019. This includes 81.35 million generated for ethanol by importers, 39.17 million generated for nonester renewable diesel by domestic producers, 22.67 million generated for naphtha by domestic producers, 16.36 million generated for ethanol by domestic producers, 2.67 million generated for LPG by domestic producers, 2.24 million generated for renewable heating oil by domestic producers, and 67,289 generated for compressed RNG by domestic producers.
Nearly 1.26 billion D6 renewable fuel RINs were generated in August, including 1.24 billion generated for ethanol by domestic producers, 11.91 million generated for nonester renewable diesel by foreign entities, and 1.32 million generated for ethanol by importers.
More than 9.95 billion D6 RINs were generated during the first eight months of the year. This includes 9.81 billion generated for ethanol by domestic producers, 132.43 million generated for nonester renewable diesel by foreign entities, 8.97 million generated for ethanol by importers, and 16,767 generated for biodiesel by domestic producers.
Nearly 331.3 million D4 biomass-based diesel RINs were generated in August, including 230.13 million generated for biodiesel by domestic producers, 45.16 million generated for nonester renewable diesel by domestic producers, 38.82 million generated for nonester renewable diesel by foreign generation, 12.95 million generated for biodiesel by importers, 3.8 million generated for nonester renewable diesel by foreign entities, and 434,812 generated for renewable jet fuel by domestic producers.
During the first eight months of 2019, more than 2.72 billion D4 RINs were generated. This includes 1.75 billion generated for biodiesel by domestic producers, 482.18 million generated for nonester renewable diesel by domestic producers, 324.28 million generated for nonester renewable diesel by foreign entities, 174.53 million generated for biodiesel by importers, 3.8 million generated for nonester renewable diesel by foreign entities, 2.73 million generated for renewable jet fuel by domestic producers, and 7,704 generated for renewable heating oil by domestic producers.
Total RIN generation for the first eight months of the year reached 13.09 billion, including 1.49 billion in January, 1.49 billion in February, 1.59 billion in March, 1.69 billion in April, 1.72 billion in May, 1.67 billion in June, 1.8 billion in July, and 1.65 billion in August.
The 2019 growing season has been filled with layers of uncertainty for farmers around the Corn Belt. Iowa Secretary of Agriculture Mike Naig continues to hear frustration from the state’s farmers, particularly over ethanol uncertainty.
It has been nearly a month since President Trump promised a “giant package” for U.S. farmers related to ethanol.
“Weather we obviously can’t control. For the most part, we can’t control whether China comes to the table and wants to do a trade deal. But, we can control, and we do have a say in determining whether USMCA passes and whether we get renewable fuels policy right,” Naig explains. “I think it’s those policy things, that could be changed, could be controlled, when those things aren’t happening, that’s where the frustration comes from.”
In recent weeks, has Naig spent time in northwest Iowa where two ethanol plants have temporarily closed. Farmers there are hurting, he says.
Plymouth Energy, an ethanol plant in Merrill, Iowa suspended production on July 24. Two months later on September 16, Siouxland Energy Cooperative in Sioux Center, Iowa announced it was stopping production. According to the Iowa Renewable Fuels Association (IRFA) a total of 18 plants around the country have been idled.
The announcement of 31 small refinery exemption waivers in early August was an immediate signal to the market that destroyed ethanol demand, Naig explains.
Monte Shaw is executive director of the Iowa Renewable Fuels Association and has been in touch with leadership at the shuttered Iowa ethanol plants. He says between losing the Chinese market and what he calls excessive and unjustified waivers, demand for the growing ethanol industry disappeared.
He says the day additional waivers were announced, about 10 cents in ethanol margins went away. “That took the majority of plants from scraping like crazy to keep their nose above water to being under water,” Shaw explains.
News of plants shutting down or idling back is no surprise, Naig says. “It’s proving out what we said would happen, which is that there would be economic hardship for these plants,” he says. “Margins have been incredibly thin, if not a situation where plants are losing money.”
Shaw says recent estimates from industry analysts indicate that 70 to 75% of ethanol plants are losing money on every gallon they produce. “You can only burn cash for so long, and then it’s gone,” he says. “We’re not crying wolf. This is real out here.”
WHAT HAPPENS IF NOTHING CHANGES
Things may get worse before they get better. “The bad news is the clock is ticking on other plants,” Shaw says. “As we sit here and wait, I’m scared that I’ll get a call any minute from another plant saying, ‘Monty, I just want to let you know we’re halting production.’”
Naig adds, “I would not be a bit surprised to see further shutdowns, or at a minimum folks continue to idle back production.”
RURAL COMMUNITY IMPACT
In the state of Iowa renewable fuels support more than 48,000 jobs, IRFA reports. “These aren’t just job, they’re good paying jobs with benefits, and some require advanced degrees,” says Shaw. When they first started popping up, ethanol plants gave people the chance to move home and raise their families in small towns where job opportunities were harder to come by before.
The plants attract a mix of people who end up engaging locally in other ways, too. From church leaders to charity volunteers, coaches, and school board members, these people have become engrained in their communities, he says.
Naig is quick to point out, it’s not just plant employees who suffer when an ethanol plant shuts down. Harvest is around the corner and many farmers depend on local ethanol plants to purchase their corn.
A farmer in Minnesota recently told Shaw they were selling corn to the local ethanol plant one week for $4.25. The following week, the plant closed, and the next best price in the area was a dollar less.
Also, ethanol plants are often the big business that attracts more robust utilities and other services to the rural area that benefit other locals. Shaw says he’s fielded calls from industries that serve ethanol plants and are concerned what may happen if the struggles persist.
It goes without saying, ethanol plant shareholders also suffer when a plant is shuttered. Many plants in the state of Iowa are owned by farmers or other local people.
HOPE FOR A FIX
The President’s direct involvement gives Naig hope for a short-term signal to the industry that the gallons that were waived will be restored. “We must have something that sends the right signal immediately to industry to help us repair the damage that’s been done,” he says.
Several other Iowans are also calling on Washington to uphold the Renewable Fuel Standard. “Governor Reynolds is a very, very important voice on this subject, directly to the White House,” Naig explains. Senators Grassley and Ernst have also been outspoken about the need for a fix.
After talking to leaders who recently met with Trump on the topic, Shaw is hopeful the president got a clearer picture of what is happening in the Midwest. “This is people’s lives. I think the president heard that. That’s what everyone walked away with that was in the room that I talked to, but we need to see some action, and we need to see it very soon.”
Central Illinois farmers took their concerns regarding recent changes to ethanol mandates to their U.S. representative on Thursday afternoon.
“Ninety-five percent of the corn grown on my farm goes to ethanol or ethanol-related products and when President Trump let the mandates fall off where they don’t have to blend as ethanol it’s really going to hurt the price of corn and hurt my bottom line,” local farmer Dan Magarity said.
Magarity is just one farmer who went to the grain elevator in Roanoke to talk to IL. 18th Dist. Congressman Darin LaHood about applying pressure to the Trump administration to get them to stick to the original ethanol mandates.
The president recently gave out waivers to small oil refineries that allow them to reduce the amount of ethanol they put in their final products. A move LaHood calls a mistake.
“I think it was the pressure from the oil and gas companies the petroleum industries it’s not based on solid policy and it needs to be rejected. It’s hurting rural America and our ag community,” he said.
He said he plans on continuing to be an advocate for agriculture on Capitol Hill as he says many of his fellow legislators, who are not from rural America, may not see the impact policies have on farmers.
Yet many many still worry the changes will reduce the demand for corn and for Mark Marquis, CEO of the country’s largest dry mill ethanol plant Marquis Energy, this is a big concern.
“We use about 500 loads of corn every day and produce a million gallons of fuel-grade ethanol and about 3000 tons of animal. So it’s really important to the corn market in this part of Illinois and these farmers that we have a strong market for their corn,” Marquis said.
Marquis called the presidents actions problematic and says they are more about supporting oil companies and not farmers.
(LANSING) – The Michigan Corn Growers Association (MCGA) today thanked the U.S. Department of Agriculture (USDA) for providing increased flexibility under Federal Crop Insurance rules for utilizing forage and cover crops, including corn silage, on prevented plant acres.
“The extremely wet weather has created challenging planting conditions for farmers across Michigan this Spring and grain planting has approached the slowest pace on record,” said Matt Frostic, president of MCGA. “This announcement by USDA will ensure the planting season is not a total loss and help offset some of the expected shortfalls in feed and forage availability. We thank USDA for providing some much-needed flexibility and relief for farmers during this tough season.”
USDA’s Risk Management Agency (RMA) announced that farmers will be able to plant forage, haylage or silage on acres of land that they have declared prevented planting and harvest those acres starting September 1. This change will allow farmers to utilize those crops when they are in the best condition and have the best nutritional value for animal feed. Previously, Federal Crop Insurance rules required farmers to wait until November 1 to harvest those acres.
Like other parts of the Midwest, large swaths of Michigan have seen precipitation measurements at double the normal rates. According to the USDA National Agricultural Statistics Service Great Lakes Region, grain planting in Michigan has approached the slowest pace on record due to relentless rain. Even the crops that have been successfully planted may see stunted growth or may require replanting.
The Michigan Corn Growers Association (MCGA) is a grassroots organization of grower members dedicated to increasing the profitability of corn production. The MCGA is the only organization in Michigan that works solely on behalf of the state’s corn growers for pro-agriculture legislation. The MCGA works to ensure that corn growers’ voices are heard at the local, state and national levels. Find out more online at www.micorn.org.
The Environmental Protection Agency is proposing an increase in the biofuels mandate.
Two sources with knowledge of the proposal told Reuters that the agency wants to increase the volume of biofuels that refiners must blend annually to 20.04 billion gallons in 2020.
That’s up from the requirement of 19.92 billion gallons in 2019.
The proposal is currently under review by other government agencies before it can be finalized.
It includes 15 billion gallons of conventional biofuels like ethanol, which is unchanged from this year.
The proposal also includes 5.04 billion gallons of advanced biofuels, such as those made from agricultural waste, up from 4.92 billion in 2019.
The biofuel mandate has helped farmers by creating a huge market for ethanol and other biofuels.
However, oil refiners say compliance with the mandate costs a lot of money.
An EPA spokesman did confirm that the agency has submitted the proposal but wouldn’t comment on anything it contained.
As part of the advanced biofuel proposal, the agency set mandates for cellulosic ethanol at 540 million gallons and non-cellulosic at 4.5 billion gallons.
The agency also set a biodiesel mandate of 2.43 billion gallons for 2021.
Biofuel stakeholders want EPA to get rid of the excess baggage and get E15 to the finish line before summer driving season starts.
The comment period on EPA’s proposed rule “Modifications to Fuel Regulations to Provide Flexibility for E15; Modifications to RFS RIN Market Regulations” ended Monday with major organizations sending in theirs at the end of the day.
The Renewable Fuels Association (RFA) strongly supports the proposed regulatory fix would allow year-round sales of E15 in conventional gasoline markets for the first time, but discouraged EPA from finalizing any of the four proposed Renewable Identification Number (RIN) market reforms.
The American Coalition for Ethanol (ACE) CEO Brian Jennings said, “With just over 30 days to go until the start of the 2019 summer driving season, time is of the essence. We encourage EPA to move forward to finalize a rule allowing RVP relief for E15 but to cast aside the unnecessary and harmful proposals to reform the RIN market.”
“Unless the EPA acts quickly, the summer market for E15 will be lost, which means higher fuel prices for consumers and another devastating blow to America’s rural workforce,” said Growth Energy CEO Emily Skor. “We cannot afford to let anything derail this opportunity to help revitalize growth in the heartland, and urge regulators to get this rule over the finish line by June 1, just as President Trump directed.
The National Corn Growers Association (NCGA) also supports EPA’s proposal to provide parity for E15 with standard 10 percent ethanol blends, NCGA cautioned EPA against finalizing proposed Renewable Identification Number (RIN) market rule changes that would be counterproductive to greater biofuels blending supported by the E15 rule.
The National Biodiesel Board also disagreed with EPA’s proposal to modify RIN market regulations without first showing data-based evidence of problems within the RIN market. “The proposed RIN market reforms are unnecessary, as EPA has yet to see data-based evidence of RIN market manipulation. Reforming a system that, while certainly not perfect, is working as intended with no evidence of manipulation has the potential to disrupt and even undermine the system that obligated parties use to demonstrate compliance with the RFS,” NBB writes in the comments.
Assessing Personnel Management Skills
As farms continue to consolidate it becomes increasingly important to assess a farm’s management skills. At a certain farm size, it is no longer easy or feasible for the manager or managers to wear every management hat. How does the management team determine when to focus on professional development, delegate management tasks among mangers, and seek outside assistance? This is the fourth article in a series of articles pertaining the assessment of management skills. The topic of this article is the assessment of personnel management skills.
Personnel Management Skills Assessment
Table 1 presents important personnel management skills. Skills listed include utilizing job descriptions; providing training and orientation to employees; developing a compensation package based on job responsibilities and performance; utilizing formal interview and search procedures when hiring employees; conducting formal performance appraisals; identifying, developing, and promoting top performers; delegating authority and responsibility to others; and offering strong reasons for talented people to join the farm. Each farm operator should rank their ability with respect to each skill using a 1 to 5 scale with 1 be relatively weak and 5 being relatively strong with respect to that skill. The idea behind checklists such as that presented in Table 1 is to assess whether a farm has a skills gap, which is defined as the difference between skills that a farm needs and the skills of their current workforce (operators and employees). Conducting a skills gap analysis helps a farm to identify skills that will be needed to become more efficient and expand. It can also be an important input into hiring programs, employee development plans, or hiring outside consultants.
The checklist in Table 1 does not include a final tally score, nor does it address tradeoffs in various skill or ability areas that may lead to success. Rather, the checklist helps farm operators evaluate their skills and abilities in areas critical to long-term financial success. As farm operators fill out the checklist, they should try to determine which of the skills listed are most essential to improving efficiency and expansion plans.
The Functions of Management
The five functions of management include planning, organizing, controlling, staffing, and directing. Planning provides direction for the business. Organizing involves grouping the tasks to be done and then assigning individuals or groups to accomplish these tasks. The control function examines how well actual farm performance relates to business plans and goals. Staffing relates to hiring employees and developing them to achieve goals and objectives. Directing involves supervising and guiding employees so that the employees can successfully complete their assigned tasks.
Staffing and directing are related to the skills listed in Table 1. Before discussing these two management functions, it is important to note that managing both family and non-family employees is essential for business success (Erven, 2000; Erven and Milligan, 2000; Lencioni, 2002). As farms grow, they often need to hire additional employees. In tight labor markets, farms must compete with non-farm businesses for quality employees. We encourage farms to answer the following question. Is my farm a highly desirable place of employment?
The staffing management function includes employee recruitment, employee selection, training and orientation, and managing employee performance (Milligan and Maloney, 1996). When recruiting employees, a farm needs to assess the external environment, identify long-term personnel needs, and develop a recruitment plan. The selection process involves developing an application, setting up an interview process, checking references, and determining whether a trial period is needed for a particular job. Effectively training an employee can help avoid error and poor performance. Part of the training process is to develop an orientation program, particularly pertaining to the first few days of employment. Performance management involves establishing performance expectations, providing regular coaching and feedback regarding employee performance, and conducting a performance appraisal interview.
The directing management function includes leadership, employee motivation, communicating, employee discipline and discharge, and total quality management (Milligan and Maloney, 1996). Leadership dimensions include vision, motivation, integrity, and knowledge. A motivational work environment can be accomplished by hiring individuals with the potential to achieve, considering individual wants and needs, and setting a good example. Part of motivation is related to compensation (wages, benefits, and perks). However, compensation is not the “be all and end all” when it comes to motivating employees. In addition to oral communication, good communication involves listening and effectively managing conflict. To attain peak productivity of employees, the supervisor needs to have a vision of what success means, communicate that vision to employees, create performance standards, and provide the training and resources needed for employees to meet performance standards. Discipline occurs when an employee’s performance is not consistent with established standards. Total quality management involves managing quality, technology, changing work force expectations, and competitiveness. Successful supervisors have a commitment to success, accept that people are a critical asset to the business, and are committed to providing the training and support needed for employees to improve on the job.
Assessing management skills is an important part of benchmarking farm performance and figuring out where improvements may be needed. If the operators on the farm identify management areas which are not currently being addressed, they will need to determine whether someone is going to get up to speed with regard to these areas or outside help is going to be sought to address weaknesses.
Personnel management skills help ensure that all individuals in the organization understand their roles, be trained to perform them, and work effectively as a team. Good human resource managers are not born. Rather, they learn their personnel management skills over time through effort and attention. Learning these skills can reap rewards such as employee retention, low turnover, and improved productivity.
Erven, B.L. “Building Your Reputation as an Employer,” Department of Agricultural, Environmental and Development Economics, Ohio State University, August 2000.
Erven, B.L. and R.A. Milligan. “Business Success through People-Oriented Management,” August 2000.
Lencioni, P. The Five Dysfunctions of a Team. San Francisco: Jossey-Bass, 2002.
Mahoney, T.R. and R.A. Milligan. “Human Resource Management for Small Business Managers,” 1996.
Source: Michael Langemeier, Farmdocdaily
USDA Reports Provide Surprises for Corn
The USDA’s quarterly Grain Stocks report and annual Prospective Planting report delivered surprises to the corn market. A greater than expected corn stocks number combined with higher than expected planted acreage of corn gave very bearish news to corn prices. Soybean stocks and acreage came in neutral to slightly positive for soybean prices.
March 1 corn stocks came in at 8.605 billion bushels compared to an average trade guess of 8.335 billion bushels. The stocks estimate suggested feed and residual use of corn during the first half of the 2018-19 marketing year came in eight percent lower than last marketing year. Lower feed and residual use materialized despite a sizable livestock herd and reduced production of distiller’s grains on weakening ethanol grind. A higher stocks estimate suggests the potential for underestimation of the 2018 crop size and supports the notion of declining demand for corn during the second quarter of the marketing year.
Corn producers reported intentions to plant 92.8 million acres of corn this year, 3.66 million more than planted last year. The reported corn acreage exceeded trade expectations by 1.4 million acres. The intention to increase corn acreage is widespread throughout the Corn Belt. Acreage is up 400,000 acres in Iowa, 200,000 in Illinois, and 150,000 in Indiana. Significant increases in corn acreage intentions showed up in the Northern Plains with North Dakota intending to plant 900,000 additional acres and South Dakota up 700,000 acres. Overall, the top ten corn producing states increased acreage by 2.05 million acres. If the intention to plant 92.8 million acres materializes, harvested acreage for grain may be close to 85.4 million acres. A U.S. average yield near 174.6 bushels per acre leads to a projection of production in 2019 of 14.9 billion bushels. Corn production at this level exceeds current marketing year use projections by 300,000 bushels. Corn use is expected to be higher in the 2019-20 marketing year, but the current implication of slowing use in the current marketing year and a larger crop next year is higher ending stocks.
The soybean stocks report appears neutral for soybean prices. March 1 soybean stocks estimates indicated 2.72 billion bushels, which came in above trade expectations by 33 million bushels. The stocks estimate implies seed and residual use of soybeans during the first half of the marketing year at 203 million bushels. Seed and residual use is up from last year and at the highest levels since the 2014-15 marketing year. The implications for soybean use this marketing year remain at previous levels and continue to rely on a resolution to trade issues.
Soybean planting intentions indicated farmers plan to plant 84.6 million acres of soybeans, down 4.6 million acres from last year. The soybean acreage intentions came in 1.55 million acres below of market expectations. Intentions to reduce soybean acreage spans most major production regions. In major producing states, the intention to plant fewer soybean acres is indicated by 300,000 fewer acres in Illinois, 600,000 in Iowa, and 500,000 in Minnesota. If 84.6 million acres are planted, harvested acreage could be close to 83.6 million acres. At a U.S. average yield of 49.4 bushels per acre, 2019 production projects to 4.13 billion bushels, 88 million bushels larger than current marketing year use projections. Without a significant change in soybean use over the next year, ending stocks appear set to increase slightly.
In addition to the allocation of acreage to corn and soybeans, the magnitude of total principal crop acreage shows a 4.2 million acre decrease from 2018. The USDA estimates that acreage planted to principal crops totals 315.4 million acres. The planned reduction in total planted acreage from that of a year ago showed up in feed grain crops other than corn. Sorghum acreage is projected to be 555,000 acres lower than a year ago at 5.18 million acres. Wheat acreage decreased two million acres to 45.8 million acres. Oat acreage declined by 191,000 acres. Acreage of oilseeds other than soybeans is projected to fall by 15,000 acres. Harvested acreage of hay is expected to increase by 215,000 acres.
The surprise in March 1 stocks and acreage created a bearish scenario for corn prices. The large corn stock number influences the consumption of corn in the feed and residual category directly during the current marketing year. An expectation of reduced feed and residual use is prudent moving forward. Without a resolution to the trade dispute, growth in ending stocks in both corn and soybeans appears feasible over the next year. Planting intentions confirmed the belief that farmers would switch to corn production in 2019. Depending on field conditions during the planting season and the changing price relationship between crops, the possibility of greater soybean acreage than reported in March exists. The June Acreage report will provide more clarification.
YouTube Video: Discussion and graphs associated with this article
Source: Todd Hubbs, Farmdocdaily
How Tough of a Year was 2018 for Ethanol Production Profits?
The U.S. ethanol industry faced considerable headwinds in 2018, including the lowest prices over the last decade, policy setbacks in the implementation of the RFS, and political resistance to granting a year-round RVP waiver for E15. The impact of these headwinds on ethanol production profits is certainly of interest to those in the ethanol industry, as well as policymakers and legislators interested in the financial health of the U.S. renewable fuels industry. The purpose of this article is to estimate the profitability of U.S. ethanol production in 2018 using the same basic model of a representative Iowa ethanol plant that has been used in earlier farmdoc daily articles on the subject (e.g., January 6, 2016; February 1, 2017; March 14, 2018).
As noted above, a model of a representative Iowa ethanol plant is used to track the profitability of ethanol production. The model is meant to be representative of an “average” ethanol plant constructed in the last decade. There is certainly substantial variation in capacity and production efficiency across the industry and this should be kept in mind when viewing profit estimates from the model. Some of the model assumptions include:
- Dry mill plant constructed in 2007
- 100 million gallon annual ethanol production capacity
- Plant construction costs of $2.11 per gallon of ethanol production capacity
- 40% debt and 60% equity financing
- 25% interest on 10-year loan for debt financing
- A total of $0.21 fixed costs per gallon of ethanol produced
- Non-corn, non-natural gas variable costs (including denaturant) of $0.21-$0.26 per gallon in 2007-2011
- Non-corn, non-natural gas variable costs excluding denaturant of $0.16 -$0.17 per gallon after 2011
- Variable denaturant costs after 2011 computed as 2 percent of wholesale CBOB price
- 30 cubic feet of natural gas per gallon of ethanol
- 80 gallons of ethanol (including denaturant) produced per bushel of corn processed
- 16 pounds of dried distillers grain (DDGS) produced per bushel of corn processed
- 55 pounds of corn oil per bushel of corn processed (starting in January 2012)
- Netback (marketing) costs of $0.05 per gallon of ethanol and $4 per ton of DDGS.
To track plant profitability over time, weekly ethanol and DDGS prices at Iowa ethanol plants are collected starting in late January 2007. Crude corn oil prices for the Midwest are available from OPIS. Natural gas costs over 2007-2013 are estimated based on monthly industrial prices for Iowa available from the EIA. Since January 2014 the Iowa industrial price has only been reported sporadically, and when reported, has been out-of-line with its historical relationship to nearby natural gas futures prices. Consequently, a regression relationship between nearby natural gas futures prices and natural gas costs over 2007-2013 is used to estimate natural gas costs starting in January 2014.
Figure 1 presents the three components of plant revenue per gallon—ethanol, DDGS, and corn oil—on a weekly basis from January 26, 2007 through February 1, 2019. The chart shows that ethanol prices (net of netback marketing costs) started 2018 at historically low levels of $1.25 per gallon, rose to a peak of $1.43 in April, and then fell most of the rest of the year, reaching a low of $1.06 in late November. The November low was the lowest weekly price for ethanol in this time period. DDGS prices were a bright spot for the ethanol prices for most of 2018, with prices generally ranging from 1.1 to 1.3 times the price of ethanol. This was a major turnaround in DDGS prices from 2017. The rise in DDGS prices was not enough to lift total revenue in 2018 above 2017 levels. Total revenue in 2018 averaged $1.75 per gallon compared to $1.76 per gallon in 2017. Figure 2 shows the four major cost components for producing ethanol. The cost of corn is the major input cost, about 70 percent of variable and fixed costs on average, and since the price of corn was relatively stable again in 2018, average total variable costs for the year of $1.55 per gallon was only slight higher than in 2017.
Figure 3 presents (pre-tax) estimates of ethanol production profits net of all variable and fixed costs. Net profits in 2018 averaged a loss of -$0.02 per gallon, compared to gains of $0.03 in 2017, $0.12 in 2016 and $0.07 in 2015. In reality, the pattern of net profits in 2018 was a tale of two periods. The average net profit from January through July was a respectable $0.05 per gallon. Mirroring the sharp decline in ethanol prices, returns from August through December averaged a loss of -$0.11 per gallon. Net profits turned negative in the second week of August 2018 and have remained so through the most recent week of available data. This is a run of 26 consecutive weeks of losses and counting. The depth of the losses experienced in the last five months of 2018 is highlighted in Figure 4, which shows the market price of ethanol at plants (net of marketing costs) and the shutdown price for the representative plant. The shutdown price equals variable costs minus non-ethanol revenue (DDGS and corn oil). The market price dipped below the shutdown price in late November 2018 for the first time since December 2012. The market price has remained very close to the shutdown price through early February 2019.
There is no mystery as to the cause of the steep ethanol production losses in 2018. As highlighted in the farmdoc daily article of February 8, 2019, the U.S. ethanol industry was rocked by low prices in 2018, especially in the second half of the year when prices reached their lowest levels in over a decade. The real argument is the driving force behind the low prices. The ethanol industry has placed much of the blame for the low prices on small refinery exemptions (SREs) granted under the Renewable Fuel Standard (RFS) by the U.S. EPA. While there is no doubt that SREs have opened a backdoor mechanism for the EPA to reduce the statutory and obligated RFS volumes, the evidence shows that the physical use of ethanol has declined little if any during the last year (September 13, 2018; December 13, 2018; January 16, 2019; January 24, 2019; January 31, 2019). Instead, the evidence points to overproduction as the most likely explanation for the low ethanol prices (farmdoc daily, February 8, 2019). While domestic and export use for U.S. ethanol have increased since 2014, both production capacity and actual production have increased even faster. For example, ethanol production in the U.S. looks to have topped 16 billion gallons for the first time in 2018 and this has simply been too much for the domestic and export fuel markets to absorb. The result is that ethanol stocks have risen sharply (Figure 5) and this has led to declining ethanol prices and profits.
Additional perspective on ethanol production profitability is provided in Figure 6, where the profit margins are aggregated over an annual horizon for 2007-2018. Profits are presented in terms of both total pre-tax net returns and percent return to equity. The 2018 net loss of -$2.2 million was the first annual loss since 2012 and only the fourth annual loss over 2007-2018. With the loss, the total cumulative (pre-tax) return to equity holders for the 2007-2018 period stands at $122.0 million, slightly less than the assumed equity investment for the representative plant of $126.6 million. We can use the average net loss for the representative plant to make a rough estimate of profit for the entire U.S. ethanol industry in 2018. Assuming all plants in the industry earned a net loss of -$0.02 per gallon and that total ethanol production for the U.S. was 16.1 billion gallons in 2018, aggregate ethanol industry (pre-tax) losses can be estimated at -$354 million.
Finally, the percent return to equity holders provides useful information on the attractiveness of investment in ethanol plants relative to other investments. The average return was 8.3 percent over 2007-2018 and the standard deviation, a measure of risk, was 13.0 percent. By comparison, the average return for the stock market over this period, as measured by the S&P 500, was 8.7 percent and the associated standard deviation was 17.7 percent. The ratio of average return to standard deviation provides one measuring stick of an investment’s return-risk attractiveness, and on this measure the ratio for ethanol investment, 0.62, continues to compare favorably with the ratio for the stock market as a whole, 0.49. This provides important context when considering the losses experienced by ethanol producers in 2018. Even with this loss included in the data, ethanol plants have a more than respectable record of investment performance over the last dozen years.
The ethanol industry in 2018 experienced its first losing year since 2012, thereby ending a run of five consecutive years of positive returns. The estimated loss for a representative Iowa ethanol plant in 2018 was -$2.2 million. While large, the 2018 loss was still far less than the -$6.7 million loss in 2012. The evidence points to overproduction as the driving force behind the low prices and financial losses experienced by ethanol producers during 2018. The fortunes of the U.S. ethanol industry are unlikely to improve until production and use are better balanced. This will require shuttering some production capacity, additional demand, or some combination of the two. The most optimistic scenario is additional demand for U.S. ethanol exports as part of a trade deal with China.
“Annual Returns on Stock, T.Bonds and T.Bills: 1928 – Current.” Obtained by Damodaran, A. from the Federal Reserve database in St. Louis (FRED). Last updated January 5, 2019, accessed February 13, 2019. http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
Irwin, S. “Why are Ethanol Prices So Low?” farmdoc daily (9):23, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, February 8, 2019.
Irwin, S. “Understanding the Price of E85 Relative to E10.” farmdoc daily (9):17, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, January 31, 2019.
Irwin, S. “What’s Behind Rising E85 Use?” farmdoc daily (9):13, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, January 24, 2019.
Irwin, S. “Small Refinery Exemptions and E85 Demand Destruction.” farmdoc daily (9):8, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, January 16, 2019.
Irwin, S. “More on Small Refinery Exemptions and Ethanol Demand Destruction.” farmdoc daily (8):228, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, December 13, 2018.
Irwin, S. “Small Refinery Exemptions and Ethanol Demand Destruction.” farmdoc daily (8):170, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, September 13, 2018.
Irwin, S. “What Happened to the Profitability of Ethanol Production in 2017?” farmdoc daily (8):45, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, March 14, 2018.
Irwin, S. “The Profitability of Ethanol Production in 2016.” farmdoc daily (7):18, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, February 1, 2017.
Irwin, S. “The Profitability of Ethanol Production in 2015.” farmdoc daily (6):3, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, January 6, 2016.
Source: Scott Irwin, Farmdocdaily
On Monday, the U.S. Department of Agriculture’s Economic Research Service (ERS) published an overview of the Conservation Title of the 2018 Farm Bill. Today’s update looks at a couple key points from the ERS summary.
After highlighting several changes to specific programs in the Conservation Title, ERS turned to a broader focus on the economic implications of the new provisions.
The ERS update explained that, “For FY2019-FY2023, the CBO [Congressional Budget Office] projects mandatory spending on farm bill conservation programs that is slightly higher than projected baseline spending (spending under an extension of 2014 Farm Act programs, without modification, through 2023). For the five largest conservation programs (and predecessors), inflation-adjusted spending increased under both the 2002 and 2008 Farm Acts (2002-2013, see chart below), but was lower under the 2014 Farm Act (2014-2018). CBO projections suggest that the 2018 Act could provide slightly higher funding, on average, than under the 2014 Act. Although program funding is mandatory (does not require appropriation), spending in future years is subject to congressional review and, under past farm acts, has sometimes been reduced from specified levels.”
“Agriculture Improvement Act of 2018: Highlights and Implications. Conservation: Title II.” USDA’s Economic Research Service (https://goo.gl/hNh4Rx, February 11, 2019).
In addition, ERS stated that, “While overall conservation funding is roughly equal to baseline levels for FY2019-FY2023, the 2018 Act shifts funding among programs. The acreage enrollment cap in the Conservation Stewardship Program (CSP) is replaced with a funding cap that implies lower spending in the future. Contracts signed under the acreage-limited CSP will continue; contracts that expire before December 31, 2019 can be renewed. Going forward, the 2018 Act sets spending limits of $700 million for FY2019, increasing to $1 billion by FY2023. CSP funding was $1.32 billion in FY2018 (estimated) and was projected to be roughly $1.75 billion per year, on average, for FY2019-FY2023 according to the CBO.
Over the next several years, as spending for existing CSP contracts ramps down and spending on new contracts ramps up, CSP spending will eventually reach an overall lower level of spending commensurate with new limits.
“In contrast, the Environmental Quality Incentives Program (EQIP) funding is increased from $1.75 billion in FY2019 to $2.025 billion in FY2023, compared to an averagebaseline of $1.75 billion over FY2019-FY2023. Funding is also increased for the Agricultural Conservation Easements Program (from $250 million to $450 million annually) and the Regional Conservation Partnership Program ($100 million to $300 million annually). Conservation Reserve Program (CRP) funding is projected to decline (a total of -$189 million) over FY2019-FY2023.”
Monday’s update also pointed out that,
Changes in major conservation program funding under the 2018 Act will effectively halt the shift toward increasing the share of conservation funding for working land programs that began with the 2002 Act and continued under the 2008 and 2014 Acts.
“While funding has shifted toward working land programs in every farm bill since 2002, the size of the shift has declined in each subsequent farm act. Under the 2014Act, working land program funding accounted for a majority (53 percent) of major conservation program funding for the first time. Under the 2018 Act, spending for working land programs will again account for about 53 percent of the five largest programs. (Working land programs are defined here to include EQIP and CSP. Other programs can also support working lands. Agricultural Conservation Easement Program (ACEP) can help preserve working agricultural land that would otherwise be developed. Some CRP continuous signup practices (e.g., filter strips) may also complement crop production. Regional Conservation Partnership Program (RCPP) can fund a wide range of practices.)”
“Agriculture Improvement Act of 2018: Highlights and Implications. Conservation: Title II.” USDA’s Economic Research Service (https://goo.gl/hNh4Rx, February 11, 2019).
ERS also explained that, “While the overall acreage cap for the Conservation Reserve Program is increased from 24 million to 27 million acres under the 2018 Act, other changes could limit the size of annual rental payments and may reduce enrollment incentives. Annual rental rates could be affected by two provisions. The first affects the determination of county average soil rental rates (SRRs). County-average SRRs, which were equal to the county-average rental rate for non-irrigated cropland under previous farm acts, would be set 15 percent below county-average rates for general signup and 10 percent below county-average rental rates for continuous signup. Because county-average SRRs underlie CRP limits on annual rental payments, these provisions could result in rental payments as much as 15 percent lower for general signup and 10 percent lower for continuous signup. Actual limits established for CRP implementation can also include adjustments to the county-average SRR, including adjustments (up or down) for field-specific soil quality. The second new CRP provision applies only to land that has already been in CRP. For these lands, an overall countywide ceiling on annual rental rates would also apply. Annual rental rates could not exceed 85 percent of the county average rental rate (not the county-average SRR) for general signup and 90 percent for continuous signup.”
Source: Keith Good, Farm Policy News
Social isolation and loneliness are increasingly being recognized as urgent public health threats, with risks to health and mortality as serious as those from obesity or smoking. Some researchers have cautioned that rural residents could be at greater risk for isolation due to the increased distances they must travel to visit their friends and family.
A new University of Minnesota School of Public Health study looked at objective and subjective measures of isolation and loneliness among rural and urban older adults and found that, overall, people in rural areas actually reported less social isolation and more social relationships than urban residents.
Henning-Smith discovered the differences in social isolation among rural and urban residents by reviewing data from the National Social Life, Health, and Aging Project, a survey of 2,439 older adults (age 65 and older) and their spouses or partners. She compared county-level survey data from people living in large cities (metropolitan), small towns (micropolitan), and very rural areas (noncore).
Among those groups of residents, Henning-Smith examined:
- their reported levels of social support (whether a respondent said they can open up to or rely on family or friends);
- their number of social relationships (close family and friends, children and grandchildren, marital status);
- their measured level of loneliness using the three-item UCLA Loneliness Scale, including how often they felt left out, lacked companionship, and felt isolated.
Analysis of the data showed that:
- rural noncore residents had more living children and grandchildren and were more likely to say they could rely on friends compared to metropolitan residents;
- rural micropolitan residents were more likely than metropolitan residents to say that they could rely on family;
- both rural noncore and micropolitan residents were more likely than metropolitan residents to report that they have more than 20 friends;
- despite having more social relationships, rural noncore residents were also significantly more likely than metropolitan residents to say that they feel left out (one important measure of loneliness) often or some of the time;
- more than 25 percent of micropolitan and approximately 20 percent of metropolitan and noncore residents reported socializing with others less than once a month;
- having more education was associated with more loneliness for metropolitan but not micropolitan or noncore residents;
- being non-Hispanic Black was associated with significantly higher loneliness scores for noncore, but not metropolitan or micropolitan residents;
- noncore Black residents were four times more likely to be lonely than noncore White residents.
“This study found significant variation by rurality in various measures of social isolation and loneliness,” said Henning-Smith. “It also found variation within types of geography in risks for loneliness. For instance, rural noncore Black residents were more likely to be lonely than noncore White residents. Further, the finding that rural residents have more social relationships, but are still more likely to report feeling left out shows that social isolation needs to be examined across a range of subjective and objective traits and experiences. No one measure can capture the full extent of social participation or isolation.”
Henning-Smith also said there is a critical need for more information on the prevalence and risk factors for being isolated and lonely by geography in order to design targeted, effective interventions, such as community programming, social support groups or volunteer opportunities.
“This study finds that while, on average, rural residents report more social relationships, some rural residents are still at a much higher risk of being lonely. Those disparities should be addressed by policy and public health interventions,” said Henning-Smith. “Further, more relationships alone is not enough to protect rural residents from feeling lonely; more should be done to facilitate meaningful social connections.”
Henning-Smith is the deputy director of the School of Public Health’s Rural Health Research Center and is the lead author on two “policy briefs” providing more information on the topic of rural social isolation (1, 2).
This study was funded by a grant from The Federal Office of Rural Health Policy.
Source: University of Minnesota