Tom Hall, Senior Agronomist, Rooster Strategic Solutions
Rooster is following issues that threaten production agriculture, ranking them from 1 (Low Danger) to 5 (Extreme Danger).
The Imminent threats we’re following and changes from previous rankings:
- Ethanol Outlook: Level 3 – Moderate Danger (previously Level 4 – High Danger)
- Weed and Insect Resistance: Level 5 – Extreme Danger
- Animal Ag and Nutrient Management: Level 2 – Moderate Danger
- Crop Protection Products: Level 1 – Low Danger (Previously Level 2 – Moderate Danger)
- Senate and House Ag Committee Bipartisanship: Level 1 – Low Danger
Threats to Ethanol in the Short Term: Level 3 – Moderate Danger
The production of ethanol requires using about a third of the US corn harvested each year. For this reason, anything that impacts the demand of ethanol will impact the demand and price of corn. The use of ethanol is mandated in the Clean Air Act to raise octane that increases power and the fuel to burn cleaner. As you might expect, the petroleum industry trade associations have fought the use of ethanol from day one. It’s not in the industry’s interest to replace a gallon of gas with a gallon of ethanol.
The ethanol mandate allowed waivers for small refineries not to blend ethanol if it causes the refinery economic injury. The ethanol industry has waged a court battle to limit the EPA’s ability to influence the granting of these waivers. This suit has now reached the Supreme Court. The ethanol industry was disappointed by the Trump administration’s inability to reduce the waivers. The Biden EPA has filed a brief to the Supreme Court that supports the ethanol industry’s position that waivers are restricted to the refineries that were granted waiver at the inception of the ethanol blending mandate. Stay tuned; the Supreme Court is expected to hear oral arguments on April 27.
Threats to Ethanol in the Long Term: Level 3 – Moderate Danger
The pandemic had a large impact on the total amount of gasoline – and therefore the amount of ethanol – used by drivers in the US. The result was a number of ethanol plants being slowed or shut down. A big surprise is that the slowdown in ethanol production did not lower corn prices, as expected. Instead, we have seen a one dollar rise in corn prices over the past six months because of renewed China buying, predicted tight ending US stocks, and short crops globally. At Rooster, the thought of relying of China to bail out the corn industry in the future sounds to us like a very risky bet.
The Biden administration has made supportive comments about the biofuel industry’s role in addressing Climate Change. On the other hand, the new Administration has singled out solar, wind, and electric cars as the primary way forward to lower greenhouse gases. There is no way to avoid the reduced future demand for gas and ethanol that come with a shift to electric cars. The Department of Energy says the world has reached its peak demand for gasoline, shown in the chart below, which predicts the reduced use of gas and the growth of the electric vehicle fleet.
The good news is that the demand for gas and ethanol will not drop dramatically, and ethanol will continue to create a stable market for corn for many years to come.
With the Biden Administration’s emphasis on Climate Change, we hope the long feud between the ethanol and petroleum industries will find some kind of settlement. The largest lobby group in DC, the American Petroluem Institute (API) lost two large European member oil companies last year because of its opposition to the Paris Climate Change Treaty. Today, API has said it NOW supports government intervention to limit greenhouse gas emissions. With API’s amazing turnaround on climate change, anything seems possible – even peace with the biofuels industry.
Weed and Insect Resistance: Level 5 – Extreme Danger
Good news and bad news from the weed and insect resistance world. The good news is that with the recent European Import Approval, farmers are just a year way from having a new mode of action from Bayer called Smart Stax Pro (DvSnf7 + Cry34/35 Ab1). This new mode of action is coming in the nick of time. Studies conducted in Illinois, Wisconsin, and Iowa found some level of resistance to the long-used Cry3 proteins in almost every field. Entomologists from these states say that Cry34/35 Ab1, used in combination with Cry3 proteins, continues to be effective. They also remind farmers facing resistant corn rootworms that rotating out of corn is the easiest and best way to manage resistant populations.
Weed resistance remains our highest imminent threat to agriculture. This winter, Arkansas scientists confirmed pigweed populations resistant to glufosinate. Farmers now have the new option of using soybean varieties that are tolerant to either dicamba/glufosinate or 2,4-D/glufosinate. It is believed that these combined modes of action can slow pigweed families from gaining resistance to these 50+ year old chemistries.
Crop Protection Products: Level 1 – Low Danger
The narrow Democratic majorities in the House and Senate have stopped (for now) proposed legislation to allow states and local communities to regulate or ban the use of pesticide products. The Biden Administration has shown no interest in using political capital to support new pesticide regulation. The lead sponsor of last year’s People Before Pesticides Act, Sen Tom Udall (D-NM), retired last December. To date, no one in the House or Senate has reintroduced Sen. Udall’s bill.
Animal Ag and Nutrient Management: Level 2 – Moderate Danger
In the federal policy arena, all is quiet in regard to the Clean Water Act. As new climate change legislation is crafted, emissions from animals and livestock facilities will be addressed. The appointments of Tom Vilsack, Secretary of Agriculture and Mike Regan, USEPA Administrator are seen by industry trade groups as favorable to the industry and an indicator of sensible regulation. The biggest immediate threat to livestock producers is higher grain prices and profitability.
The protein industry is expecting a fight for consumers with the rapidly growing fake meat sector. Beyond Meat is presently doing deals with McDonalds and Burger King; Ingredion is doubling down on its meatless business in China; and most distressing to livestock producers, Tyson Foods is now selling meatless chicken nuggets.
Senate and House Ag Committee Bipartisanship: Level 1 – Low Danger
The completely partisan Covid Relief Bill had bipartisan agricultural carve-outs under the steady leadership of Democrat Ag Senate and House Committee Chairs Senator Debbie Stabenow (D-MI) and Rep David Scot (D-GA). Included provisions in the bill for ag were relief for biofuel producers, dairy industry support, cotton mill assistance, aid for meat processing workers, and aid for underserved farmers.
As conditions change, we’ll do our best to alert you on these issues and tell you if they’re moving up or down the “danger list.” For now, we recommend:
- Joining an organization like Farm Bureau of other Ag livestock or commodity organizations that will help you see what’s coming and how to plan accordingly.
- Lend your voice to shape legislation, both in writing and by attending public hearings
- Take action to stay in front of the situation. For example, every livestock farm should implement a nutrient management plan with the guidance of local soil and water associations or the NRCS.