Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.Georgia Suspends Chicken Price for First Time in Over 40 Years
The Georgia Dock chicken-price index, an industry benchmark whose reliability has been questioned in recent months, will not be published this week because of a lack of data from participating producers, the Georgia Department of Agriculture said.
The state agency, which has compiled the index since 1972, had a "significant reduction" in participants after new reporting requirements were established, spokeswoman Julie McPeake said Wednesday in a telephone interview with Bloomberg. She declined to comment on the number of producers contributing data, while saying the total was insufficient.
The index came under fresh scrutiny after the largest U.S. producers were named as defendants in a series of lawsuits filed since September alleging collusion to control supply and drive up prices, something the companies denied. The index has also been criticized by the director of Georgia Department of Agriculture's weekly chicken-price report, who complained of inadequate resources and a lack of cooperation from the chicken companies.
The Georgia agriculture agency asked participants to sign and return affidavits and attestations by Tuesday to confirm their data is accurate. McPeake said the department received some documents from some companies, while others may need more time. She declined to provide the names and exact number of participants. "We do understand we gave them a short turnaround," she said. "It is possible we may resume publishing the Georgia Dock in the future."***
Bloomberg: Brazil Indirectly Using US Cotton WTO Payments to Fund Farms
Brazil has indirectly used the $800 million paid by the U.S. in fines for losing a case on cotton subsidies at the WTO to finance farms in the country which is a use that is not covered by the terms of the agreement between the two countries, according to a report from Bloomberg.
Brazil created Instituto Brasileiro do Algodao (IBA) to manage the funds paid by the U.S. and has invested part of that money into Fundo Cerrado -- the fund is solely financed by the IBA, according to Bloomberg. The fund has received about $234 million over the past two years from IBA, the report said, with about half of that used for loans to cotton farmers.
However, IBA President Haroldo Cunha said there isn't any misuse of funds as it is not directly funding farming activities and the fund aims only to produce income from interest, Bloomberg said.
"Those Cerrado loans have similar interest rates and are submitted to the same criteria adopted by banks," Cunha told the news service from Brasilia by telephone. "The agreement with the U.S. allows us to produce interest income from this money and didn't restrict any kind of financial application to reach that." He also noted that the fund's balance sheet has a note explaining the Cerrado fund includes cotton farmers' financing.
On the U.S. side, the Office of the U.S. Trade Representative said it hasn't "received reports like this regarding use of the funds." The agreement with "Brazil resolving the dispute identifies specific activities for which monies paid to the Brazil Cotton Institute may be used and provides for periodic reporting," USTR told Bloomberg via email.
An agreement signed in 2014 calls for the funds to only be spent on authorized activities, including technical assistance, infrastructure projects, farmer training and cooperation with producers in developing countries.
The $234 million (800 million reais) used to finance cotton farmers is a small amount of the overall level of financing used for cotton production -- about 7 billion reais, according to the report.
Washington Insider: Advanced Biofuels Targets Unlikely to be Met
Biofuels blending targets are spelled out in legislation and enforced by EPA standards, as is well known. However, current policies face significant pressures for change, the Government Accountability Office says and describes "several factors" that are combining to make it unlikely that there will be enough advanced biofuels produced in the US to meet the rising mandates in current law.
These were based on assumptions that advanced processes would emerge and limit pressures on national food and feed supplies. In fact, GAO says, while there are several advanced biofuels are "technologically well understood, there is limited potential for increased production in the near term."
In 2015, GAO noted, about 3.1 billion ethanol-equivalent gallons of advanced biofuels were produced, short of the statutory target of 5.5 billion gallons for that year. By 2022, the advanced biofuels target increases to 21 billion gallons, so production would have to rapidly increase to meet this target. GAO says it is skeptical that will happen.
The agency pointed out that biomass-based biodiesel "is the exception among the categories in that it exceeded its minimum of at least 1 billion gallons for 2015 with about 1.5 billion gallons of biodiesel were produced, according to EPA."
Despite that progress, "Experts agreed that expansion potential for these fuels is limited by the availability of feedstocks (fats and oils), for which there are competing uses. For example, soybean oil is also used as a cooking oil," GAO said.
One area that has fallen far behind statutory requirements is cellulosic biofuels, specifically cellulosic ethanol and renewable natural gas from landfills. For these, the level of output is less than 5% of the statutory target of 3 billion gallons and GAO sees "limited potential for expanded production in the next five years to the higher volumes called for in the statute."
Experts told GAO that the most economical way to quickly expand production of cellulosic ethanol is through "bolt-on" facilities—but even that approach is limited to about 750 million gallons "even if added to every existing corn-starch ethanol refinery."
Thus, GAO concludes that "significant expansion of cellulosic ethanol production beyond current levels would require construction of large stand-alone facilities and that even though several such facilities have been built, attracting the investments necessary to build more is unlikely until conversion yields and operability improve and costs come down."
A major reason is the current low price of fossil fuels relative to advanced biofuels. These affect advanced biofuels in two ways, GAO said. Getting more consumer acceptance requires biofuels to be priced competitively with the same fossil fuel. And the cost of converting cellulosic feedstocks is important since handling solid feedstocks as opposed to liquids or gasses is more time consuming and complex resulting in additional costs.
The report also noted that time and cost of bringing new technology to commercial-scale production from laboratory scale is great, and that it "may take 12 years if every step works out well and could take considerably longer." Not only is the process of bringing the new technology to production lengthy, but there can also be "several steps" before the fuel can be brought to the market, including "regulatory registration, certification by ASTM International, as well as oil company and vehicle acceptance."
Of note, GAO said, "new advanced biofuels must also have their combination of a feedstock, a conversion process and a final product approved by EPA in order to be counted toward the annual volume requirements under the RFS." GAO labeled this constraint as a "major" impediment "because it sends mixed signals to the market, which can limit investment."
That uncertainty applies not only to incentives like tax credits for biodiesel but also to the future of the RFS itself, GAO said.
In general, GAO says, the renewable fuels industry is responding unevenly to the mandates laid out in the 2007 law.
Clearly the laggard is and has been cellulosics where several technical factors and weak petroleum markets continue to limit the rate of future growth. GAO notes that these challenges are well known, but are "not likely to change in the near-term."
So, the complexities of US renewable fuels policies and the specific blending mandates are likely to continue to be highly controversial—and possibly to face significant pressures for change in the future—especially as price competition from fossil fuels continues. These developments should be watched closely by producers as the debate intensifies, Washington Insider believes.
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