OMAHA (DTN) -- Each year, DTN publishes our choices for the top 10 ag news stories of the year, as selected by DTN analysts, editors and reporters. Today we continue the countdown with No. 4 being how poor economics and a federal policy caused struggles for the ethanol and biodiesel industries; No. 3 highlights cattle market havoc, including bad weather and the impact of the Tyson packing-plant fire in Kansas; and No. 2 is China and the quest to get a big trade deal for agriculture.
No. 4: Biofuels Industry Struggles From Poor Economics, Small-Refinery Exemptions
DTN's No. 4 top ag story of 2019 was the ethanol and biodiesel industries' mighty struggles during the year brought on by poor economics and a federal policy granting small-refinery exemptions to the Renewable Fuel Standard.
By Todd Neeley
DTN Staff Reporter
OMAHA (DTN) -- For the ethanol and biodiesel industries, this past year was one of the most difficult for biofuels since the Renewable Fuel Standard became law starting in 2005.
Profit margins have been deep in the red for most of 2019, forcing both ethanol and biodiesel companies to close plants and scale back production.
The ethanol industry was saddled by an oversupplied market and a precipitous drop in the price of renewable identification numbers, or RINs.
The price of biofuel credits fell as the EPA continued a policy of granting small-refinery exemptions in unprecedented numbers.
The biodiesel industry continued to suffer from the expiration of the blenders tax credit in December 2017. A deal was reached in December 2019 to provide an extension of the credit through 2022, to include a retroactive extension for 2018 and 2019.
The continued granting of small-refinery exemptions was like adding salt to an open wound for biofuels and agriculture, at a time when markets for agriculture products remained in flux from an ongoing trade war with China and other trade uncertainty.
From 2016 to 2018, the EPA granted 85 exemptions totaling more than 4 billion ethanol-equivalent gallons not blended with petroleum.
The last straw for many biofuel producers came on Aug. 9 when the Trump administration granted 31 new exemptions for 2018. More biofuel companies announced plans to cut production and close additional plants in the days following that action.
In all, at least 19 ethanol plants and nine biodiesel plants have either stopped or cut production.
In September, federal lawmakers from Midwestern states garnered an agreement with the White House to account for exemptions by using a three-year rolling average of gallons exempted, in future RFS volumes.
When EPA released a proposed rule in October, however, biofuels and agriculture interests were unhappy at a proposal they say didn't match the agreement.
The uncertainty in federal policy led some major biofuel companies to take action. Sioux Falls, South Dakota-based POET LLC, one of the nation's largest ethanol producers, announced plans to close one plant and scale back production at many of its 28 plants. In addition, the company announced it had stopped production at a cellulosic ethanol plant in Emmetsburg, Iowa.
Todd Neeley can be reached at email@example.com
Follow him on Twitter @toddneeleyDTN
No. 3: Cattle Market Havoc Hits Cattle Industry Hard
DTN's No. 3 top ag story of 2019 was how a year of market havoc, unforgiving weather and a brutal series of events affected the cattle industry.
By ShayLe Stewart
DTN Livestock Analyst
Calendar year 2019 will surely be remembered as a year of market havoc, unforgiving weather and a brutal series of events that led many producers to drop off their last load, possibly forever. If you've chatted with an ag lender this year, you know that they feel more like a mortician and an opportunist and eagerly welcome 2020 for no other reason other than that the new year always welcomes some shimmer of hope and opportunity.
First, it was the bitter-cold calving season that shook cattlemen to their core, along with some dangerous blizzards. Instead of every two hours, cattle producers at times struggled to check every 15 minutes, hoping no new calves were born in the night's storm or froze down to the ground. They did all they could to save newborn calves.
Next, it was the treacherous floods that swept away freshly planted seed, fences and stored commodities. At a time when input costs are at an all-time high, cattlemen were devastated by the flood's effects. Stored grain was swept away, haying season was cut in half because the fields were too wet to cut, the hay that was harvested was washy, and keeping 2-month-old calves healthy in wet conditions was a battle.
Then came the Tyson packing-plant fire in Holcomb, Kansas, in August. News broke that the plant had caught on fire, and the market went into panic mode. The following week, fat cattle sold $5 to $6 lower, sale barns were selling calves $10 lower, and a country buyer couldn't be found anywhere in sight. All the while, packer margins nearly doubled from $250 per head to $500 per head and boxed beef prices jumped $22. Packers then processed 9,000 head more cattle, with one plant down, than they did the week before with all packing plants up and running. Cattlemen rallied as USDA began an investigation into cattle prices.
And, lastly, if you've had the chance to stop in to your local sale barn and watch a sale or two, you'll know that the billboard hung by the door coming in is pinned full of herd dispersions. Whether it was the banker that had to pull the plug or the rancher that didn't want to have the conversation, so he put it all up for sale, there were few producers that didn't worry about this year's financial means.
By no means was it an easy venture wading through the market's swings this year. But, as 2019 comes to an end, there are a few things that still remain true. The sheer yearning for the highest quality of beef is what has carried this fall's market; beef slaughter has been unexpectedly vigorous and helpful in keeping fat cattle supplies manageable; and when there are tough times, there is also opportunity.
ShayLe Stewart can be reached firstname.lastname@example.org
No. 2: China and the Quest to Get a Big Trade Deal for Agriculture
DTN's No. 2 top ag story of 2019 was the on-again, off-again tariff war with China that carried on all of 2019 and led to $16 billion more in government money for farmers approved by the Trump administration. Trump and China almost had a trade deal in May, in August, in October, in November, and in mid-December, there is the tentative agreement on phase one.
By Chris Clayton
DTN Ag Policy Editor
OMAHA (DTN) -- The on-again, off-again relationship between President Donald Trump and China was one of the major market movers throughout the year, as word of a deal -- or a fiery tweet -- would send soybeans, pork and other commodity prices bouncing.
A deal with China was the light at the end of the tunnel for farmers, until the threat of more tariffs came, then a deal was close, or not. As 2019 closes, the light looks bright with debate now about just how big can the dollar value go for U.S. agricultural sales to China.
By late February, the U.S. imposed a 25% tariff on $50 billion in Chinese goods and a 10% tariff on $200 billion more. China retaliated with tariffs on $110 billion on U.S. goods, including 25% retaliatory tariffs on soybeans and 62% tariffs on pork.
The president tweeted on the last Sunday in February that farmers and others should anticipate a deal soon. "I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues. As a result of these very ...
"... productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!"
By early May, the tenor had shifted from positive signs of a trade deal ready to sign to the likelihood of more tariffs on the horizon. Trump tweeted on May 8, "The reason for the China pullback & attempted renegotiation of the Trade Deal is the sincere HOPE that they will be able to 'negotiate' with Joe Biden or one of the very weak Democrats, and thereby continue to ripoff the United States (($500 Billion a year)) for years to come ...."
The president added, "... Guess what, that's not going to happen! China has just informed us that they (Vice-Premier) are now coming to the U.S. to make a deal. We'll see, but I am very happy with over $100 Billion a year in Tariffs filling U.S. coffers ... great for U.S., not good for China!"
A day later, the president raised tariffs from 10% to 25% on $200 billion of Chinese products. Chinese officials warned they would retaliate. The president said at the time that talks with China continued "in a very congeal manner -- there is absolutely no need to rush -- as Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products. These massive payments go directly to the Treasury of the U.S. ...."
He added, "... The process has begun to place additional Tariffs at 25% on the remaining 325 Billion Dollars. The U.S. only sells China approximately 100 Billion Dollars of goods & products, a very big imbalance. With the over 100 Billion Dollars in Tariffs that we take in, we will buy ..."
The president then indicated the billions of tariffs from China would go to buy U.S. agricultural products and sell overseas as humanitarian aid. "... agricultural products from our Great Farmers, in larger amounts than China ever did, and ship it to poor & starving countries in the form of humanitarian assistance. In the meantime we will continue to negotiate with China in the hopes that they do not again try to redo deal!"
And so it went. A July anniversary for Chinese tariffs on U.S. agricultural products came and went with a 25% retaliatory tariff remaining in place on various agricultural products, including soybeans. Some other products have even higher tariffs, such as pork, which had a 62% retaliatory tariff.
In August, the president announced his administration would place 10% tariffs on $300 billion more in goods from China starting in September.
China then countered with plans to raise the tariffs on soybeans 5% higher starting Sept. 1. Despite African swine fever raising pork prices in China, U.S. pork and beef were also looking at 10% higher tariffs.
Then a sort of truce was struck. Trade talks resumed with a possible October deal. President Trump said China had promised to buy $40 billion to $50 billion in agricultural products as part of a phase-one trade deal.
"The deal I just made with China is, by far, the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our Country. In fact, there is a question as to whether or not this much product can be produced? Our farmers will figure it out. Thank you China!" Trump tweeted in mid-October.
In a sign that U.S. agriculture may indeed start to see greater access to China, the Chinese Finance Ministry announced in early December that China would drop tariffs on soybeans, pork and other agricultural goods. Trump, in turn, agreed not to add a 15% tariff on $160 billion in Chinese goods.
The October phase-one deal now appears to carry into January with questions remaining about just when a deal will be signed and what it will mean. Farmers are getting anxious over the possible deal.
"Our priority is to tear down all of the barriers and all of the tariffs so we can have a level playing field with the rest of the world to export to China," said Zippy Duvall, president of the American Farm Bureau Federation. "We need access to that market. If that number is $20 billion, $30 billion, $40 billion, $50 billion -- the question is, can we produce that? Wouldn't we love to have that challenge? Give the farmers the market, give them the technology, and turn them loose, and I promise they will produce it."
Chris Clayton can be reached at Chris.Clayton@dtn.com
Follow him on Twitter @ChrisClaytonDTN
Editor's Note: You can find the Number 1 story in DTN's top 10 list on Dec. 31.
If you missed the others:
Top 10 Ag Stories of 2019
Best of the Rest
Top 10 Ag Stories of 2019: 10, 9, 8
Top 10 Ag Stories of 2019: 7, 6, 5
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