Washington Insider -- Friday

By DTN's Washington Insider

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Groups Start to Weigh on RFS Point of Obligation Issue

Requests to tweak rules under the Renewable Fuel Standard (RFS) to shift the point of obligation for complying with the program should be denied, according to a coalition of groups representing biofuels, oil and other industries in a letter to EPA Administrator Scott Pruitt.

"The one issue that brings us all together is our belief that the Environmental Protection Agency (EPA) should deny petitions to change the point of obligation for RFS compliance," the groups said in the letter.

The American Petroleum Institute (API), Association of American Railroads, the Biotechnology Innovation Organization and others penned the letter to Pruitt in the wake of news this week that the Trump White was readying an executive order to shift the point of obligation for the RFS from refiners to blenders. While a White House spokeswoman denied there was any ethanol executive order in the works, Bloomberg reported there were discussions over the last two days on the matter that is said to be pushed by Carl Icahn, an adviser to President Donald Trump and owner of a major stake in refiner CVR Energy.

Several groups also weighed in the issue recently via public comments sought by EPA relative to the agency's decision in November to deny a petition for the agency to shift the point of obligation away from refiners. EPA rejected the request, but then sought public comments on whether they should examine the issue anyway.

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Chicken Buyers In Mexico Fear Trade Barriers: Sanderson

Sanderson Farms Inc.'s customers in Mexico are concerned that chicken supplies from the U.S. may become more costly or be disrupted if heated political rhetoric turns into trade tariffs, according to executives of the third-largest U.S. chicken producer cited by Bloomberg. Mexico, the largest importer of U.S. chicken, represents more than half of Sanderson's export volume, according to Chief Financial Officer Mike Cockrell.

Laurel, Mississippi-based Sanderson supplies to processors and retailers in northern Mexico from plants in Texas. Since the November presidential election, the company has fielded questions from nervous customers, Cockrell said in a telephone interview Tuesday with Bloomberg. "Our customers in Mexico are very concerned," Lampkin Butts, Sanderson Farm's chief operating officer, said in the same telephone interview. "So far shipments to Mexico are fine."

Customer concerns include supply disruptions that could contribute to food inflation in Mexico, Butts said. Mexico's broiler chicken production growth hasn't kept pace with domestic consumption in recent years, and total imports surged by 33% from 2012 through 2016, according to USDA data.

Exports also are a key factor in determining overall demand for U.S. chicken. That is especially important for Sanderson and its domestic rivals this year because U.S. meat and poultry supply is forecast to climb to a record. "Chicken is not where the trade deficit is," Butts said.

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Washington Insider: Puzzlement about Delays with Perdue Nomination

Agriculture found itself in the center of a puzzle of sorts this week. The question is what is happening to the nomination of Sonny Perdue to be Secretary of Agriculture. Both Bloomberg and the Associated Press went public with questions by top officials about any possible holdup and the reports generally conclude that they have no answer for the delay.

For example, AP notes that the nomination was made some six weeks ago but to date, "the administration still hasn't formally provided the Senate with the paperwork for the nomination."

The delay is frustrating farm-state senators, who represent many of the core voters who helped elect Trump, the report said.

So far, the press has been content to publish somewhat agonized musings with people like Senate Agriculture Committee Chairman Pat Roberts, R., Kan., who says "he wishes he knew why Perdue's paperwork hasn't been filed."

Building on that, AP says "some farm-state lawmakers are questioning whether Trump is paying enough attention to rural areas, which overwhelmingly voted for him."

AP also says that after Trump's address to Congress on Tuesday night, Sens. Heidi Heitkamp, D-N.D., and Jon Tester, D-Mont., "both noted that Trump didn't specifically mention rural America." Both senators are up for re-election in 2018, AP notes.

In general, press coverage of the Perdue nomination has been highly favorable, so there seems to be no evidence of any problem that would explain the delay. But the slow pace is clearly raising concerns of Chairman Roberts as well as others in Congress who face current and future battles over trade policies as well as a number of other issues including the need to reauthorize the farm bill over the next couple of years.

Of course, it is clear that the administration has had a number of significant issues on its plate in recent weeks, including key economic and trade policy issues, all of which have the potential to distract attention from what likely is seen as a fairly routine nomination. At the same time, the delay is being seen by some to indicate a somewhat lower priority for ag issues and top ag officials than the sector feels it deserves.

One possible aspect of the concerns about the "Perdue delay" arises from a rumor about possible changes in the biofuel programs which bounced around the press for much of last week. Bloomberg reports that White House officials spent the past several days discussing a proposal from White House adviser Carl Icahn to modify federal biofuels policy to move the "point of obligation" for biofuel blending.

The Icahn proposal was presented as "a matter of extreme urgency" that has to be addressed "to avoid potential bankruptcies," he told Bloomberg. He said the situation represents "the quintessential example of the type of insane regulations throttling our economy" that President Trump campaigned to change. It is within the White House's power to move quickly on this issue." He added, "I hope and believe the point of obligation will be changed shortly."

Top administration officials apparently discussed the plan with Icahn at length, Bloomberg says, and also talked with representatives of the Fuels America coalition that opposes the move. Also, the American Petroleum Institute discussed the matter with officials in the White House and at the EPA.

Bloomberg says the administration is not leaning in any particular direction on the matter, wanting to study it to understand the legally complex and politically charged issue. White House spokeswoman Kelly Love told Bloomberg that there was no executive order in the works on the issue, but did not respond to questions on the status of discussions.

While an executive order could set the process in motion by directing EPA to take action, the report noted it could take a year or more for regulators to formally implement the change.

Those arguing against the plan signal it would inject uncertainty into the biofuels market by forcing those who have never participated in the biofuels program to comply with the Renewable Fuel Standard and that could hold up efforts to broaden the use of ethanol in the US fuel supply.

Clearly, the Icahn biofuels flap has nothing directly to do with the Perdue nomination, except that it is the kind of thing a top adviser with an agricultural point of view and heft to counter Icahn would be expected to clarify and sort out much more credibly than others on the President's team and across the industry. So, the biofuels proposal could be seen as an indicator that time may be running out for the administration to move the Ag Secretary nomination and avoid criticism. If that doesn't happen, the Sector's commentary could well take on a different tone, Washington Insider believes.

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