EPA Enacts New Livestock Reporting Rule
At the stroke of noon, Barack Obama officially became the nation’s first black president, calling on the people to unite in hope against the "gathering clouds and raging storms" of war and economic hardship.
Amid his 18-minute inaugural address, President Obama outlined an ambitious agenda for his administration, Congress and the American people.
The centerpiece of the plan, an $825 billion measure to stimulate the economy with spending and tax cuts, is already being hammered out on Capitol Hill. But his proposals also include increased regulation of financial markets, legislation to create new public works projects, government policy reforms, and alternative energy initiatives.
Change, of course, has been a recurring theme in many Obama speeches, and change is never easy. That was evident this week in rural America, as new reporting guidelines on gas emissions raised a stink in farm country.
The new rules also consider the size and scope of livestock operations. Large-scale facilities are required to report discharges of 100 pounds of ammonia and hydrogen sulfide in a 24-hour period to state and local authorities. However, the new rules exempt smaller operations from the reporting mandate.
Wayne Gieselman, Iowa Department of Natural Resources: "It specifically exempts livestock facilities that raise less than 1,000 animal units and 1,000 animal units is 700 head of dairy cattle 2,500 head of finishing hogs, 1,000 head of beef cattle... It does require reporting yet for any livestock facility that is more than 1,000 animal units. It only requires it one time, verbal report to the state department of natural resources and they also have to report to their local emergency management office in their county. They have to follow that up within 30-days with a written report that is a good faith best estimate of what their emissions are. And then those same operations, one year later, another report in case anything has changed and that's the extent of the reporting."
The EPA will, however, continue to investigate citizen complaints of hazardous releases from livestock operations.
The National Pork Producers Council, or NPPC, filed a lawsuit against EPA seeking an injunction to delay the rule from being enacted. NPPC officials claim livestock producers have always been exempted from reporting high levels of ammonia and hydrogen sulfide.
Mike Formica, National Pork Producers Council: "What we would like to see EPA do is, one, come out with a guidance documentthat clearly explains to producers what their requiremnts are, what do you need to worry about reporting, and how do you make that calculation. Two, we want EPA to tell us who we need to make the report to and the information they provide is needs to be accurate."
The suit further alleges "EPA violated the due process rights of farmers by failing to develop an adequate system to accept the reports, making compliance with the law impossible...because we know in Henderson County Illinois, just across the river, right across the Mississippi River from Iowa, producers there were being told 'You don't need to worry about making this report. It's nothing but an internt hoax.' "
NPPC is willing to comply with the new guidelines but is calling on EPA to finish a two-year odor study begun in 2007. Once the data are sorted out, NPPC believes a system can be created allowing all producers to easily comply with the new regulations.
EPA officials are reviewing the NPPC lawsuit and declined Market to Market's request for an interview. However they did say attempts were made to make the transition as easy as possible through information on their Web site.
There is no word on when the case will be heard in court.
President Obama's Rural Agenda
Not since FDR’s 1933 inaugural address in the midst the Great Depression has a president used the occasion to advocate a legislative agenda the way Obama did on Tuesday.
Roosevelt realized that the largest task at hand in 1933 was to put people to work. And Obama renewed his call for congressional action creating new jobs building and repairing public infrastructure.
Both FDR and Obama were faced with a skeptical electorate that had grown increasingly disillusioned amidst troubling economic times. While Obama has repeatedly stated that the economy is his top priority, it is less clear what that means to America’s farmers and ranchers.
Andrew Batt examined Obama’s rural agenda over the past two years and filed this report.
As the nation watched Barack Obama assume the Presidency this week, the weight of two wars and an economic recession hung heavily on America’s 44th Commander-in-Chief.President Barack Obama: “America. For everywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act - not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.”
“We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age. All this we can do. And all this we will do.”
President Obama’s nod towards alternative energy is nothing new. A grueling two-year campaign for the Presidency highlighted numerous issues including the future of wind power and biofuels.
From the cold caucuses in Iowa…
Obama: “We need to foster the development of the next generation of biofuels.”
To the daily grind of the general election…
Obama: “Wind, tide, solar, we can do it all and we must do it all…”
Obama has promised to double alternative energy production in his first term – a lofty goal buoyed by massive federal spending. The $825 billion stimulus bill proposed by Obama and modified by House Democrats includes a litany of investments. Under the new plan, some federal tax credits, for sectors like wind energy, would become Energy Department grants paid in advance to spur faster alternative energy investment.
The omnibus bill also includes $6 billion designated for rural broadband infrastructure. But it’s still unclear whether or not the bill’s larger sums, aimed at state and local infrastructure, will be used for Rural projects like bridges and country highways.
Outside of the stimulus proposal, the Obama Administration’s views on agriculture include a variety of initiatives and some in agreement with Republicans.
Tom Buis, President National Farmers Union: “Let’s give Senator Barack Obama a warm Iowa Farmers Union welcome.”
Speaking to members of the Iowa Farmers Union in November 2007, then-Senator Obama agreed with a bipartisan proposal from Iowa Republican Charles Grassley to cap farm subsidy payments at $250,000. Despite a bipartisan coalition, the subsidy cap did not make it in the 2008 farm bill.
President Barack Obama: "Here's what I'll do as president. I'll immediately implement Country of Origin Labeling because Americans should know where their food comes from."
Federal officials were set to enforce Country of Origin Labeling, or COOL in the coming months but an Obama executive order this week froze all pending regulations until further review from the new Administration.
Current COOL policy would allow a meat processor using product from foreign and domestic sources to simply place “multiple countries” labels on the packaging. Some cattle groups hope Obama and new Ag Secretary Tom Vilsack will “tighten” rules concerning a “multiple countries” label and enforce more descriptive labeling.
Obama: "I have always stood for tougher environmental regulations and local control over whether CAFOs can be built in your neighborhood. That's why we need to limit EQUIP funding to giant CAFOs so they pay for their own pollution and that's what I will do as President of the United States."
Obama’s stance on controlled animal feeding operations, or CAFOs, has endeared the new President in many environmental circles but those same stances have created an uneasy reception from livestock producers.
Barack Obama: "Tell ConAgra it's not the Department of Agribusiness. It's the Department of Agriculture."
Despite Obama’s public condemnation of agribusinesses, critics have blasted new Ag Secretary Tom Vilsack as “too close” to large agriculture companies. The former Iowa Governor has a history of supporting biotechnology and ethanol production during his tenure in the Hawkeye State. In his conformation hearing last week, Vilsack said he would be a Secretary for all American farmers.
Sec. Tom Vilsack, USDA: "I do appreciate the diversity of agriculture and that it's the job of the USDA to be responsive and representative of all of that diversity and to be supportive of that diversity...These are hard working people, these are folks that have a value system that is not just important to them I would argue that it's important to us, to this country.”
While Obama will likely confront multiple domestic and international challenges in his first 100 days, the 44th U.S. President made a 2007 promise to quickly tackle rural policy.
Obama: "After I'm elected I will ask Democrats and Republicans to come together for a summit on Rural America and it won't be held in Washington it will be right here in Iowa. And we will take action on a Rural Agenda in my first hundred days in office."
For Market to Market, I’m Andrew Batt.
Market Analysis: Sue Martin
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For the week, March wheat gained about a nickel, while the nearby corn contract moved fractionally lower.
America's dominant oilseed also was under pressure. For the week, March soybeans lost 11 cents while the nearby meal contract gained $2.30 per ton.
In the softs, cotton finally broke through the 50-dollar barrier with the March contract posting a gain of $1.64.
In livestock, February cattle lost $1.85. Nearby feeders were off $1.35. And the February lean hog contract lost $1.03.
In other markets of interest, the Euro fell 249 basis points against the dollar. Crude oil gained nearly $4 per barrel. Comex Gold was up nearly $56 per ounce. And the Goldman Sachs Commodity Index gained more than 7 points to close at 349.70.
Martin: Thank you.
Pearson: Let's talk just generally here. A new administration has come to power out in Washington, D.C. and, of course, administrations have a big impact on agricultural policy and on trade and all these things that impact us, bottom line in American agriculture. With those changes, with what we've been seeing since the first of the year and with the pullback that we've had in crude oil, up a little bit this week, what do you see ahead? In the broad commodity field worldwide what do you see?
Martin: Well, I do think that in the world of investments commodities are going to end up actually reigning better as an investment than the stock market. I think that we know that we have less hedge fund money and less investment money to come to the table this year. But still I think ag commodities or food commodities is going to be the key items that are going to see investments. The one thing that I am concerned about was just yesterday we heard word out of Timothy Geithner, the Treasury Secretary, that he was looking at possibilities of looking into coming toward spring that he and President Barack Obama would be looking into possibly filing complaints to the International Monetary Fund about China manipulating their currency. And I think that this speaks volumes because everything has been all about China for several years and especially this year in our export picture for the soybeans. But they are concerned because they want China to let their currency float freely which in essence would then make us more competitive on the export market. However, China has been reluctant to cotton up here and so it's thought by spring possibly, he indicated by spring that President Barack Obama may elect to file complaints and also this could lead to tariffs. If that happens I'm concerned. I think that that's something we don't want to see for our grain markets. I think it could hurt us horribly, especially in the soybean complex. I think that we've had China as a huge buyer, they have been our ray of sunshine because they have been the main buyer. Without them the demand picture would have been pretty bleak on soybeans and yes, we have a weather market going in South America, not only do they have drought type conditions in Argentina and, of course, parts of Brazil had them earlier, but the concern is that they also didn't put in near the inputs or the fertilizer that they needed to because of lack of credit. And so yields are probably going to be down anyway and we're looking at Argentina, it's very possible Argentine yields on beans are down 17% to 25%. That's a pretty good pull down especially when acres are less planted than what they originally planned on picking up the slack for wheat, that type of thing.
Pearson: You mentioned wheat, let's talk about the wheat market. Again, this week certainly we're starting off with more volatility again it looks like in 2009, up and down markets for sure and we're seeing that here in just the beginning of this calendar year. But as we look at this wheat market and we look at worldwide production, we had a big increase in production last year, what do you see ahead for wheat prices? Looking at these prices right now are they pretty attractive to make sales?
Martin: Well, we're getting into a price level that we have to start looking -- we have you remember you always remember what happened latest and, of course, wheat prices got on the Chicago Board of Trade and the KC over $13 this last year, Minneapolis wheat made it up to a euphoric $25. Of course, we know that we're not going to see those kind of levels but the concern I have for wheat is, and the potential I think that wheat has, is that one, we do have less acres around the world being planted or has been planted so that says that the production this coming year for '09 and '10 is going to be less. Now, the wheat that we have on hand at this time, the bulk of it, is feed wheat quality so supplies are very tight for good quality food wheat and the U.S. has good quality food wheat. But in the meantime we've had some potential winter kill in the U.S., China is dealing with drought and also bitterly cold temperatures too especially in the northern and northeastern provinces of that country. And so while we have to wait for dormancy to break to really see what damage has been done there is potential out here that we're seeing a contraction in the supplies of wheat. Now, having said that everything plays together here. Having said that the corn market may, as we go through 2009 and on into 2010, actually next year corn may have to step up to the plate again and cover for wheat's misfortune.
Pearson: In terms of making sales you're not in a big hurry, right now we're not quite high enough. What are your targets?
Martin: Well, the last time I was on the show I talked about timing, beans, corn and wheat kind of all three together, but timing for a low around Thanksgiving and a high around January 9th, 10th, 11th, 12th of which we've gotten. Now, the market is massaging, it's kind of narrowing in, it's in a little diamond formation on the beans. Corn, of course, is just meandering in a sideways range. And the wheat, of course, is kind of finding some new legs because it's caught some demand. I do think the demand picture for wheat is going to start to pick up here because I think the Ukraine out of the Black Sea may have started to extinguish -- I think they're starting to get to the point where they don't have as much quality wheat or even feed wheat that they're able to send out for export. You've got Argentina with half a crop, even though they say they're going to export they have half a crop. That's major. That means Brazil is probably going to have to come to the U.S. for wheat. I think the export picture is picking up, that's a good thing but I wonder if we won't have better prices as we get into the spring. If you get prices up around $6.30 to $6.50 start to make some sales. If you get prices up again up towards $7 in the spring here in the April to early May timeframe I would definitely be very aggressive on sales. In fact, I'd have most everything you need to sell sold.
Pearson: So, keep that one in mind. Let's talk about the corn market as you look at what's happening there. USDA dialed back ethanol usage this year which means they'll pick some back up on the feed side but as you look at this corn market going forward and you look at still a lot of people are dealing with the higher input costs and high fertilizer costs are we at a price where farmers are going to plant more corn right now?
Martin: No, we're not. Actually we're at a level here where prices are almost looking more advantageous in the beans than they are in corn. But farmers do like to plant corn and I think that once we get closer towards spring we're going to see this acreage fight between new crop corn and new crop beans. And I think the new crop beans already being so soft in their spreads is telling you that they think they're going to pull the acres away from corn. We have to have -- we had a private analyst from our analytical firm come out with an estimate of around 82.7 million acres here about a week ago. And if you take an average trend line yield of 157 bushels per acre and taking say an assumption that you harvest your planted acreage maybe 91.5% to 92% of that acreage, you aren't going to have enough to meet the demand that we are actually targeted for at this time. You don't have enough grain to go around. Our carryout is going to drop and that's just on corn for itself. In the meantime, we have VeraSun who is now looking at selling off seven of their plants kind of under the bankruptcy trustee regulations and everything and hopefully they aren't going to be dismantled, those are going to go to someone that intends to put them back into operation. We've had a disruption in our ethanol demand but once we get this settled, I suspect by the end of March, we're going to have some demand picking back up for the old crop corn. In the meantime I think our export picture is going to start to get a little more lively. We have to remember that without China majorly in the export market Argentina is number two exporter in the world and their corn crop is looking anywhere from 33% to 40% down this year. That is demand, again, that's going to come back to the U.S. so I think the corn market, while I do think we have the February break coming, I don't think new lows are going to happen in the March corn. I think we're going to see a situation here where we fall back but maybe the $3.40, $3.50 to the $3.30 mark might be low enough.
Pearson: So, what are your targets on the up side?
Martin: Well, on the up side I think we have potential for, barring any weather issue, I think we have the potential for possibly $5 to $5.50 on new crop corn. I will say this, we have to have a minimum of 87 million acres to 88 million acres just to keep our carry right where it's at.
Pearson: Let's talk about soybeans and what your outlook is there. You mentioned China, exports have been very strong for soybeans, it's been a positive over the winter months for us. What do you see ahead there?
Martin: Well, I think that in the bean market the beans are actually the ray of sunshine or the best commodity of all three. The soybean market with Argentina's bean production dropping between 17% and 25% on estimate, and that's as we stand today, if this drought continues by March we're going to be looking at considerably downsizing those crops. I think that our carry was pegged at 205 million bushel, that was because we found more acres and increased yield just a hair. They lowered crush but exports outpaced that. Well, the one thing we have to watch is any changes in complexion of China because they're going into their Chinese Lunar New Year, they're saying that they're pretty well done buying for their reserve for foreign buying, maybe three million metric tons in the month of February. I don't know as if I believe everything I'm hearing out of them because we have to remember China had a major food safety issue, they had melamine found in baby food, dairy products because it was fed to dairy cows, it showed up in shrimp from the aqua farming, it has shown up in cattle and it's shown up in pork and poultry. They have a major issue. I wouldn't be surprised, this is my own opinion, but I think they're buying some of these beans to crush to sort of filter out or dilute some of that poor quality tainted protein out so they can feed it all out. I think that we have another time coming here where we're going to see across the board all the grains even the stock market but livestock too kind of a euphoric time April to the first two weeks of May.
Pearson: So, we'll look forward to that and a good opportunity to make sales for the balance of '09 and 2010.
Martin: Well, let's put it this way and I'll be on before then again but if farmers miss this one they're going to regret it because I'm extremely bearish for June, July and August.
Pearson: Keep that one in mind. You mentioned livestock, let's talk about the fed cattle market. It's been ugly, been losing a lot of money in the cattle business, a lot of equity has been chewed up. The cattle on feed report this afternoon what was your take on that?
Martin: It was friendly, it was a ray of sunshine again. Your on feed number came out at 93, the trade was looking for 94. Placements was at 93, trade was looking at 97. The marketings was at 102 and the trade was looking for 100. So, it was really, really good. Excuse me, the placements was 97 and the trade was looking for 100. But it really came out positive, it should be good to feeder cattle on Monday morning. I think the cattle market has been trying to put in a little bit of a cash bottom here. I think cattle have a chance too to rally as we go into spring. And, of course, we are carrying a lot of weight. The one thing that concerns me is the dairy buyout because we have to remember that they're buying out for the dairy industry but in the meantime that's going to put more product on the shelves or into the coolers and we've already got a ton of product. So, that's a concern there. I guess the one thing if I could make one point we are all about currency. It's not only in the cattle, it's in the grains, everything. We are all about currency and we have to watch what our dollar is doing in relationship to foreign currencies because when our dollar is rallying it seems to slow the intent of exports. But so far we've been blessed because imports of beef have not been very much at all.
Pearson: So far so good. So, your strategy for cattle for making sales?
Martin: Well, I hate to say this because I disagree with quite a few different individuals, analysts, but I would not be locking in cattle at this time. I think we're going to get a better chance as we go into April.
Pearson: Real quick, Sue, on the hog market what do you see ahead for that side of the business?
Martin: Well, the hog market we keep killing about 430,000 head a day. We seem to have plentiful supplies. But in the meantime we've had a whale of a break in the pork industry. And so I tend to think that these June hogs and July hogs if they get about another dollar or two down I'm thinking maybe that's about enough and we're going to catch there too.
Pearson: Of course, we've also had a break in getting some feed needs covered.
Martin: Exactly.
Pearson: So, hopefully people will take advantage of that. Sue, as usual, great insights. We look forward to you joining us again soon. Thank you so much. That's going to wrap up this edition of Market to Market but if you'd like more information from Sue on where these markets may be headed visit the Market Plus page at our Web site where you'll find streaming video of our program and you can download audio podcasts of our Market Analysis and our very exclusive Market Plus segment which you'll find at our Web site and it's all absolutely free. And, of course, be sure to join us again next week when we'll examine a public school curriculum designed to teach children the importance of agriculture. Until then, thanks for watching. I'm Mark Pearson. Have a great week.
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