The decision could undermine President Donald Trump’s support among farmers, an important constituency in the November 2020 election. Some U.S. farmers have already been hurt by the United States’ prolonged trade war with China.

“The administration is moving forward to finalize the 2020 RVO (renewable volume obligations) in line with the agreement that the President made this fall,” White House spokesman Judd Deere said.

Deere confirmed he was talking about a proposal unveiled by the U.S. Environmental Protection Agency in October, which was intended to compensate the biofuel industry for the administration’s expanded use of refinery waivers, but which the industry has largely panned as insufficient.

Under the U.S. Renewable Fuel Standard, oil refiners are required to blend some 15 billion gallons of corn-based ethanol into their gasoline every year, but small facilities can be exempted if compliance would hurt them financially.

The Trump administration’s EPA has roughly quadrupled the number of the so-called Small Refinery Exemptions, something corn farmers and biofuel producers say has deeply undercut demand for ethanol.

The oil industry says the waivers are needed to preserve blue-collar refining jobs and disagrees with the claim that the waivers destroy demand.

The EPA plan, devised after weeks of negotiations with both the oil and biofuel industries to resolve the issue, would raise the biofuels volumes that some refineries must blend in 2020 based on U.S. Energy Department recommendations for volumes that should be exempted.

Biofuel interests wanted the regulation to be based on volumes that have actually been waived, since the EPA has routinely waived more blending volumes than the DOE has recommended.

On Tuesday, more than 1,700 farmers and biofuel advocates sent a letter to Trump, criticizing EPA’s proposal and asking him to directly intervene in the debate.

By then, the decision had already been reached. White House economic adviser Larry Kudlow told the Iowa Corn Growers Association during a meeting in Washington on Tuesday that the administration was sticking with the EPA’s proposal, two sources familiar with the matter said.

The plan is expected to be finalized by Friday, one source said. The final rule for 2020 blending requirements is already past its end-November deadline.

“EPA has reviewed all comments received during the comment period from the public and we plan to finalize the rule this winter,” EPA spokesman Michael Abboud said.

Support across key Midwestern states helped propel Trump to the presidency in 2016, a trend he is hoping to replicate in next year’s election.

But some farmers have threatened to withdraw support because of his administration’s handling of biofuel policy.

The biofuels news, however, comes amid progress in the United States’ trade war with China, a dispute that has been especially damaging to U.S. farmers.

It also comes as Congress readies a vote on the nation’s new trade pact with Mexico and Canada, an agreement also expected to boost farmers’ fortunes.

Renewable fuel (D6) credits for 2019 traded at 12.75 U.S. cents each on Wednesday, down from 13.25 in the previous session, traders said.

— Reporting for Reuters by Stephanie Kelly in New York and Jarrett Renshaw in Philadelphia.

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The EPA is charged with setting biofuel blending requirements for the refining industry as part of the Renewable Fuel Standard (RFS), a more than decade-old regulation that is aimed at helping farmers and reducing U.S. dependence on oil. It also provides waivers to small refining facilities that can prove compliance would cause them financial harm.

RFS and the waiver program, known as the Small Refinery Exemption (SRE) program, have increasingly been at the forefront of a heated political debate between the influential corn and oil lobbies, leaving President Donald Trump struggling to find a balancing act between the two important constituencies as he eyes re-election next year.

The issue has also gained more importance with many 2020 presidential hopefuls looking to secure support in key states such as Iowa, a major ethanol producing state.

Since Trump took office, the EPA has more than quadrupled the number of waivers it has granted, saving the oil industry hundreds of millions of dollars but enraging another key constituency — corn growers — who claim the move threatens demand for their products.

EPA on Friday said it has proposed increasing the volume of biofuels refiners must blend into their fuel annually to 20.04 billion gallons in 2020, up from 19.92 billion gallons in 2019. The proposed mandate included 15 billion gallons of conventional biofuels like ethanol, unchanged from 2019.

Reuters reported the proposed volumes ahead of the announcement in May, citing industry sources.

The EPA also proposed holding the biodiesel mandate at 2.43 billion gallons for 2021, unchanged from 2020. The agency sets biodiesel mandates a year in advance. Corn and ethanol producers have long urged the EPA to lift the figures to make up for the volumes waived under the small refinery hardship program.

The lack of it infuriated biofuel groups and Republican senators from corn state Iowa. “It’s unacceptable that EPA would set biofuel volumes below demand at a time when farmers, biofuels producers and agribusiness owners are forced to shed jobs and close plants,” influential Senator Chuck Grassley said.

“I urge President Trump to compel EPA to reverse course and keep his word to the forgotten Americans who have faithfully stood with him.”

American farmers have been among the most affected by Trump’s trade war with China, which once was a top export market for U.S. agricultural products – although the rural heartland has mostly remained loyal to him.

“EPA appears to be selling out to oil refiners — again — at the expense of rural America,” said Geoff Cooper, president and chief executive of the Renewable Fuels Association.

“Until the EPA reins in the abuse of SREs (small refinery exemptions) and reallocates what has already been lost, billions of gallons of biofuel demand will be destroyed each year as SREs explode around our industry like fireworks above the Washington Monument on the Fourth of July,” said Monte Shaw, executive director of the Iowa Renewable Fuels Association.

Trump has also been increasingly annoyed with the waiver program, sources told Reuters, and ordered a review of it, after hearing from angry farmers during his Midwest tour last month.

The proposed mandate also includes 5.04 billion gallons of advanced biofuels, such as those made from agricultural wastes, up from 4.92 billion in 2019. As part of the advanced biofuel proposal, the agency set mandates for cellulosic fuel at 540 million gallons.

The deadline for EPA to issue the final rule on blending requirements is Nov. 30.

— Humeyra Pamuk is a Reuters correspondent covering U.S. energy policy from Washington, D.C.

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China imported about 87 per cent of its soybean needs last year and one-third of that came from the U.S., according to a report in the South China Morning Post.

The proposal remains open for comment until Oct. 15. The association said the move was designed to reduce the country’s reliance on foreign suppliers, although it did not mention its trading relationship with the U.S. by name.

U.S. biofuel refueled

U.S. President Donald Trump’s plan to eliminate the ban on summer sales of gasoline with 15 per cent ethanol content, also known as E15, is going down well in corn country, according to reports by Associated Press.

Trump said he wanted to boost energy production and to help farmers and refiners.

“The president’s action isn’t just a win for corn farmers and the ethanol industry, motorists everywhere will now be able to fuel up at the pump year-round with E15… that’s what I call good news for all of us,” Illinois Corn Growers Association president Aron Carlson said in a statement.

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It was unclear whether the order would be enacted by President Donald Trump, who has vowed to pull out from the U.S./Mexico/Canada trade pact if he cannot win better terms for America.

But the action under consideration could signal heightened prospects that one of the world’s biggest trading blocs could unravel in an economically damaging dispute.

The possible executive order, first reported by Politico, sent stocks and currencies falling in Mexico and Canada. Investors were rethinking their assumptions that Trump would back away from some of the drastic actions on trade that he had promised during the presidential campaign.

“It is a clear indication that they (in the White House) are wanting changes but we will have to see what emerges,” said Paul Ferley, assistant chief economist at Royal Bank of Canada.

Trump has long accused Mexico of destroying U.S. jobs and recently ramped up his criticism of Canada, saying last week that Ottawa’s protection of its dairy industry was “unfair.”

Trump this week ordered 20 per cent tariffs on imports of Canadian softwood lumber, setting a tense tone as the three countries prepared to renegotiate the 23-year-old trade pact.

The U.S. president has faced a series of setbacks since he took office in January, with courts blocking parts of his orders to limit immigration and the Republican-controlled Congress pulling legislation he backed to overhaul the U.S. healthcare system.

As president, Trump has broad authority on trade policy, including the power to withdraw from NAFTA without votes by Congress, according to many legal analysts. It was under an executive order signed by Trump on Jan. 23 that the U.S. pulled out of the sweeping Trans-Pacific Partnership trade deal.

Mexico had expected to start NAFTA renegotiations in August but the possible executive order could add urgency to the timeline.

Trump criticized Mexico extensively during his presidential campaign. The U.S. went from running a small trade surplus with Mexico in the early 1990s to a US$63 billion deficit in 2016.

Canada said it was ready to come to talks on renewing NAFTA at any time.

“At this moment NAFTA negotiations have not started. Canada is ready to come to the table at any time,” said Alex Lawrence, a spokesman for Canadian Foreign Minister Chrystia Freeland.

At least one U.S. farm group, the National Corn Growers Association, warned Trump in a statement Wednesday that while corn producers helped elect him, a withdrawal from NAFTA “will cost America’s farmers and ranchers markets that we will never recover.”

Corn and corn product exports today account for 31 per cent of U.S. farmer income, NCGA president Wesley Spurlock, a Texas panhandle grain grower, said in a release.

“Mexico is the top export market for corn. Canada is also a top market for corn and ethanol. With a farm economy that is already weak, losing access to these markets will be a huge blow that will be felt throughout the ag value chain.”

— Steve Holland is a Reuters correspondent covering the White House in Washington, D.C. Additional reporting for Reuters by Fergal Smith in Toronto and David Ljunggren in Ottawa; writing by Jason Lange. Includes files from AGCanada.com Network staff.

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The southwest corner of the province appears to be the wettest, while other areas are drying nicely, according to Pam de Rocquigny, general manager of the Manitoba Corn Growers Association.

“For some producers it (planting) isn’t as far away while others are a few weeks away,” she said.

Over in the Steinbach region, in southeastern Manitoba, there is still excess moisture to burn off, according to area farmer Dennis Thiessen, the group’s vice-president.

“We’re anywhere from 10 days to two weeks away from seeding here,” he said in an interview Tuesday.

It would have been closer, he added, except for showers over the weekend that dumped “probably half to three quarters an inch” of rain on the area.

Time is definitely an issue for corn farmers in Manitoba, as most regions see crop insurance cutoffs happening at the beginning of June.

“June planting is too late,” Thiessen said. “My cutoff is around the 20th for grain corn, silage can go later.”

Last year, producers sowed 330,000 acres in Manitoba, the second largest amount ever. De Rocquigny expects that to continue.

“We’re being kind of hesitant not to put a jinx on what acreage could be,” she said.

Thiessen expects acres will stay steady, as long as Mother Nature co-operates.

“It’s totally dependent on the weather, if we get cool damp days it counts for nothing but if you get 20 C with wind, things dry up quick,” he said.

Prices are down about 10 per cent from the year before, he added, due to the record crop.

“We’re getting around $4.40 a bushel here, $4.30 for some guys,” he noted. “That’s doable but if it drops below $4 it’s tough to get a margin.”

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.

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U.S. net farm income is forecast to decline in 2017, with projections from the U.S. Department of Agriculture showing an 8.7 per cent drop, bringing the total to US$62.3 billion, marking a fourth consecutive year of declines.

What happens in U.S. markets can dictate and drive profitability levels for Canadian farmers.

The crux of improving profitability in agriculture is growth and demand, said Chris Novak, CEO of the National Corn Growers Association, speaking at the National Ethanol Conference in San Diego.

“We know that growth and demand is going to come from trade, and that picture is a little muddled right now,” he said.

The U.S. government’s abandonment of the Trans-Pacific Partnership (TPP) and the potential renegotiation of the North American Free Trade Agreement (NAFTA) have dealt blows to the corn market.

The TPP, Novak said, “was our opportunity for growth of exports.”

Japan and Mexico are huge markets for U.S. livestock, said Randy Spronk, managing partner for Spronk Brothers and a past president of the National Pork Producers Council.

The axed TPP was also a hit to that sector, he said.

The U.S. Farm Bill program will provide some support as farmers face financial issues and the potential for lower commodity prices moving forward, Novak said.

In terms of more proactive solutions, fostering understanding between agriculture and consumers can help improve demand.

Understanding customers’ needs from the livestock and feed sectors is among the challenges producers face.

“Certainly a number of food chains have said ‘We don’t want any antibiotics used in the production of meat that’s coming to our restaurants or grocery stores,'” Novak said.

The corn industry is also facing resistance to biotechnology from China, he said, adding he hopes the government will take steps to address that issue.

“We’re challenged these days with a Chinese process that is very slow to accept new biotechnology, advanced crops.”

Adopting risk management into his business model has allowed Spronk to stay in a place of profitability — something other producers could employ to safeguard against financial loss.

U.S. farmers are working against high stockpiles, especially for corn and wheat, which are expected to keep a lid on commodity prices throughout 2017.

— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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The agency’s assessment of atrazine could lead to tighter regulatory limits on the product, manufactured by Swiss-based Syngenta. That could ultimately prevent farmers from being able to use it to control weeds, according to agricultural groups that blasted the report as flawed.

Atrazine is primarily used on corn, sorghum and sugarcane to fight weeds and increase yields in the U.S. Midwest. In Canada, atrazine is a Group 5 active ingredient in herbicides for corn crops, such as Syngenta’s Lumax, Aatrex, Propero and Primextra.

The EPA’s review adds to a debate about the safety of leading crop chemicals after a branch of the World Health Organization said last year that the herbicide glyphosate was “probably” able to cause cancer in humans.

The EPA said atrazine’s effects exceeded its “levels of concern” for chronic risk by 198 times for mammals and 62 times for fish. The agency will accept comments on the preliminary findings and consider whether to require label changes after it publishes a final risk assessment.

The EPA republished the findings after it said it inadvertently posted the same report, along with other related documents, online this spring in an error that has sparked criticism from U.S. lawmakers.

Syngenta, which is set to be acquired by Chinese state-owned ChemChina, said atrazine is safe and that the EPA report “contains numerous data and methodological errors and needs to be corrected.”

If the EPA’s report is finalized as written, it could cause label restrictions so severe that they would “effectively ban the product from most uses,” the Iowa Corn Growers Association said.

“EPA’s flawed atrazine report is stomping science into the dirt and setting farmers up for significant economic hardship,” said Gary Marshall, executive director of the Missouri Corn Growers Association.

The U.S. House of Representatives’ agriculture committee is looking into EPA actions related to its multi-year review of potential risks tied atrazine and glyphosate.

In April, the agency posted documents online, including a report that said glyphosate was not likely to be carcinogenic to humans. It later pulled them down.

The agency said it plans to release its draft cancer risk assessment for glyphosate by year’s end.

— Tom Polansek reports on agriculture and ag commodity markets for Reuters from Chicago. Includes files from AGCanada.com Network staff.

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