Farm-state fury creates pressure for Trump as trade, energy pain collide

Source: By David J. Lynch, Washington Post • Posted: Wednesday, October 2, 2019

Steve Westra, plant manager at the Siouxland Energy Cooperative, walks inside a massive bunker that usually houses up to 3,000 tons of an ethanol byproduct known as wet distillers grain. (Kathryn Gamble for The Washington Post/For The Washington Post)
Steve Westra, plant manager at the Siouxland Energy Cooperative, walks inside a massive bunker that usually houses up to 3,000 tons of an ethanol byproduct known as wet distillers grain. (Kathryn Gamble for The Washington Post/For The Washington Post)

SIOUX CENTER, Iowa — On a typical day, about 80 tractor trailers full of corn line up to dump their loads at Siouxland Energy Cooperative, the ethanol plant just outside of town. The air throbs with the noise and vibration of this industrial moonshine operation, which distills nature’s harvest into a cleaner-burning fuel.

But today, the warm Iowa sun shines on an almost empty parking lot, and the machinery sits idle.

After two decades, Siouxland this month halted operations following the Environmental Protection Agency’s decision to exempt 31 small oil refiners from a federal law requiring them to blend ethanol in their gasoline. The waivers, which the Trump administration has approved almost four times as often as its predecessor, have undercut demand for ethanol and the corn used to make it, farmers said.

“The waivers are what pushed us over the edge,” said Steve Westra, 46, the plant manager. “It absolutely killed the potential for anybody to make any money at this.”

For Iowa farmers already suffering from an extended trade war with China, the ruling has made ethanol the focus of their growing ire over President Trump’s policies.

The trade war has cost farmers potential Chinese orders for the corn-based fuel as well as for a byproduct that is used as animal feed. Now, the refinery exemptions are compounding the financial pain — and threatening political consequences for the president, who won this state and its six electoral votes in 2016.

“I supported Trump in the last election. Today, if the election were held, I don’t think I could vote for him,” said Kelly Nieuwenhuis, 60, a corn and soybean farmer in Primghar, about 40 miles east. “It’s definitely growing, the displeasure with the Trump administration.”

’A punch in the gut’: Farmers hit by tariffs see crops swept away by flood

The president won Iowa handily three years ago, beating former Secretary of State Hillary Clinton by nearly 150,000 votes, and the Midwest remains a pillar of his reelection strategy. Many of those grumbling about Trump today concede they are unlikely to vote for a Democratic presidential candidate next year.

But Democrats flipped two of the state’s congressional seats in the 2018 midterm election, and Barack Obama won Iowa twice, so Republicans are attentive to any signs of eroding support. In recent days, amid a rising impeachment furor, the White House has scrambled to midwife a compromise between ethanol advocates and the oil industry.

The discontent in deeply conservative northwest Iowa has its roots in the president’s confrontation with China, which farmers initially backed. Many bore the scars of China’s trade practices, including its rapacious attitude toward American intellectual property. In 2016, a Chinese businessman, who had been caught digging in a corn field northeast of Des Moines, pleaded guilty in federal court to stealing proprietary corn seeds from DuPont Pioneer and Monsanto.

But this year, as hopes for an agreement with China rose and fell, and multiple rounds of Chinese retaliation for U.S. tariffs destroyed their export sales, farmers’ support curdled into impatience.

“Something needed to be done with China. It always felt like we were being taken advantage of,” said Jolene Riessen, who grows corn, soybeans and alfalfa in Ida and Sac counties. “But President Trump always talks about ‘The Art of The Deal.’ Well, it’s time to make the close. It’s time to get something done.”

The trade war’s mounting costs are especially evident in this corner of the corn belt. Iowa’s fourth congressional district, which sprawls from the Nebraska and Minnesota borders to the outskirts of Des Moines, has lost more export sales to China than any other district in the country, according to the U.S.-China Business Council.

China’s retaliation for the president’s tariffs on Chinese goods last year cost farmers 78 percent of their $856 million in oilseed and grain shipments to China, the study found.

Those figures may understate the toll. The trade war erupted as farmers were counting on a major increase in Chinese orders for U.S. ethanol and an ethanol byproduct called distillers dried grain (DDG.) Those potential sales for the past two years have now become casualties of the trans-Pacific conflict, Nieuwenhuis said.

Impeachment inquiry threatens to overtake Capitol, upend trade and spending talks

His sprawling operation, ringed by stalks of corn and the distinctive yellow leaves of maturing soybeans, illustrates ethanol’s financial punch.

Nieuwenhuis began raising crops amid the 1980s farm crisis, purchasing his first land for $2,000 an acre in 1983, only to see its value plummet by half over the next few years. For his first quarter century, his corn crop ran in the red almost every year, only kept afloat by government subsidies.

“For the first 25 years, there was no money left over for anything fun. It all went back into the farm,” he said.

In the late 1990s, he borrowed money to take a small stake in the Siouxland plant and now sits on the board. Later, he invested in a biodiesel facility in Ames and a second ethanol operation in Council Bluffs, which Trump visited in June.

By 2005, when the Bush administration began mandating that refineries blend specific quantities of ethanol each year, Nieuwenhuis’ fortunes turned. He bought a four-bedroom home, where he and his wife raised their four children, and now owns 30 plots within a 25-mile radius. In recent years, he has added wind turbines to his fields.

Today, almost all of the corn he and his brothers produce on 2,100 acres is sold to ethanol plants. The renewable fuel standards are “the best thing that happened in my 37 years of farming,” Nieuwenhuis said. “That’s why I have this building. That’s why I have this tractor.”

Yet even before the trade war, complications arose. Starting in 2016, China imposed tariffs on U.S. ethanol and DDG to protect its domestic producers. After Trump began imposing tariffs on Chinese goods last year, Beijing increased its duties in retaliation.

U.S. exports cratered. China in 2015 had purchased more than 5 million metric tons of DDG, a high-protein animal feed, valued at $1.4 billion, according to the U.S. Grains Council. By the following year, China was the No. 3 export market for American ethanol, purchasing more than 200 million gallons, worth almost $350 million, the industry group said.

Since then, DDG sales have plunged by roughly 98 percent; ethanol orders are virtually nonexistent. In the absence of a protracted trade conflict, the U.S. and China might have resolved their differences over ethanol.

“I was in China last September,” Nieuwenhuis said. “We were told once this trade dispute is settled, they would be in the market for up to 1 billion gallons really fast.”

The current moment, he said, is the toughest time he has seen in his farming career.

China targeted Midwestern farmers for retaliation, calculating that complaints from a key part of Trump’s political base might cause him to buckle. The president so far has instead tried to make farmers whole with a $28 billion bailout and promises of future riches.

Neither seems to be working. Multiple farmers said the Agriculture Department payments that the president bills as full compensation for lost Chinese sales, while better than nothing, still leave them in the red.

Farmers are growing exhausted by the president’s alternating suggestions of an imminent deal or an indefinite stalemate. “People thought it was going to be about a two-round fight, and we’d show them who was boss,” said Eric Walhof, president of Northwest Bank. “Now, we have fatigue. Are we in this for another two years? Five years?”

Many corn growers also were unimpressed by Trump’s Aug. 25 statement that Japan would place orders for “hundreds of millions of dollars” worth of corn as part of a new trade deal. U.S. corn exports to Japan last year totaled nearly $2.4 billion.

“The president was exaggerating what they’ll increase,” said Curt Mether, who grows corn and soybeans on 1,200 acres outside Logan and describes himself as a Trump supporter. “It’s not a new market. It’s a mature market.”

Against this backdrop, the EPA’s Aug. 9 decision catalyzed farmers’ simmering resentment into outrage. Oil companies that produce less than 75,000 barrels per day can qualify for federal relief by demonstrating that compliance would cause a “disproportionate economic hardship.”

In a June visit to an ethanol plant in Council Bluffs, Trump celebrated “clean affordable American ethanol,” took credit for regulatory actions that promoted its usage and promised to “fight for the American farmer like no president has ever fought before.”

Yet, his administration has exempted more than 38 billion gallons of gasoline and diesel fuel from ethanol blending requirements compared with just 7.4 billion in President Obama’s final three years, according to the Renewable Fuels Association, an industry group.

Trump acted in response to complaints by refiners that the mandates were costly and unnecessary given growing U.S. energy production.

Unlike similar Obama administration waivers, the latest EPA actions did not reassign the affected output to other refineries, thus reducing the total amount produced. In the month after the announcement, the price of corn dropped 14 percent. The normally tame Iowa Corn Growers’ Association issued a statement accusing the president of breaking his promise to back ethanol and said farmers were “fed up.”

In Sioux Center, meanwhile, the economics for the local ethanol plant grew dire. Siouxland spent $3 million on an upgrade just a few months ago, expanding annual capacity to 80 million gallons.

But the waivers drove the facility into the red. To cut their losses by two-thirds, officials extended indefinitely an annual maintenance shutdown. They continue to pay Siouxland’s 42 employees, hoping the administration will reassign the lost refinery requirements to other facilities and allow them to reopen.

Roughly a dozen other plants across Iowa are close to making the same decision, according to Westra, the plant manager.

“A few fans and air-actuated valves are still running. Other than that, we pretty much have everything shut off,” he said, during a tour.

Nieuwenhuis would not say how long the company can afford to pay workers to stay home. But the board has agreed to provide a 90-day warning if it decides to make the closure permanent.

Siouxland’s shutdown is rippling across area farms. Farmers who otherwise would have sold their crop to the plant now will have to pay to dry and store it.

Farmers have not been shy about complaining to their elected officials. Nieuwenhuis said he had Sen. Joni Ernst (R-Iowa) perched on a stool in his garage earlier this month and traveled 175 miles to Ames last Saturday to buttonhole the state’s senior senator, Charles E. Grassley (R-Iowa), who said in August that the administration had “screwed” farmers.

The president, meanwhile, jokes that brokering a compromise between farmers and the oil industry is more time-consuming than haggling with China. Last month, he promised to unveil a “giant package” to mollify farmers.

“We are putting a lot of pressure on the Trump administration,” said Nieuwenhuis. “And we’re being noticed.”