Tariff fears replacing ethanol woes in farm country, says Joni Ernst

Source: By John Siciliano, Washington Examiner • Posted: Friday, July 6, 2018

The potential negative consequences of President Trump’s trade policies could replace the concerns farmers have about ethanol as a major issue in the midterm elections, says Sen. Joni Ernst, R-Iowa.

Ernst will begin her 99-county tour of Iowa over the July 4th recess, where she says trade concerns will likely top farmers’ woes about the administration’s mismanagement of the Renewable Fuel Standard.

“What I do anticipate will be a big issue is the trade issues that we’re having, right now,” Ernst told the Washington Examiner in an interview. “Even more than the RFS, it has reared its ugly head.”

When asked if the trade situation will be a defining issue in the 2018 midterm elections, Ernst said, “It will be in Iowa.”

Trump had won Iowa in 2016 on the promise of supporting farmers and the Environmental Protection Agency’s corn ethanol program. But with the prospects of tariffs driving up prices for farmers and increasing uncertainty from EPA on ethanol, it is unclear where the farm vote will go in November.

The issue is “two fold,” Ernst explained.

First, there is Trump’s “tariffs that are being put on various products like steel and aluminum, and so that’s the first wave,” she said.

The tariffs will drive up costs, both for the manufacturers of farm equipment, and the farmers themselves, she said.

“Prices have gone up 50 percent” for manufacturers in her state, she said. “So, that’s significant for those folks. And then the cost is passed on to our farmers.”

“If the manufacturer feels like they have to pass it on, they pass it on to the farmers,” Ernst explained.

The second wave of problems comes from countries who are preparing to retaliate for Trump’s imposition of tariffs on their goods.

“So with those tariffs, now we are starting to see the retaliation,” Ernst said. “And in retaliation, [agriculture] is always the first area that gets targeted by those countries. So with China, the tariffs on pork, tariffs on soybeans, you name it, and its causing our commodity prices to tank.”

Ernst has also been an outspoken critic of EPA Administrator Scott Pruitt’s handling of the Renewable Fuel Standard ethanol program, along with Sen. Chuck Grassley, R-Iowa, the chairman of the Judiciary Committee, and several other prominent Republicans.

Both senators have said Pruitt’s mismanagement of the ethanol program has undermined the president’s promise to boost ethanol in the marketplace and help farmers.

Chinese retaliation already begun targeting U.S. ethanol exports in March with a 15 percent tariff, which was in direct response to Trump’s tariffs on steel and aluminum.

China said it will roll out another set of tariffs on U.S. goods in July, responding to Trump’s separate actions targeting tens of billions of dollars in Chinese imports. It said other tariffs will follow in the coming months, targeting U.S. energy exports to China.

“Unfortunately, these challenges are not new for the Council or its members, who produce, sell and export U.S. corn, sorghum, barley, distiller’s dried grains with solubles (DDGS) and ethanol,” said the U.S. Grains Council, representing the agricultural commodity industry.

Despite the “dizzying headlines and potential trade disruptions,” the group wants to continue to push for greater trade for U.S. agricultural commodities.

“China is a very important market for U.S. coarse grains and their coproducts, but so too is the rest of the world,” said Tom Sleight, the group’s president and chief executive officer in a statement. “We will stay closely engaged with China, but we will also redouble our efforts in the rest of the world to expand demand.”

Some new potential markets for U.S. grains could include the oil-rich kingdom of Saudi Arabia, according to the group.

“After it purchased four vessels of sorghum when China imposed 178.6 percent tariffs on the commodity, Saudi Arabia could represent another possible market to which to redirect grain sales,” the U.S. Grains Council said. Japan, South Korea, and Taiwan also represent mature markets that U.S. exporters have come to rely on in tough times, said the group in a recent statement.

The U.S. Grains Council was part of an Agriculture Department-led trade mission to Japan to explore a new market for ethanol in Japan. The Japanese government enacted a new policy that calls for the use of U.S.-produced corn ethanol in gasoline to lower emissions.

“With this decision, Japan recognizes the environmental value of U.S. corn-based ethanol,” said Darren Armstrong, the group’s secretary/treasurer who participated in the trade mission.

“Going forward, our role is to further demonstrate the economic value of using even greater volumes of ethanol, including through direct blending, as is done in the United States.”