When President Obama mentioned clean energy, however, I started paying attention to him, in spite of the 2-year-old. “We have subsidized oil companies for a century. That’s long enough,” the president said. “It’s time to end the taxpayer giveaways to an industry that’s rarely been more profitable, and double-down on a clean energy industry that’s never been more promising.”

My jaw hit the ground. It was a theme I had heard repeatedly at the summit during the day, starting with the opening address by Iowa Renewable Fuels Association (IRFA) executive director Monte Shaw. “Today the oil industry enjoys billions of dollars in tax subsidies while the renewable fuels industry has none,” said Shaw, proceeding to name off all of the subsides unique to the oil industry.

It’s a long list that requires a high-price accountant to understand – not a problem for the oil industry! Percentage depletion allowance, marginal oil well incentives, enhanced oil recovery credits, intangible drilling costs expensing, deduction for tertiary injectants, exception from passive loss limitations for oil and gas, etc. According to a DTN analysis, the total comes to about $17.9 billion a year.

All of it goes back to the inception of the tax code in 1913. What that means is simply that these subsidies, unlike the meager tax credit that helped the ethanol industry for a fraction of that time, are EMBEDDED in our tax code. They are never going to expire.

So, that begs the question of whether Congress will ever do anything to get rid of those subsidies. It will not be an easy process. But, like the president said, a century is long enough. If the ethanol industry is now mature enough after about 20 years to stand on its own, surely the oil industry can do so.

Calling the overall plan a Blueprint for Stronger Service, Vilsack said it was born out of necessity.

“Since 2010, Congress has reduced our discretionary operating budget by more than $3 billion – a roughly 12% cut,” said Vilsack. “We understood this day of reduced budgets was coming and we have been proactive.”

Part of the plan includes closing 259 domestic offices, facilities and labs across the country, as well as seven foreign offices and consolidating over 130 county Farm Service Agency offices in 32 states. “Of the 131 offices on the list, 35 currently have no employees,” Vilsack said. “Our choice was either to maintain these offices or reduce our effort at improved technology to better serve producers and furlough workers, disrupting service to many, many people. We’ve invested millions of dollars and thousands of hours in an effort to get technology that should allow us to better serve producers with reduced staff.”

Overall, it should save about $150 million a year, which is really just a fraction of USDA’s $145 billion per year budget, but in an atmosphere of increasing spending all the time, it is at least a start.

So far, there seems to be surprisingly little grumbling out in the countryside about the office closings, although the national media has been trying hard to find people willing to complain about it. Of course there will be some people who are inconvenienced initially by the changes, but ideally using technology (internet, cell phones, etc.) will result in way better, more flexible and more efficient service in the long run.

Listen to Vilsack’s comments to AFBF annual meeting here: Ag Secretary Tom Vilsack at AFBF annual meeting

“This ruling reaffirms our position that the state of California violated the U.S. Constitution when it created a low carbon fuel standard punitive to farmers and ethanol producers outside of the state’s border,” said National Corn Growers Association President Garry Niemeyer. “We hope that this ruling will lead to an inclusive discussion where regulators join other stakeholders to find effective renewable energy solutions.”

The Commerce Clause specifically forbids state laws that discriminate against out-of-state goods and that regulate out-of-state conduct. The original filing notes that “the LCFS imposes excessive burdens on the entire domestic ethanol industry while providing no benefit to Californians. In fact, in disadvantaging low-carbon, domestic ethanol, the LCFS denies the people of California a genuine opportunity to clean their air, create jobs, and strengthen their economic and national security. One state cannot dictate policy for all the others, yet that is precisely what California has aimed to do through a poorly conceived and, frankly, unconstitutional LCFS.”

On this claim the Court found that the LCFS discriminates against out-of-state corn-derived ethanol and impermissibly regulates extraterritorial conduct. As a result, the Court issued an injunction. The judge also ruled that CARB failed to establish that there are no alternative methods to advance its goals of reducing GHG emissions to combat global warming.

The California Air Resources Board (CARB) is expected to automatically appeal the ruling to the U.S. Court of Appeals for the 9th Circuit and the industry is prepared to continue the fight to provide clean corn ethanol for all Americans.

Both former Governor Mitt Romney and former Senator Rick Santorum expressed their support for the federal renewable fuels standard while campaigning in Iowa. In addition, both candidates were 4-for-4 on other important ethanol issues, including a fair and equitable energy tax policy; the attempt to ban E15; and consumer fueling choice through programs to increase the number flexible fuel vehicles (FFVs)and blender pumps in the nation. The other two candidates who scored well in all those categories were Newt Gingrich and President Obama.

“Despite scant attention on agriculture issues by the national media, both Governor Romney and Senator Santorum prioritized rural and ag issues,” said Iowa Renewable Fuels Association Past President Walt Wendland, CEO of Golden Grain Energy near Mason City. “It came as no surprise to us that friends of ethanol fared well in the Iowa Caucus.”

Ron Paul, Michelle Bachman and Rick Perry all were opposed to the RFS and increasing FFVs and blender pumps, while only Rick Perry was against E15 and a “fair and equitable energy tax policy” that would “create a level playing field for energy taxes” by revising the permanent tax benefits enjoyed by the petroleum industry.

The voter guide was mailed to approximately 10,000 Iowa households with residents who are directly involved in Iowa ethanol refineries and was also promoted to all of Iowa’s 250,000 agricultural households via email, the Internet and social media. An electronic version of the guide can be viewed at: www.IowansFueledwithPride.com.

“We had a lot of things that came together and pushed prices up for a wide variety of products the last couple of years,” said Patrick Westhoff, Director of the Food and Agricultural Policy Research Institute (FAPRI) during a visit at the St. Louis Agribusiness Club. “We expect a lot of volatility in the year ahead.”

One of the main reasons is an “ordinary garden variety one” – the weather. “People tend to forget that sometimes,” said Westhoff. On top of that, the biggest factors to consider are land markets and what Congress will decide to do with farm policy. No surprises there!

He notes that tight stocks will continue to keep corn prices particularly volatile. “Every little piece of news, either positive or negative, can make the market move around a lot,” Westhoff added.

Westhoff believes that the spending cuts presented to the “super committee” by the House and Senate agriculture leadership should help start the conversation for a new farm bill in 2012, “but it certainly won’t be the end of that conversation.”

Listen to Chuck Zimmerman’s interview with Patrick Westhoff here: Patrick Westhoff Interview

Now it’s time to play catch up to gain market share lost due to the slowness in getting those agreements ratified. “Earlier this year, NCGA provided testimony to the Senate Finance Committee citing Panama as an example of lost market share,” says National Corn Growers Association president and Illinois farmer Garry Niemeyer. “Corn exports to the country peaked in 2008 and have since dropped 20 percent. This market erosion was due in part to a lack of progress on the Panama FTA. As a farmer, it has been frustrating to see other nations achieve access to markets over U.S. corn and corn products.”

Colombia has been importing more corn from Argentina, Brazil and Paraguay because of an import duty preference. From marketing year 2007-08 through 2009-10, U.S. corn exports to Colombia dropped 78 million bushels, an estimated loss of $475 million. Under the Colombian FTA, U.S. corn producers gain immediate access to the Colombian market for 2.1 million metric tons of corn at zero percent duty.

The new agreement with Panama eliminates 50 percent of tariffs immediately and is estimated to mean a $46 million gain in U.S. agriculture exports to that country. The Colombia agreement will bring a $370 million gain in agriculture exports and will eliminate 80 percent of tariffs, and the Korea agreement could mean a $1.9 billion gain for U.S. agriculture exports by eliminating two-thirds of tariffs immediately. Under the Korea FTA, imports of U.S. corn for feed and distillers grains are guaranteed to enter duty free immediately.

What this means in a word is jobs. “Farm exports help support more than 1 million American jobs, said Agricultural Secretary Tom Vilsack upon the signing of the FTAs. “These three agreements will increase farm exports by an additional $2.3 billion—supporting nearly 20,000 American jobs—by eliminating tariffs, removing barriers to trade and leveling the playing field for U.S. producers.”

American Farm Bureau estimates that the trade agreements will create more than 22,500 jobs when fully executed. Now that’s a real stimulus for the economy. Let’s get back in the game and play catch up.

Legislation called the Renewable Fuel Flexibility Act has been introduced in the House that would change the requirement for ethanol in the motor fuel supply under the RFS2 whenever corn stocks are tight. While this might seem like a good idea to some on the surface, it’s really a very bad idea.

The intent of bill sponsors Bob Goodlatte (R-VA) and Jim Costa (D-CA) is to give relief to livestock producers, dairymen and consumers. Here’s what Rep. Costa said introducing the bill:

“The Renewable Fuel Standard has been incredibly successful in replacing a portion of the oil we import with home-grown energy, and I continue to support RFS. While ethanol is not the only factor I am convinced it is a factor in the high prices farmers pay for feed and consumers pay for food.”

So, even though the RFS is helping reduce our dependence on foreign oil, and even though it is only one factor of many in the price that livestock producers pay for feed, these lawmakers want to tamper with a standard that basically has been doing what it was intended to do since it was first implemented in 2005 and expanded in 2007.

All of the ethanol organizations and a number of farm organizations – including American Farm Bureau and National Farmers Union, both of which have livestock producers as members – are opposed to changing the RFS2 for a number of reasons. First and foremost is that the corn stocks-to-use ratio can vary tremendously from month to month. The Goodlatte-Costa bill would determine the amount of change in the RFS based on the stocks at the time EPA sets the RFS standards for the following year. The problem with that is the stocks-to-use ratio is just an estimate and has varied by 4-8% between USDA’s first prediction to the final for the last three years. Geoff Cooper of RFA has an excellent analysis of this on the E-xchange Blog where he has the following table:

The Goodlatte-Costa bill would require a reduction in the RFS when the stocks-to-use ratio drops below 10 percent, up to a 50 percent reduction if the ratio falls below 5 percent. Under the estimates for the 2010-11 year, if the RFS was set at the first estimate, there would have been no change. If it were set later, at the 5% low estimate, then the RFS would have been cut by at least 25%.

Another reason not to mess with the RFS is that it would likely result in increased gas prices. A study done earlier this year by economists at the University of Wisconsin and Iowa State University found that the increase in ethanol use between 2000 and 2010 reduced gasoline prices by an average of $0.25 per gallon, or 16 percent. In addition, the report determined if ethanol production ended, gas prices would increase, depending on a range of conditions, from 41% to 92%.

So, if the Renewable Fuel Flexibility Act were passed and the RFS2 were changed in the coming year to require 25-50% less ethanol in the fuel supply, gas prices would probably go up as a result. And since energy costs are one of those other factors in the price of food and feed (actually the biggest factor, but whatever) the result would be …. higher food and feed costs!

Bottom line, the RFS2 is doing what it was intended to do by cutting our dependence on foreign sources of petroleum – don’t mess with it now that we are actually making progress.

First, take a moment to review the lesson.

The United States is the largest producer and exporter of corn in the world. Developing new markets for our country’s agricultural products is vital to producer income and it also helps our sector lead the nation in economic growth and international competitiveness. USDA is forecasting the United States will reach a record high $135.5 billion in exports this year. Agriculture’s trade surplus is not something other sectors of our economy achieve. Passing FTAs will ensure our market share stays strong in existing and developing markets.

Now, it is time to try your hardest.  Today, that entails actually meeting directly with your members of Congress.  It is the most effective way to inform them how important the pending Free Trade Agreements with Korea, Colombia and Panama are for rural America, consumers and the agriculture industry. Opponents of free trade agreements will be working hard this summer to kill support for the agreements. But your message, told in person, will make sure Congress knows the truth about the benefits of FTAs.

For more information on the FTAs, click here.

Scheduling a meeting with your member of Congress requires some homework.  First, you will need to talk to their scheduler, typically located in Washington, DC. You can find your member’s contact information online at www.senate.gov, www.house.gov or by calling the Congressional switchboard at (202) 224-3121 and ask them to connect you to their office.

Be aware that many schedulers have a policy requiring that all meeting requests be submitted by fax or email, so be prepared to send the following information: your name, hometown, and title; description of the issue(s) you wish to discuss; other meeting attendees (along with their names, hometowns, and titles).  You can then expect the scheduler to follow up with you via phone or email.

Be prepared to offer the scheduler your available dates and times.  The greater your flexibility, the greater the odds are that you will be able to meet with the member.  If the member is not available to meet with you, there are still options.  Schedule a meeting with their legislative aide responsible for agriculture or trade issues.

If you have difficulty scheduling time with your representative, you may also ask the scheduler if the member will be holding any public events, town hall meetings or similar listening sessions in the District that you might be able to attend.

Life, and government in particular, can seem complex and confusing at times.  Just remember, the lessons that you learned early on are still applicable today.  Use playground rules and make sure that Congress spends their recess doing something productive.  It takes some work, but it can pay off for corn growers across the country.

“A lot of folks here are familiar with corn-based ethanol, but the fact of the matter is the technology is moving where we need to start taking advantage of a whole range of biofuels, using refuse, using stuff that we don’t use for food to create energy,” he said during his first stop in Minnesota. “And we are seeing incredible progress on that front, but it’s key to make sure that we continue to make the research and that we also use the incredible purchasing power of the federal government to encourage it.”

In Iowa, the president and Agriculture Secretary Tom Vilsack announced a partnership between the private sector and the U.S. Departments of Agriculture, Energy and Navy to produce advanced drop-in aviation and marine biofuels to power military and commercial transportation. The focus would be on fuels not made from corn.

During Obama’s stop at the Wyffels Hybrids corn seed production plant in Atkinson, Illinois on Wednesday, the 11-year-old grandson of a corn farmer and ethanol plant investor asked what he is going to do to keep the ethanol plant running.

“I will say that the more we see the science, the more we want to find ways to diversify our biofuels so that we’re not just reliant on corn-based ethanol,” said Obama. “And so hopefully your grandfather, with his ethanol plant, is starting to work with our Department of Agriculture to find new approaches to the biofuel industry.”

I do wish that the POTUS had given corn-ethanol a bit more credit for getting us where we are today in cutting our dependence on foreign energy sources. See Cathryn’s post below on unicorns where she notes, “Due to the magic that is modern technology, production practices continually improve and create an even more efficient, eco-friendly product.” Let’s remember that corn ethanol brought us to the dance, Mr. President, and it just keeps getting better.

At that same event in Illinois, the president dismissed concerns by a a local corn and soybean grower, who was applauded by the crowd for telling Obama not to challenge the nation’s food producers with more rules and regulations. “We would prefer to start our day in a tractor cab or combine cab rather than filling out forms and permits to do what we’d like to do,” he told the president, noting particular concern about regulations regarding dust and water runoff.

“If you hear something is happening, but it hasn’t happened, don’t always believe what you hear,” Obama responded. “And I’m being perfectly honest, the lobbyists and the associations in Washington, they’ll get all ginned up and they’ll start sending out notices to everybody saying, look what’s coming down the pike. And a lot of times we are going to be applying common sense.” He suggested that if farmers have concerns about the administration “putting something in place that’s going to make it harder for you to farm, contact USDA. Talk to them directly. Find out what it is that you’re concerned about. My suspicion is a lot of times they’re going to be able to answer your questions and it will turn out that some of your fears are unfounded.”

The president got quite a bit of flack in the national media from those remarks, including an editorial in the Wall Street Journal. It was evident that the president does not understand that 1) most of the proposed regulations that could impact agriculture are coming from EPA and 2) it is very unlikely that a simple call to USDA by a farmer about something like that would be anything more than a huge waste of time.

Farmers have at least one friend in Congress these days in Representative Stephen Fincher (R-TN), who *in an address to the 2011 Southern Peanut Growers Conference said he was the “working farmer currently serving in the House.”*

“We’re 7th generation cotton farmers from the Frog Jump community in West Tennessee and still actively farm,” Rep. Fincher told me in an interview. “It’s an honor to serve in Washington and represent rural ag communities.”

Fincher is one of the freshman class in Congress that is shaking up the status quo in the Capitol and he is very concerned about cuts in agriculture funding being considered on the federal level. “Farmers understand that we’ve all got to tighten our belts a little bit, but we can’t kid ourselves and think that we can balance the budget on the back of one percent of the budget, which is what ag gets.”

Because of the current hot political climate in Washington, Fincher would like to see the current Farm Bill extended until after the 2012 election when cooler heads might prevail. “Where we could sit down and have a reasonable discussion about our next 5-6 years in the ag world,” he said. “I’m afraid from some of the comments made by some of our colleagues in Washington that they want to slash and burn the Farm Bill on the ag side!”

Listen to my interview with Rep. Fincher here: Congressman Stephen Fincher