More MFP coming soon to a farm near you

A third tranche of Market Facilitation Program (MFP) payments could be on its way this year to U.S. farmers and ranchers affected by the trade war with China, according to Stephen Censky, deputy secretary at the USDA.

Censky told reporters in a press conference after his speech at the Iowa Renewable Fuels Summit on Thursday, Jan. 16, that the third installment of the payments is under consideration. If it is made, he stated, the third tranche would total $3.625 billion, which is the remaining 25% of the $14.5 billion set aside for the MFP.

MFP payments are intended to financially assist farmers and ranchers who have been directly and adversely impacted by foreign retaliatory tariffs imposed because of the trade war with China. Two other MFP payments have been made, with 25% coming in November 2019 and 50% before that in August 2019.

No decisions have been made on when the third tranche will be made, Censky stated, but he said the timing is under consideration. The MFP payments, he said, are being made because farmers have taken the brunt of the trade wars being waged by the Trump Administration.

There was good news on the trade front, Censky noted in his address, with the signing of the phase one agreement between the U.S. and China. The agreement calls for China to purchase $36.5 billion in U.S. agricultural goods in 2020 and $43.5 billion in 2021. In 2017, the year before Trump first imposed tariffs on Chinese goods and the Chinese retaliated with tariffs against the United States, the Chinese
purchased $24 billion in agricultural commodities from the United States.

U.S. trade officials will be monitoring the Chinese purchases of agricultural commodities to make sure they meet the two-year total of $80 billion, Censky added.

Censky noted in his prepared remarks at the renewable fuels summit that the U.S.-Mexico-Canada Agreement (USMCA) was approved by the U.S. Senate just 20 minutes before he took the stage at the conference, which was held in Altoona, IA by the Iowa Renewable Fuels Summit. The Senate passed the implementing bill for USMCA, 89-10 on Thursday. The House of Representatives earlier approved the replacement for the North American Free Trade Agreement by a margin of 385-41.

The bill implementing the accord now goes to the White House where Trump has indicated that he will sign it next week.

A third trade agreement also was reached earlier in January with Japan, Censky stated. Of special note for the ethanol producers in the audience, he said, was a provision that removes the Japanese tariffs on ethanol.

Brian Jennings, chief executive officer of the American Coalition for Ethanol, said implementation of the trade measures were welcome news for ethanol producers.

Passage by U.S. Senate of the USMCA "solidifies a multi-billion-dollar export market while providing more stable market access to farmers and instilling confidence in other nations that the U.S. is a reliable partner and supplier to help U.S. agriculture remain competitive in the years ahead," he said.

NAFTA has been a success for American agriculture and the USMCA builds upon this successful trading relationship, he noted. "Over the past 20 years, U.S. agricultural exports to Canada have tripled and quintupled to Mexico.

For U.S. corn, Mexico and Canada have served as the industry's largest and most reliable markets, and this agreement keeps the door open for related commodities, like ethanol and distillers grains. Although USMCA doesn't set ethanol-specific trade provisions, its ratification positively reaffirms this long-standing relationship with markets next door as we enter into this new decade of market growth."

Jennings also noted that the "phase one" trade agreement between the U.S. and China includes a commitment by China to purchase agricultural products over the next two years, including U.S.-produced ethanol and distillers grains. "Phase one represents a positive step in the right direction," he said, "especially once we have evidence that China has made actual purchases of U.S. ethanol and distillers grains, but given ongoing export and domestic market constraints, there is much more work to do."

Complicating the outlook for U.S. ethanol exports to China, Jennings explained, are reports that China has suspended its plan to implement this year a nationwide mandate that each gallon of gasoline contain 10% ethanol.

Although the reports raise more uncertainty for the U.S. ethanol industry, Jennings added, "We remain hopeful the next phase of talks with China can conclude with the restoration of a robust and enforceable trade relationship."

However, Jennings cautioned, the signing of the partial Chinese trade deal doesn't erase the pain still being felt by U.S. ethanol producers because of the Small Refinery Exemptions that have been granted by Trump's appointees at the Environmental Protection Agency. The exemptions have cut U.S. ethanol demand by an estimated four billion gallons and have been cited by ethanol producers as a reason for the shutdowns or partial shutdowns of numerous U.S. ethanol plants.

Renewable Fuels Association President and CEO Geoff Cooper told Successful Farming after his presentation at the summit that the phase one trade agreement with China is short on details about ethanol and dried distillers grains imports so it will be difficult to predict what it means for U.S. ethanol exports.

News that China is suspending its 10% ethanol (E10) mandate wasn't unexpected because its goal of implementing an E10 mandate was unrealistic, Cooper stated. "We think there will be some U.S. ethanol exported to China," he said.

China imported 200 million gallons of U.S. ethanol in 2016, he noted, before it erected a 30%, then a 70%, tariff on the renewable fuel.

If it opens its market to U.S. ethanol, Cooper said he believes the potential ethanol exports could be huge. China currently consumes 40 billion gallons of gas annually and has the capacity to produce one billion gallons of ethanol a year. That means the Chinese export market for ethanol could total as much as three billion gallons annually, Cooper added, if ethanol can earn a 10% market share of the Chinese fuel market.