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Ethanol Margins Remain Tight


By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- While corn ethanol production costs have continued to remain low, a drop in the price of ethanol is keeping net margins tight at DTN's hypothetical Neeley Biofuels ethanol plant.

This week, the 50-million-gallon plant in southeast South Dakota is posting a net loss of 12 cents per gallon of ethanol produced. The cost of production includes all variable and fixed costs, including debt service and depreciation. One month ago, the plant was posting a 9.8-cent loss.

However, assuming most corn ethanol plants today are free and clear of debt and depreciation, the net-margins picture is much different. With that assumption, Neeley Biofuels is showing a positive 19-cent net margin per gallon produced in our latest analysis.

"Ethanol prices have followed the move lower as front-month ethanol futures have backed away from recent highs, falling as much as 7 cents per gallon in the same time period," DTN Ethanol Analyst Rick Kment said. "The loss of revenue at the plant is outpacing the lower production costs, despite growing demand for ethanol in the upcoming months."

DTN established the plant in DTN's ProphetX Ethanol Edition as a way of tracking ethanol industry profitability. Using the real-time, commodity-price data that flows into the "corn crush" in ProphetX and some industry-average figures for interest costs, labor, overhead, etc., DTN is able to track current profits. It also tracks how much Neeley Biofuels would make or lose under an infinite number of "what-if" scenarios.

DTN uses industry-average figures from Iowa State University economist David Swenson. Included in the figures are annual labor and management costs, transportation costs, debt-servicing costs, depreciation and maintenance costs. Even though Neeley Biofuels is paying debt-service and depreciation costs on its plant, many real plants are not in debt.

Also, it should be noted the calculations include all other costs such as chemicals and yeasts, electricity, denaturant and water. While DTN uses natural gas spot prices for these updates, many ethanol plants lock in prices on the futures market, so they are not as vulnerable to natural gas market volatility.


Donna Funk, a certified public accountant with K-Coe Isom based in Lenexa, Kansas, who works with several ethanol plants, said February and March are showing better financial margins than January.

However, she said China's role in the sorghum market is pressuring some producers in the United States who use sorghum.

"China's demand for sorghum is impacting some plants, and rising rail transportation costs are causing some plants to re-evaluate rail versus truck markets, which has a trickledown effect on plants in those truck markets as they are seeing increased deliveries in their markets that didn't historically see large volumes of ethanol from other regions," she said.

Washington talk about possible changes to the Renewable Fuel Standard so far isn't affecting bottom lines, Funk said.

"Folks are watching the RFS/RINs (renewable identification numbers) heavyweight fight with lots of interest, but I'm not seeing or hearing folks talk about it impacting margins yet," she said.


A recent analysis by Farmdoc at the University of Illinois shows 2017 was one of the tightest-margin environments for corn ethanol producers in years.

Farmdoc looked at what it calls a "representative Iowa ethanol plant." An analysis showed an average net profit of just 3 cents per gallon of ethanol produced in 2017. That was down markedly from about 12 cents in 2016. The total net profit of its model ethanol plant was the fourth lowest between 2007 and 2017, according to Farmdoc.

"The story behind the declining fortunes of the ethanol industry is straightforward," the analysis said. "Domestic and export use for U.S. ethanol has increased nicely since 2014, but production capacity and actual production increased even faster.

"The surge in production basically overwhelmed the rise in use, which caused ethanol stocks to increase and ethanol prices and profits to fall. The fortunes of the U.S. ethanol industry are unlikely to improve until production and use are better balanced. Based on recent production and stocks data it looks like this could take some time."

Farmdoc said the trend of rising ethanol stocks has continued on into 2018.

Read the Farmdoc analysis here:…

Todd Neeley can be reached at

Follow him on Twitter @toddneeleyDTN


Omnibus Offers Funds, Fixes


By Chris Clayton
DTN Ag Policy Editor

WASHINGTON (DTN) -- Farm groups, agribusinesses and rural advocates are finding much to like in the $1.3 trillion federal omnibus spending bill released late Wednesday.

On the regulatory front, the bill includes:

-- A provision that would relieve livestock producers of the emissions reporting requirements under EPA Superfund laws as the National Cattlemen's Beef Association (NCBA) indicated, effectively assuring 200,000 farms and ranches around the country from dealing with the emissions requirement.

-- The bill gives livestock haulers an exemption from new federal rules on electronic logging devices (ELDs) until at least Sept. 30, 2018. The Federal Motor Carrier Safety Administration will have more time to educate livestock haulers on ELDs while the industry works on solutions to the existing hours of service rules that currently do not work for truckers driving livestock across this great nation.

-- Section 199A Fix: The 199A fix included in the bill will equalize tax treatment of commodity sales to cooperatives and non-cooperatives while also providing a flow-through deduction from co-ops to their members similar to the old Section 199 deduction for domestic production activities.

The Section 199A fix, which is retroactive to Jan. 1, 2018, was supported by a broad group of agribusinesses, spearheaded by the National Grain and Feed Association. Still, farmers who saw the "grain glitch" as a 20% deduction on gross sales are likely going to be disappointed that Congress greatly reduced the benefits of the tax break for selling to farmer cooperatives. The National Farmers Union was one of the few groups calling on lawmakers not to make the change.

Congress is expected to pass the spending bill by March 25, but already there are reports that House conservatives will seek to make changes to the bill through amendments on the House floor. That could slow down debate moving forward.

The funding bill also includes several major funding initiatives for USDA programs and rural America, including $600 million in investment for a new pilot grant and loan program for rural broadband. USDA was also given just over $1.05 billion for rural water and wastewater infrastructure, a boost of $500 million to help address the $3 billion backlog in funding. The Senate Appropriations Committee said this would support an additional $2.9 billion in loans and $495 million in grants.

As Sen. Debbie Stabenow, D-Mich., told reporters on Wednesday, the bill also addresses a longstanding problem in the U.S. Forest Service over funding for wildfires. For years, the Forest Service has had to shift funding from other programs to deal with escalating costs for wildfires. The funding fix will eventually shift wildfire response to an emergency disaster fund.

The National Sustainable Agriculture Association highlighted several areas where funding was boosted, or at least avoided cuts, which include:

-- Farm Service Agency direct farm ownership and operating loans funded at $3 billion, an amount that should be sufficient to meet the anticipated increase in farmer demand.

-- Conservation Operations and Technical Assistance: $874 million appropriated, an increase of $10 million to provide land users with the conservation delivery system needed to achieve the benefits of a healthy and productive landscape.

-- Farm Bill conservation programs: This the first time in a decade that funding for farm bill conservation programs has been left intact in an appropriations bill. Overall discretionary funding for the Natural Resources Conservation Service was pegged at $1.04 billion, $8 million above last year and $262 million higher than requested by the Trump administration. The funding includes $150 million for Watershed and Flood Prevention Operations Program to support investments in rural towns.

-- Sustainable Agriculture Research and Education Program (SARE): $35 million appropriated; a 30% increase and the highest funding level in the program's 30-year history.

-- Outreach and Assistance for Socially Disadvantaged and Veteran Farmers and Ranchers Program: $3 million in appropriations for outreach and technical assistance for farmers and ranchers of color and military veteran farmers, in addition to the program's $10 million in farm bill funding.

-- Food Safety Outreach Program: $7 million appropriated; a $2 million (40%) increase in funding for farmer food safety training.

-- Value-Added Producer Grant Program: $15 million appropriated; this funding level represents a maintenance of the increase in this program to support producer entrepreneurship received in FY 2017.

The National Sustainable Agriculture Coalition (NSAC) praised congressional appropriators, noting the robust funding levels for NSAC's top priorities were achieved despite the delays and political challenges getting a bill done.

"Congress, in particular the members of the House and Senate Agriculture Appropriations Subcommittees, have produced an agriculture appropriations bill that sends a clear message about their commitment to the sustainability of our food and farm system," said Greg Fogel, policy director at NSAC. "We thank Congress for delivering a bill that provides increased funding for programs that help farmers and ranchers start careers in agriculture, stay profitable and sustainable over the long-term, protect our shared natural resources, support their communities, and conduct cutting edge agricultural research."

Colin Woodall, NCBA's senior vice president of government affairs, pointed to the regulatory relief provided in the funding bill.

"The omnibus spending bill includes a number of positive developments for cattlemen and women, including language that would prevent 200,000 farms and ranches from being regulated like toxic waste sites; delay the implementation of electronic logging devices for livestock haulers for another six months; and provide a critical fix for wildfire funding that also provides expedited authority to implement much-needed vegetation management on federal lands," Woodall said. "We are also glad to see refinements to the tax code that address the 199A issue. NCBA and our affiliates have been working closely with Congress to ensure the spending bill addresses issues of concern for U.S. ranchers and beef producers, and we are glad to see our policy priorities reflected in the legislation. We urge Congress to take the next step and vote 'Yes' when the bill comes up for a vote."

Despite the months of delays over immigration, the bill doesn't address the immigration challenges that forced the delays, which included a brief government shutdown. The action over people brought to the U.S. as children, known as Deferred Action for Childhood Arrivals, or DACA, remains unresolved.

The House passed the bill early Thursday afternoon and President Trump was awaiting a final Senate vote to approve it. Statements and fact sheets coming from the White House indicated the president supports the spending bill.

Chris Clayton can be reached at

Follow him on Twitter @ChrisClaytonDTN


Cash Market Moves


By Mary Kennedy
DTN Cash Grains Analyst

Similar to the excitement surrounding the spring home opener for your favorite professional baseball team, river terminals in the Upper Mississippi River (UMR) are also excited to see the sleeping river wake up after a long winter and once again fill up with barges. It's also good news for grain and feed shippers, as it provides another -- and sometimes cheaper -- route to ship commodities.

Shippers will have to contain their excitement for a while longer this spring, though. The first barge has yet to make its way through Lake Pepin to get to St. Paul, Minnesota, because the ice in the middle of the lake was still too thick on March 14, 2018, to allow tows to pass through.

Lake Pepin, located 60 miles downriver from St. Paul, Minnesota, is the widest naturally occurring part of the Mississippi River. Pepin is the last roadblock for barges waiting to come upriver to open the spring shipping season in the Twin Cities District. Tows prefer the ice thickness to be 15 inches or less before attempting to move through the middle of the lake with barges as they head upriver.

The U.S. Army Corps of Engineers St. Paul District considers the first tow to arrive at Lock and Dam 2 as the "unofficial" start of the navigation season because it means all of its locks are accessible to commercial and recreational vessels. According to the Corps, the earliest date for an up-bound tow to reach Lock and Dam 2 was March 4 in 1983, 1984 and 2000. The average start date of the navigation season is March 22. In 2017, the season opened early on March 9 when the Motor Vehicle (MV) Stephen L. Colby towboat moved through Lock and Dam 2, dropping its first load just south of downtown St. Paul.

This year, measurements started on Feb. 21 as the Corps survey crew used an airboat and a global positioning system to collect the data.

Here is a video showing that process of how and where the Corps measures ice thickness on Pepin:…

The last measurement on Lake Pepin showed ice was thinner in some places and thicker in other places, according to the Corps.

Here is the Corps measurements from 2009 through March 14:…

The shipping season-opener for the mid-Mississippi River began as of Friday, March 9, 2018, when, "pursuant to the National Grain and Feed (NGFA) Trade Rules," NGFA declared that the Mid-Mississippi River opened for navigation.

NGFA Barge Freight Trading Rule 18(J) states as follows: "The Dubuque and South (mid-Mississippi) opening commences the first 07:00 hours of the first business day after the first empty dry cargo covered barge suitable for loading, originating at or below Winfield, Missouri, reaches Dubuque, Iowa. The mid-Miss opening shall be determined by a majority vote of a three-person committee appointed by the NGFA Chairman and shall be announced by publishing the committee's confirmation of the opening on the NGFA web site."

As set forth in the rule, the Mid-Mississippi River was officially opened as of 7 a.m. on Friday, March 9, 2018, after the MV Jerry Jarrett reached Dubuque at 4:15 a.m. on Thursday, March 8, with at least one empty dry cargo covered barge suitable for loading.

A dried distillers grains with solubles trader told me that barges have started to load in the Dubuque, Iowa, corridor and also in Winona, Minnesota. For the week ending March 13, barge freight rates were higher in the Mid-Mississippi River corridor, signaling shippers are buying freight to move in place to load now that the river has opened for business there.

Rates for the UMR for the week of March 25 are quoted at 575% to 600% of tariff. However, freight brokers have noted that bids are hard to find as many shippers are staying on the sidelines without new grain movement.

For now, river terminals in the UMR continue to look forward to that first barge of the shipping season, much like baseball fans look forward to the first pitch of their team's home opener.

Mary Kennedy can be reached at

Follow her on Twitter @MaryCKenn


The Market's Fine Print


By John Harrington
DTN Livestock Analyst

If any random focus group was asked to name top corporate icons, I'm pretty confident the resulting list would enjoy a fairly tight consensus: Google, Amazon, Apple, UPS, Toyota, Starbucks, Walmart, Coca-Cola and Budweiser.

Oh yeah, and what's that little hamburger joint with the clown and golden arches? McDonald's? Some would no doubt claim this Johnny-come-lately vendor has above-average name recognition.

Of course, I jest. If the mere mention of "McDonald's" via television, social media or President Donald Trump's lunch menu doesn't cause a marquee of lights to immediately flash in your head, you probably need to get measured for a half-suit at the local mortuary.

It goes without saying that recognition and admiration are not synonymous terms. All of the powerful brands noted above owe their commanding notoriety to fans and detractors alike. Indeed, I don't think it's unusual for individuals to simultaneously experience both love and hate in this regard.

In fact, I would argue that many beef producers currently struggle with torn allegiance to McDonald's thanks to recent policy announcements by the fast-food giant that seem to pull in conflicting directions.

It's a little like being caught between a good cop and a bad one.

First, consider the easy and most intuitive end of the stick: McDonald's with its sprawling infrastructure and global network sells mind-boggling quantities of beef every year.

In a nutshell, McDonald's is the world's largest restaurant chain by revenue, serving over 69 million customers daily in over 100 countries across nearly 40,000 stores.

Serving 25 million customers daily in its nearly 14,000 U.S. outlets, the McDonald's menu has grown greatly, but beef remains the core of the firm's success.

According to Rob Cannell, the company's chief beef and pork buyer, he needs to fund enough product to make 15 million hamburgers each day. Such amazing velocity off of the grill makes McDonald's the single-largest beef purchaser in the U.S., nearly 1 billion pounds, at about $1.3 billion in value annually.

While the team in product development has occasionally been guilty of mutinous behavior (e.g., McNuggets, McRib, even vegetarian wraps), corporate leadership has generally been loyal to the meat that brought 'em to the dance. In fact, when CEO Steve Easterbrook was given the reins of a stagnant operation in 2015, one of his first decisions was to refocus on basics, like a good-tasting hamburger that consumers enjoyed.

All of which brings us to the positive headline of 2018 that beef producers can applaud without the slightest reservation.

In 2017, McDonald's announced plans to use all-fresh beef in its Quarter Pounder. This month, the company finally began serving fresh-beef Quarter Pounders and "signature crafted" burgers in 3,500 restaurants across the U.S. McDonald's is expected to have the program throughout the restaurant network by May (except in Hawaii and Alaska).

Such a shift in policy should most certainly have a positive impact on the domestic wholesale trade. The program will displace a percentage of presumably frozen, imported beef with domestic-sourced, fresh, lean beef in the Quarter Pounder formulation. This should support the domestic 90% lean trim market, which has ties to lower-quality fed cattle chuck and round cuts that can also be used as lean trim alternatives.

So it's all good news, right? What's not to like out of the McDonald's boardroom?

Unfortunately, the home of the golden arches has issued a second policy change, one far less appetizing to beef producers, one strongly implying that the current standards of beef production are hostile to environmental sustainability.

Last week, McDonald's announced its first targets for reducing greenhouse gas emissions, claiming it will "prevent 150 million metric tons of emissions by 2030." That's a 36% reduction compared with the restaurant chain's 2015 emissions.

The high-minded pledge said the company would be able to meet its targets, while continuing to grow it business, by taking a range of actions. McDonald's will switch its franchisees' outlets to LED lighting, make their kitchen equipment more energy-efficient, and step up its sustainable packaging and recycling efforts.

Well, that sounds easy enough. Just turn off a few more lights and cut down on the garbage. No sweat. Unfortunately, the crusading paragraphs just kept rolling.

Furthermore, the green police at McDonald's said it would "prioritize action" on beef production. Since red meat is a particularly environmentally unfriendly foodstuff, McDonald's felt the need to underscore the company's determination to move toward more sustainable beef production.

"To create a better future for our planet, we must all get involved. McDonald's is doing its part by setting this ambitious goal to reduce greenhouse gas emissions to address the challenge of global climate change," said CEO Easterbrook. "To meet this goal, we will source our food responsibly, promote renewable energy and use it efficiently, and reduce waste and increase recycling."

On one hand, what kind of troglodyte would you have to be to take offense at this soaring rhetoric? Who among us doesn't want to be the best possible steward of Mother Earth?

And yet talking the talk and walking the walk are two very different projects.

Frankly, I get very nervous when ambiguous phrases such as "sustainable beef production" and "sourcing food responsibly" start flying around like aimless spitballs. Can we really judge their value and practicality if no one really knows what they mean?

My great fear is that some well-intended individuals and businesses start defining such sketchy goals by making incorrect assumptions about the status quo. For example, an incredible number of responsible citizens still believe the misleading suggestions of "Livestock's Long Shadow," the environmental study issued by the United Nations in 2006.

Infamously, this study suggested that livestock production was responsible for 18% of greenhouse gas emissions, more than the entire transport industry. It sent shockwaves to many corners of the world until the larger scientific community seriously examined the study's faulty methodology. While everything from corn production to the burning of the rainforest was counted as the carbon cost of livestock production, only fossil fuels were charged against transport.

Even U.N. scientists have acknowledged the unfair comparison and promised a corrective study. More than a decade later, we're still waiting.

Please understand: I'm not some flat-earther who's blind to the environmental risks and responsibilities of livestock production. But if we allow some zealots to exaggerate and/or misrepresent the reality of the context, then meaningful progress on all fronts is doomed.

Finally, one of the most important of these fronts is the awesome task of feeding the world (i.e., 7.5 billion, on its way to 10 billion by 2050). I think that means we just can't be good stewards, we must be good, productive stewards.

In McDonald's-speak, I think that means we just can't have range-free chicken and grass-fed, organic burgers, at the drive-through -- we must have safe, plentiful and affordable offerings produced by a sustainable agricultural economy.

John Harrington can be reached at

Follow him on Twitter @feelofthemarket


Sec. 199A Fix in House Bill


By Todd Neeley
DTN Staff Reporter

Editor's note: The original version of this article was posted at 11:49 a.m. CDT on Wednesday, March 21. It was reposted with additional information at 3:30 p.m. CDT on Wednesday, March 21.


OMAHA (DTN) -- A Section 199A fix will be included in a version of a spending bill currently being drafted in the U.S. House of Representatives, a source familiar with the negotiations told DTN.

Back in February, 85 House members asked leadership to include a fix on the upcoming omnibus bill. A source who spoke to DTN on background, said the final bill is expected to include the 199A fix.

This week, a coalition of House Republicans pushed House leadership to include the 199A fix in the omnibus. That resulted in about 20 House members pressing leadership to make sure the fix was a priority in the omnibus.

Though the exact language in the bill was yet to be released at the time this article was posted Wednesday afternoon, an industry source familiar with the legislation told DTN the language is unchanged from a draft released last week.

The whole omnibus package needs to be signed off on by President Donald Trump, who reportedly is meeting with congressional leaders.

The tax language would eliminate a 20% deduction on all gross sales to farmer cooperatives that was included in the Tax Cuts and Jobs Act. No sooner was the tax bill signed than the grain industry determined it was leading to "unintended consequences" in the sale of farmer commodities. Lawmakers said they did not intend to distort the commodity markets when they drafted the tax break.

A number of agribusinesses in recent weeks told congressional leaders that they support the language change in the tax code backed by farmer cooperatives and businesses that would provide farmers with a deduction similar to what they received under the old Section 199.

Sen. Charles Grassley, R-Iowa, said during a news conference on Tuesday that as of Monday night a Section 199A fix was not part of the Senate omnibus bill, saying the provision "absolutely has got to be fixed."

Chuck Conner, president of the National Council of Farmer Cooperatives, said in a statement to DTN that the provisions in the omnibus bill will prevent a "tax increase on farmers" by keeping the domestic production activities deduction, or DPAD.

"DPAD will largely be recreated in this bill, which also preserves the competitive position of co-ops in the marketplace," Conner said. "In fact, by combining the individual-level business deductions that farmers can claim and the recreated DPAD pass-through from their co-ops, farmers selling to cooperatives have the opportunity to see more of a tax deduction than farmers selling to non-cooperatives. This action fits in line with Congress's long history of public policy in support of co-ops and shows an appreciation of the unique relationship that co-ops have to their farmer-owners. It is a recognition that for many farmers, their co-op isn't simply some business that they buy from or sell to, it's an integral part, an extension of their operations."

Todd Neeley can be reached at

Follow him on Twitter @toddneeleyDTN


Farms With Benefits


By Deborah R. Huso
Progressive Farmer Contributing Editor

Performance and seniority awards don't always have to come in the form of cash. You might consider noncash incentive plans to reward your best employees.

The Limoneira Co., based in Ventura County, California, has been growing lemons and other citrus fruits since 1893. Today, nearly 125 years later, the company has gone global with more than 11,000 acres in production worldwide and is one of the largest producers of both lemons and avocados in the U.S. The company has grown to 275 employees -- some have been employed there for more than 20 years. It's not just cash wages that keep them with Limoneira, said John Chamberlain, director of marketing for the citrus company. "Providing incentives to our employees helps with employee retention, morale and productivity."

Noncash incentives are a popular form of added compensation for farm employees, confirms a 2011 survey by Iowa State University Extension and Outreach. The average cash wage paid to Iowa farm employees was $33,320, the survey found. But, that figure represented only 85% of employee compensation. Bonuses made up an additional 4%, and fringe benefits (ranging from housing to extra vacation time) represented 11%.

Twenty-two percent of Iowa farm workers received housing as a benefit, with an average annual value of $4,560. Workers also received incentives such as the use of farm equipment and vehicles, coverage of continuing-education expenses, a portion of farm-raised food and sometimes clothing.


Larry O'Hern runs a 1,700-acre operation near Vermont, Illinois, raising corn, soybeans and feeder cattle. He offers employees the opportunity to graze their own animals and use his feed as a benefit of employment. O'Hern buys calves from his employees and said the opportunity is offered based on tenure.

"They have to have at least two years of service," O'Hern said. He documents the incentive in his labor agreement with employees.

Why consider noncash benefits? If you're looking for ways to motivate and retain employees, but feel like you can't afford cash incentives or at least can't provide enough of a cash incentive to employees to really motivate better performance, alternative incentives may be the way to go.

"With varying degrees of success, these programs do work," said Darrell Dunteman, a certified public accountant and consultant with Bonnett and Dunteman, LLC, in Bushnell and Havana, Illinois. "But, make sure the incentive plan involves meeting criteria and that those criteria are measurable." Additional time off with pay, use of employer recreational facilities, use of employer facilities for personal projects, gift cards or sports tickets are good incentives, he added.

Kelly Raso, an associate partner with Alloy, Silverstein, Shapiro, Adams, Mulford, Cicalese, Wilson and Co., in Cherry Hill, New Jersey, agrees. "The most successful programs recognize and reward performance, and provide opportunity and flexibility." She suggests award presentations, gifts and prizes, increased responsibility, decision flexibility and flexible scheduling.

It's important to consider the criteria and cost of noncash benefits. "Make sure you understand what it will cost you before you put [benefits] on paper," Dunteman advised.


When designing an incentive program, it's important to decide what "average performance" looks like. Ask yourself what is the most you can give away, and then design a program around that. Make sure the incentive is under the employees' control. "Profitability of the operation should not be part of the incentive," Dunteman explained. Employees can't calculate that. As long as an employee knows what to do, he'll be working toward earning his incentives.

"Create a good evaluation in a written form that assigns points to various tasks or accomplishments," Dunteman said. He also suggested asking the employee to fill out his or her version of the evaluation. He said, more often than not, the employee's and employer's evaluations will match up. "If someone has an evaluation that's very different from yours, that's generally a sign there's a problem."

Dunteman advised instituting a quarterly plan, where employees have an opportunity to win a prize or benefit every three months. Dunteman has some clients who reward employees by offering extra days of vacation, sometimes at an employer-owned recreational facility.

Among the many available noncash incentives Limoneira offers employees are tuition reimbursement for those who attend English language classes or pursuing other continuing-education tracks that develop their skills. Employees also can earn scholarships for themselves or their families. All employees at Limoneira can take advantage of free wellness screenings, which include mammograms, high blood pressure testing and Body Mass Index testing.


In an effort to encourage employee safety on the farm, Limoneira offers tickets for Los Angeles Dodger games as an incentive for safe working practices.

Dunteman acknowledged that certain agricultural operations are more conducive to offering incentives than others. "Grain operators are the hardest because there are so many factors not in control of the employee," he said. "Just remember: The employee should not be penalized for things beyond his control like a herd illness, drought or flood."

As with cash incentives, noncash awards must be reported to the IRS, Dunteman said. Generally speaking, benefits with a cash value exceeding $100 need to be reported on an employee's W-2. They are also subject to income tax withholding as well as social security and Medicare withholding.

Limoneira has been successful with its noncash incentives, Chamberlain believes. "We strive to create a work environment where our employees can develop and thrive."


Grassley Talks Trump and RINs


By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- With the future of the Renewable Fuel Standard hanging in the balance, Sen. Charles Grassley, R-Iowa, said he's unsure whether President Donald Trump understands how capping renewable identification numbers, or RINs, would affect the agriculture and ethanol industries.

Trump is slated to meet with U.S. Secretary of Agriculture Sonny Perdue and U.S. Environmental Protection Agency Administrator Scott Pruitt on Tuesday to reportedly discuss a number of changes to the RFS.

During his weekly press conference with agriculture journalists on Tuesday, Grassley said he and four other senators who requested a meeting with the president on the RFS have not heard back from the White House.

"I have taken a position that if something out there works, I'm willing to look at that," Grassley said, reiterating his opposition to capping RIN prices, because it would be "catastrophic" to the ethanol industry. "That's a non-starter as far as I'm concerned."

Grassley said he's not opposed to backing RFS changes that come from industry officials. Based on previous meetings at the White House, however, he said he is unsure if the administration understands the RIN situation.

"I went away from the meeting with the feeling the president really doesn't understand the damage a cap on RINs will do," Grassley said, referring to a White House meeting he had with other senators and industry leaders in recent weeks. "I'm very fearful and hope he will take a look at the alternatives. Anything is better than a RINs cap."

One of the proposals coming from a recent White House meeting is to cap RIN prices for two years as part of some deal between ethanol and oil interests that could include allowing year-round E15 sales.

In a letter sent to the president last week, Grassley, along with Sens. John Thune, R-S.D.; Roy Blunt, R-Mo.; Deb Fischer, R-Neb.; and Joni Ernst, R-Iowa, requested a meeting with Trump about the issue.

So far, numerous studies have shown that capping RINs essentially would cap the amount of ethanol in the gasoline pool at 10% or lower. In addition, Pruitt said the EPA continues to explore whether it can implement an administrative fix to allow year-round E15 sales, or whether it would need to require an act of Congress.

In addition, a potential industry proposal circulating among biofuel interests would be to multiply the number of RINs and reduce compliance costs.

That includes a temporary two-year program to immediately multiply the number of D6 RINs, reducing compliance costs, while encouraging the use of higher biofuel blends. The renewable volume obligation for conventional biofuels would remain unchanged at 15 billion gallons.

Such a proposal would give refiners a RIN multiplier for blending volumes above 10% to generate more RINs.

The proposal also includes a permanent waiver for E15, restoring incentives for flexible-fuel vehicles that can use up to E85 blends and pushing the minimum octane level for fuels to 91AKI (anti-knock index) level.

Growth Energy CEO Emily Skor said in a statement to DTN that both agriculture and ethanol are united against changing the RINs system.

"Our conversations across the industry and with the administration are focused on constructive solutions -- like year-round sales of E15 -- that would accelerate the adoption of higher ethanol blends, promote growth, and put more RINs on the market," she said. "The biofuel and agriculture sectors, as well as our champions in the heartland and on Capitol Hill, remain adamantly opposed to any scheme that would cut, cap, or waive RINs."

So far, other meetings between the industry and the White House have not been scheduled, Grassley said.

Todd Neeley can be reached at

Follow him on Twitter @toddneeleyDTN


Ag Issues Persist on Ag Day


By Chris Clayton
DTN Ag Policy Editor
Jerry Hagstrom
DTN Political Correspondent

WASHINGTON (DTN) -- Vice President Mike Pence celebrated National Agriculture Day at the Agriculture Department on Tuesday, bringing a proclamation that President Donald Trump had issued Monday.

The National Ag Day celebration is generally full of speeches filled with platitudes about farmers, but the proclamation and speech by the vice president elevated the event on Tuesday. Still, there are also several major agricultural issues hanging in the balance this week in Washington, as well, which were addressed by Agriculture Secretary Sonny Perdue.

Perdue, speaking at the National Press Club, noted grain companies and farmer cooperatives are waiting for a tax change in the omnibus spending bill to deal with the Section 199A "grain glitch."

"Its effects would be very market disruptive if it's continued," Perdue said. "It is urgent to be cured, and the language has been agreed upon to be fixed ... There's even talk the way the language has been written that doctors, lawyers, accountants and even journalists could form co-ops to take advantage of the language in there. Can you imagine a journalist co-op?"

Yet Politico reported from Capitol Hill that Senate Democrats agree to fix the Section 199A as long as the GOP agrees to expand a low-income housing tax credit. House Speaker Paul Ryan, R-Wis., is balking at those demands. The omnibus spending bill that lawmakers hope to use to pass the 199A fix also needs to be approved by Friday.

The biofuels industry, along with corn and soybean farmers, are closely watching the moves on the Renewable Fuel Standard. Perdue said there have been intense discussions about what to do regarding Renewable Identification Numbers (RINs), but no solutions have been reached. Perdue suggested to reporters that President Trump may seek a solution through Congress rather than administrative actions.

Perdue noted RIN prices have fallen more than 60% since last fall, and RIN prices would fall further if EPA would approve year-round 15% ethanol blends.

"The conversation itself has already been helpful in that area of driving those RIN prices down, but the president's responsibility is to look at the whole economy. But he has asserted several times his commitment to the RFS and an energy policy for this country," Perdue said.

Perdue also talked about trade again and repeated that the White House drive for tariffs is worrying farmers. "We're anxious that agriculture may be the tip of the retaliatory spear again," Perdue said. "Naturally, farmers, when you have 20% of every dollar you make depends on exports, you have a right to be anxious about that."

The Washington Post and other media are reporting President Donald Trump will impose as much as $60 billion in tariffs on China by the end of the week. That could derail more than $22 billion in agricultural exports to China, including $14 billion in soybeans.

Zippy Duvall, president of the American Farm Bureau Federation, said in a brief interview during the Ag Day events that he hopes there is still time to sway the president not to impose new tariffs on China. Duvall said he hoped Perdue and White House agricultural adviser Ray Starling, as well as the U.S. Trade Representative's Office, are all talking to the president about reconsidering his stance.

"I don't think it's ever too late, but I think the door is closing," Duvall said. "China is our biggest soybean market, so this is huge for them. Hopefully, they can bring a little more compromise to this issue."

In his speech earlier in the day, Pence noted Ag Day was started in 1973 by the Agriculture Council of America to celebrate agriculture and encourage young people to consider careers in agriculture. Pence praised the National Association of State Departments of Agriculture, the American Farm Bureau Federation, the FFA, 4-H and other student groups, and noted that he was wearing his FFA tie.

Pence stressed the importance of deregulation to the Trump administration, pointing out that the Environmental Protection Agency is rewriting the Waters of the United States rule. Referring to the estate tax, Pence also said that the new tax law "eliminated the death tax" for almost all farmers. He also said farmers would benefit from tax provisions such as 100% deductibility of new equipment.

Pence also touched briefly on the farm bill, saying, "We're going to pass a farm bill that delivers for American farmers."

Pence also quoted legendary news broadcaster Paul Harvey, who gave a 1978 speech to FFA students, explaining, "On the eighth day ... God made a farmer."

"America's farmers have long led the world in innovation and achievement," the vice president said, praising the productivity of American agriculture. But he ended his speech by saying, "We will make American agriculture great again."

Trump, in his Ag Day proclamation, noted the importance of the agricultural economy, including exports.

The proclamation also said that USDA is investing in rural broadband access, roads and bridges and is "supplying affordable, reliable power" to those living on the outskirts of larger cities and towns.

It also said that the Tax Cuts and Jobs Act "is providing much-needed relief to America's farmers, who can now expense 100% of their capital investments, including expenditures for farm equipment, over the next four years. Additionally, under this new legislation, the vast majority of family farms will now be exempt from the death tax."

Chris Clayton can be reached at

Follow him on Twitter @ChrisClaytonDTN


Todd's Take


By Todd Hultman
DTN Analyst

If we didn't know anything about grain markets other than Friday's Commitment of Traders data, we might think things are going pretty well across rural America. After all, noncommercial traders were 75% long in corn, 76% long soybeans, 87% long soybean meal and 69% long in K.C. wheat. That is a lot of bullish optimism.

As mentioned in last week's column, bullish speculators can be a blessing for producers, bringing higher grain prices when they're buying on the way up. But with the blink of an eye, they can also turn into a curse if, at some point, the market disappoints all that optimism. Depending on the context, it may not take much of a price drop to turn heavy net-long positions into a new source of selling. Monday showed us one example of the danger of traders overloaded on one side of the market.

The one crop that has traders even more bullish than soybean meal this spring is cotton, having convinced 90% of trader positions to take the long side of the market as of March 13. Since hurricanes Harvey and Irma threatened crops last fall, world demand for U.S. cotton has been active with outstanding export sales up 61% so far in 2017-18 and actual U.S. cotton shipments down 6%.

Similar to corn, cotton's outstanding sales may not all ship by the end of July 2018, but USDA did raise the estimate of U.S. cotton exports from 14.50 million to 14.80 million bales in the March WASDE report. USDA also lowered the estimate of U.S. ending cotton stocks from 6.00 million to 5.50 million bales for 2017-18, a comfortable 30% of annual use.

USDA's perspective of world cotton is where things start to look a little more bullish. While USDA's early projection expects a slight increase in U.S. harvested acres in 2018, the world's cotton acres are expected to be down 3% in 2018-19 to 79.1 million or 32 million hectares (Cotton: World Markets and Trade,…).

Further, if USDA is correct, world ending stocks of cotton will fall from 88.6 million to 82.7 million bales in 2018-19, or 67% of annual use. Yes, 67% is a large surplus of world cotton, but keep in mind that non-exporting China holds 41.0 million bales of the surplus in 2017-18, expected to drop to 33.6 million bales in 2018-19.

According to USDA, the world's 2018-19 reduction of ending cotton stocks will be the third in four years. China's ending supplies will be down a fourth consecutive year, and it is in that environment of shrinking international supplies that U.S. cotton exports are looking more promising.

The more-bullish factor lifting noncommercial hopes in the U.S. lately has been weather. The past three years, over 50% of U.S. upland cotton was grown in Texas, the bulk of which comes from northern Texas. If you've been following HRW wheat, you know the area hasn't had significant rain in over five months and is in severe and extreme drought.

The Mississippi Delta is another important cotton region, which has had flooding problems early in 2018. Finally, southern Georgia and the Carolina coasts have been dry, but are expecting rain this week.

In the first full week of March, the crop wasn't even planted yet and spot prices came close to hitting last year's high of 87.18 cents per pound -- a lively start in 2018. Fundamentally, we cannot ignore the seriousness of drought in northern Texas and the potential bullish impact it holds for U.S. cotton prices.

Technically, with 90% of speculators on the long side of the market, it is important that May cotton prices hold above 76.44 cents, the low so far in 2018. There is plenty of uncertainty ahead, but a breach below support, if it happened, would put bullish traders under pressure to liquidate.

On March 29, USDA will issue its Prospective Plantings report. As the most-bullish contender among traders, it will be interesting to see if cotton entices more plantings than USDA's early estimate of 13.3 million acres. Either way, cotton will be an interesting watch in 2018.

Todd Hultman can be reached at

Follow him on Twitter @ToddHultman1


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