Signal to Noise Exclusive: Peterson Says Time is Now for New Dairymen
In an exclusive interview with Pro Farmer policy analyst Jim Wiesemeyer and Farm Journal news director John Herath for the DC Signal to Noise Podcast, House Ag Committee Chairman Collin Peterson (D-Minn.) comments on some important farm, trade and energy policy issues, along with his potential re-election timeline and his no vote on an impeachment resolution. The following are slightly edited comments from Chairman Peterson:
You recently sent a letter to USDA Secretary Sonny Perdue that urged changes in the operation of the Market Facilitation Program (MFP). Any response, yet?
“I already think they have responded to one request regarding alfalfa... a mixture deal, which was one of the issues we wrote him about. They (USDA) made some adjustments there. Whether it's going to be enough to satisfy people, I'm not sure. You know, the letter was something I didn't really want to do, but I had a bunch of Ag Committee members and a bunch of the ag groups pushing me and I finally gave in and sent the letter. My position is, this is not our deal. We did not have any input about how the MFP was structured. We are getting so many people who feel like it wasn't fair.”
If there's another MFP for 2020, should USDA take your letter of suggestions under advisement?
“I would think, yes. To some extent, maybe the 2019 program came about because of some of my criticism of the 2018 MFP. So it makes me wonder whether I should do that or not because you end up maybe worse off if you do.
“Also, I told my farmers that my biggest concern about this is the potential backlash we're going to get [about the billions of dollars in MFP payouts]. Feedback from members of both parties and the general public. I'm already hearing some of that even in my own district.”
If there is a U.S./China trade agreement, how hard of a sell to get an MFP 3?
“I don't know. If they can figure out how to use the Commodity Credit Corporation (CCC), they don't need Congress. And that's part of my concern. Before this all happened, there were only a handful of us that even knew what the CCC was for. Now, the House Freedom Caucus knows what it is. The Liberal Democrats know what it is. So that is not helpful. That's all I'm saying.”
Should the second and third installments for MFP 2 be made?
“Yes, irrespective of any China deal because too many farmers are going to have a hard time surviving the way it is. I'm not going to be one that's going to stand in the way of this money going out because there's probably no other way to give it to them.”
The latest disaster program will very likely bump up against the $3.050 billion authorized. Do you see Congress approving additional disaster funding?
“Are you kidding me? I don't think there's a snowball's chance in hell that we're going to get that done. I might be wrong.”
Regarding the Renewable Fuel Standard (RFS), it is hard getting a logical explanation on what EPA is going to do. Is that a fair assessment?
“That is a very fair assessment. And my guys feel like they were promised something, and they said it was not delivered. That's how they feel.”
Corn growers and the biofuel industry feel they did not get what they were promised and what everybody was excited about when they met with President Trump.
“Well, you didn't see me being excited about it. Because I think the Trump administration was trying to make both groups happy... make the oil and gas people and the ethanol industry and corn growers happy. As someone who's been trying to do that for years, I could have told them that's probably not going to work. If you do make one side happy, the other side is not going to be happy. And that's exactly where they ended up. The changes being made are not going to work because the EPA doesn't really understand the marketplace, and exactly how all this stuff works. They are going to try to improve the infrastructure because many believe they are not going to get to 15 billion gallons from the EPA. Whether that is going to work or not, who knows? But people are not happy.”
It's hard to get that infrastructure investment if you don't have the security of the RFS being at 15 billion gallons, isn't it?
“Well, that's really not the issue. And that's part of the problem. I mean, show the Trump administration’s plan can get to 15 billion gallons. Problem is, most people don't have the infrastructure to do it. So, we are at the blend wall again, basically. I don't know their attitude is going to somehow or another convince the oil companies and the administration that they need to add more ethanol because it adds more octane. My biggest problem in the whole thing is that they won't tell us how they came up with this plan and they won't tell us how they base these waivers. What information are they using? It's pretty hard to argue against something when you don't even know what it is.”
Where do you see the RFS program going after 2022?
“If we have every gas station in America proving E15 year-round, I'm not sure you need the RFS. If it was available to the consumers, I think the consumers would figure this out because it's cheaper. Ethanol is cheaper than gas and it comes to the octane. And again, the more they blend into this, the more they're going to save themselves money. Some gas stations are figuring this out... like Casey's and Sheets. They and some others are already blending more ethanol because they realize ethanol is cheaper than gasoline. And it's to their benefit to do it. If you could get to the situation where everybody understood that, and everybody was doing it, we'd have enough demand that we probably wouldn't be able to keep up with it. The question is, How do we get to that point?”
In the past, you have said E20 or higher is the sweet spot on octane and ethanol economics. Is that still true?
“In terms of getting the best fuel efficiency out of your vehicle, and also getting the best impact on the environment. Brazil figured this out years ago. That's why they are doing 25%... blending 25% because they've figured this out. I just bought E30 and it was $2.11, nearly 40 cents cheaper than regular gas. You probably get one and a half miles per gallon penalty with E30 but if you do the math, you are ahead buying E30. Ironically, E85 was not much cheaper than E30. So, we need to get people like they are in Brazil, where they are very knowledgeable about these blends and what they do. What happens is when the government in Brazil raises the price of gas, they switch to ethanol, and vice versa. Because they know how all this works. American consumers do not have a clue... 50% of them have a flex fuel vehicle and they don't even know they have one. That's the work that's got to be done: get people to understand how all this stuff works... what the mileage penalty is using E15 or E30 and the lower price impacts. And, some states are standing in the way of legalizing the E15 pumps.”
On another biofuel issue, will Congress approve an extension for the lapsed biodiesel tax incentive?
“There's a will to do it, but among Democrats, the problem is we've got to get the money to pay for it. And it's not just biodiesel. You have all these other extenders out there, such as wind and solar. You're not going to get a biodiesel credit just by itself. You add up all these other extenders into it, it gets to be a fair amount of money. And our side does not want to do a bill that is not paid for. I've told the biodiesel guys I think it's a long shot, but I'm for it. That's all I can do.”
Give us your thoughts on U.S. dairy policy, currently and what's ahead.
“We have finally put together a program that is working pretty well. If you have 220 cows (5 million pounds) or less, you have a safety net that's affordable and will keep you from losing money if you buy the $9.50 coverage. I don't know how we can have any better deal than that. We also made catastrophic coverage available to the bigger guys at a reasonable cost. But the best thing that has happened is the marketplace has turned around.
“We went through four of the worst years we've ever had... 2018 was I think the worst year we've ever had, and dairy prices were a tremendous hardship on people. The previous Margin Protection Program (MPP) did not work. But now we have a program that works.
“I don't really at this point have anybody complaining to me, other than the people that got so far behind the eight ball because of those bad years, and they're so far in the hole, the program you have does not guarantee them enough profit to get out of the hole. There's no way we can pass a bill that's going to do that.
“But the futures market signals the next couple years is going to be pretty good years for dairy and people are going to be able to make some money and that will help stabilize some of these operations.
“In terms of young guys that are starting off, that didn't get behind, if you have 200 cows, you can buy this coverage and that will guarantee you are not going to lose money for the next five years. If you're a young guy, you can take that to the bank. That's something that the bank will finance you on. I've been telling young guys there's no better time to get into dairy if you want to do it. Because there are cows out there that are relatively cheap. You've got dairies that have been shut down that you could actually lease one of these barns. You could have farmers grow the crops for you. You wouldn't have to do anything. We are seeing some young guys, smaller operators, get back into business. We're seeing the organic guys making money. And we have large producers in my district that are doing well.
“I think we've got a pretty good policy right now and maybe we should tweak the 5 million pounds. Maybe that should be increased, because I am getting some questions from people that have 400 or 500 cows saying, 'Why don't you have a program for us?' Money for one thing. But this is the next area that I would go to look at, to increase the amount of coverage that we would do at the $9.50 level like we've done for the smaller producers.”
On the dairy demand side, some analysts say alternative “milk” products and the increase in water consumption, coffee, etc., equate to about 20% or so for the drop in real milk consumption. If true, what do you do relative to domestic consumption and building exports?
“First of all, I don't agree that demand is down 20% because of those other alternatives. That being said, I'm one of the people that wants to stop people from calling almond milk, milk. I don't think anything that substitutes for milk should be called milk.
“One of the reasons we went through such a tough time in dairy is that we had risen to the highest level of exports we ever had, and those exports fell off. Dairy cannot adjust as quick as some other industries. That's why we went into such a tough time in 2018. While exports are good, they add volatility into the system that you can't control. And if they decide in Mexico or in China or wherever, where we were selling a lot of basically powder, if they stop buying it, it could really undermine the whole marketplace. I'm for exports, but I'm for not putting all my eggs in that basket.”
Farm Journal's MILK Business Conference is being held next week, is there anything else you want to tell dairy industry participants attending our meeting?
“I think the dairy program will be renewed for another five years and we will try to see if we should extend it to larger producers. But that having been said, every producer in the United States can take advantage of the safety net up to 5 million pounds. If you have 500 cows, you can put half of them under this program and get yourself protected. We actually have a pretty good safety net now.
“There have been significant improvements to the dairy safety net and we're always looking for ideas, but also to maintain the dairy industry. We're open to that. But we realistically cannot do anything that's going to cost a lot of money. And dairy producers should utilize the programs that we put out there. USDA said about 75% signed up for the new dairy program. I guess those numbers are not right because we've had 100% sign up in some counties that USDA said is 75%. The difference is, we believe, USDA did not address producers who have left the industry. Also, I would tell producers to hang in there as times are going to get better. Lastly, there are some people in the industry that are looking at reforming Federal Milk Marketing Orders. That is something we are exploring but is seems like that's going to be a slow process if we do anything.”
When will the House vote on the U.S.-Mexico-Canada Agreement (USMCA)?
House Speaker Nancy Pelosi (D-Calif.) wants to get the USMCA vote on the fast track, Peterson said. “[USMCA Working Group chair] Richard [Neal] (D-Mass.) told me he is going to try to move it when we get back next week, or the week after, so he’s pushing hard,” Peterson said. “It’s going to get done. The question is, is it going to get done in those two weeks or is it going to get done in December?”
Peterson noted that Pelosi talked about the push to pass USMCA on a caucus conference call this week. “She was pushing and explaining the USMCA on that call, and she wouldn’t be doing that if she didn’t want to get this done,” Peterson explained. “So, this is going to get done.”
The USMCA working group has been meeting with U.S. Trade Representative Robert Lighthizer to negotiate changes to the trade agreement required to get votes from both sides of the aisle. Peterson said he anticipates that work will clear the way for rapid approval in all three countries. “They (the USMCA working group) were down there, they met with the Mexicans,” Peterson said.” They told the Mexicans what they were going to do, and if it’s going to require a re-vote (on the USMCA), I got the sense that the Mexicans don’t think it’s a problem.”
Canadian leadership has indicated that Parliament will wait until the U.S. has a completed deal before voting on USMCA.
Regarding the Conservation Reserve Program (CRP), how do you think the 2018 Farm Bill changes are going?
“I was not totally happy with the USDA CRP rollout because they allow continuous CRP to go under the old regulations (higher rental rates) and general CRP under new regulations (significantly lower rental rates). But apparently, after I complained, they made some changes. So that helps somewhat, but we don't know how this is going to work. It's a big change from what we've been doing. And we also have to be able to see how it's been accepted by people. There are a lot of people out here that want to sign up. And we're hoping that we've simplified the program and made it easier to get in, even though they're going to get less money. But when they find out, they're going to get less money, we'll see how interested they are in signing up. But my whole thing with this is, we were paying too much. We were getting good farmland into the CRP that should not have gone in... more environmentally changed land should be in the CRP. And that's what some of the changes I hope will alter. We will see how the changes work.”
Regarding logistical and other problems farmers are having in getting propane this year. Any comments?
“We go through this every so many years, but we have released the hours of service on trucking and people are working as hard as they can do deal with whatever the shortages are. My sense is that shortages are spotty; there are some pinch points. Minnesota's governor has loosened up the hours of service regs. The federal highway people have loosened it up, so I think we're doing what we can do to get the stuff where it needs to be.”
Agricultural bankers provide important information for you and other lawmakers. What are you hearing from them, especially as it appears the 2020 planting and marketing season could again be challenging, and is there rising anxiety about the major reduction in working capital?
“Yes, there is anxiety. It depends on who you talk to. Some of them are more worried than others. It's too early to tell just exactly where we're at. But people are very nervous. And this fall has not helped anything. This harvest is the worst that anybody can ever remember. And with relatively low prices, you had weather problems in the spring, you have weather problems in the fall. You already have bankruptcies going up to some extent. It's going to be a tough winter.”
When will you announce your intentions for re-election?
“When I get ready. These campaigns go too dang long the way it is, and I'm not going to give the NRC an extra three, four months to beat me up. There's no reason for me to get out there any sooner. I don't want to start the campaign any sooner than the Republicans, who have five people running and not any of them are going to give up anytime soon. I think they're going to have a primary and that primary is going to be in August. So, people should be asking them... they're the ones that are going to have a bigger problem that I'm going to have.”
We usually do not get into the impeaching dealings in Washington other than where it intersects with agriculture, but you were one of two Democrats who voted against the resolution, putting in place the rules for the impeachment proceedings. Can you walk us through the thought process on that vote?
“Well, the vote was unnecessary. First of all, it didn't need to be. Number two, the press and the Republicans made this out to be a vote on impeachment, which it wasn't. Number three, I didn't like the way those committees handled the report. And I didn't like what was coming out of the investigation that was happening so far. I didn't want to put my name behind what they were doing. That doesn't mean that I decided on a future vote. But I think it's a mistake if you don't get some Republicans supporting it. And right now, I don't see any. And so, I know there's Democrats that wanted to impeach Trump the day after he got elected. And they've been frothing at the mouth ever since. But we have enough trouble in this country without dividing people anymore over something that's not going to happen. Nancy (Pelosi) held this up as much as she could... these folks that are clamoring for impeachment, but they're kidding themselves. And I think it's a mistake, so I voted no.”