Washington Insider-- Friday

By DTN's Washington Insider

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Another Report Criticizes Biofuels

An environmental group called the World Resources Institute this week issued a report that concludes that producing and using crops for the manufacture of biofuels is proving to be a bad idea. According to reporting by the New York Times, the report says that turning plant matter into liquid fuel or electricity is so inefficient that the approach is unlikely ever to supply a substantial fraction of global energy demand. The report adds that continuing to pursue this strategy — which has already led to billions of dollars of investment — is likely to use up vast tracts of fertile land that could be devoted to helping feed the world's growing population.

This is a familiar criticism in a long list of calls for governments to re-think their renewable biofuels policies. It appears increasingly likely that Congress this year will look more closely at the federal Renewable Fuels Standard and the way it has been administered by the Environmental Protection Agency.

Each new study and report that questions the wisdom of current U.S. energy policy will provide additional ammunition to those who believe we are on the wrong path.

***

Congress Concerned about Effect of Rising Interest Rates on Federal Debt

The Senate Budget Committee held a hearing earlier this week to question Congressional Budget Office Director Douglas Elmendorf about the nation's fiscal outlook, and whether CBO had earlier underestimated an expected increase in interest rates ahead as the economy recovers, and what effect higher rates might have federal debt payments.

There are expectations that the Federal Reserve will raise short-term interest rates later this year and although some have expected an announcement along these lines for a while, this time is may be for real. If rates do increase, congressional Republicans say it will put additional pressure on the government to reduce the deficit by cutting federal spending.

Elmendorf said a continuing high level of debt was not just related to interest payments. "For example, if there were another financial crisis, or severe recession or international events to which you and your colleagues wanted to respond with government resources, the more debt you have going into that situation, the harder it is for you to respond."

There is another way to reduce the annual federal budget shortfall that does not involve significant cuts to federal programs and services. However, that route –– increased revenues –– appears closed for the time being.

***

Washington Insider: Boardroom Fights and Animal Rights

Agricultural observers have been modestly surprised at the bitter criticism farming operations have faced in recent years, especially as large scale commercial livestock production has become increasingly important. For example, the USDA-Health and Human Services advisory committee for the new dietary guidelines is leaning toward offering what many see as undefined and undefinable standards of "sustainability" as well as recommendations for consumption of sharply less meat and sugar.

Now, still another threat seems to be emerging. The Wall Street Journal this week said that an important class of Wall Street insiders is moving to urge firms to accept animal rights recommendations if they are to avoid damaging pressure from retailers.

Groups such as the Humane Society of the U.S. (HSUS) have sought for years to build support among large companies' shareholders to urge changes in animal treatment, but without much success, the Journal says. Now, though, they may have found a new weapon. Apparently some highly influential firms that advise investors on how to vote their shares, including Institutional Shareholder Services Inc. and Glass, Lewis & Co., are weighing in on animal issues that they are willing to couch in terms of "business risks."

HSUS earlier this month landed the endorsements of ISS and Glass Lewis for its shareholder proposal that Hormel Foods Corp., the maker of Spam, detail the financial risks that could arise from reliance on hog farmers who still use gestation crates for their sows. It will be very interesting to see what the estimates of the magnitude of that risk turn out to be.

Proxy advisers are receptive to hearing about the issue with meatpackers such as Hormel and Tyson Foods, the Journal notes, at least partly because big customers like restaurants and retailers have been tightening their own animal-welfare policies in response to consumer pressure. This raises the risk of lost business for packers, the advisors say.

As animal-rights advocates focus on the financial-risk angle instead of merely animal treatment, they "are getting a bit more savvy with respect to what shareholders are wanting to support," Courteney Keatinge, senior environmental, social and governance analyst at Glass Lewis told the Journal.

And, the trend appears to be accelerating as more food companies embrace campaigns by animal-welfare groups to revamp farming methods, the Journal believes. Companies including Nestlé and Starbucks recently announced tougher standards for their suppliers, including both the phase out of sow-gestation crates and egg producers' practice of placing hens in small cages.

The Journal sees efforts by advocacy groups to push companies to alter environmental or social practices as a new trend among institutional investors such as mutual funds to press for change at companies, rather than divest their shares in protest. This, together with the efforts by proxy firms (which major investors pay for advice on corporate referendums and board elections) to attract business by weighing in on more corporate matters across a broader range of companies, suggests even greater future efforts by advocates to shape farming to suit their own concepts.

These changes, while subtle, certainly imply even greater pressures in the future for producers to meet "social goals." They also suggest that producers need to be increasingly aware of the trends as they develop, and that they take effective steps to maintain and increase production efficiency to meet growing global food needs, Washington Insider believes.

---

Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN's Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the U.S. Ag Policy, U.S. Farm Bill and DTN Ag News sections on their News Homepage.

If you have questions for DTN Washington Insider, please email edit@telventdtn.com

(GH/CZ)

Copyright 2015 DTN/The Progressive Farmer. All rights reserved.